One loyal reader recently pointed out that this blog might have unintentionally drifted from one of its stated goals–namely, to give practice examples of the myriad situations in which Virginia Fraud Against Taxpayers Act might be useful.
Today’s example concerns the Marine Habitat and Waterways Improvement Fund, which was established in the year 2000 by an act of the General Assembly. The statute is found at Virginia Code § 28.2-1204.2 et seq. The statute provides that “Moneys in the Fund shall be used solely for the purposes of improving marine habitat and waterways, including the removal of obstructions or hazardous property from state waters.”
Interestingly enough, one of the major sources of revenue for this fund is permits for one of two purposes: (1) fees paid to the Treasurer of Virginia for a permit to “recover underwater historic property” and (2) permits to use “state owned bottom lands.” I take example (1) above to mean treasure hunters, archaeologists, etc., looking for old shipwrecks off the Virginia Coast.
Example number (2), permits “to use state owned bottom lands” primarily means the mining of sand from the bottom of the Chesapeake Bay. The type of sand found at the bottom of the Chesapeake Bay–or most other bays, for that matter–is very different from the sand found on beaches or in a kid’s sandbox, and it is quite valuable. Among many other commercial applications, this sort of sand is used in the manufacture of concrete.
For that reason, Virginia Code § 28.2- 1206(C) specifies that “When the activity or project for which a permit is requested will involve the removal of bottom material, the application shall indicate this fact. If granted, the permit shall specify a royalty of not less than $.20, nor more than $.60, per cubic yard of bottom material removed.”
Such royalties for the sand removed are to be paid to the Treasurer of Virginia, and used for the improving Virginia’s marine habitats and waterways–in other words, for the public good and for the preservation of our precious natural resources.
Virginia’s part of the Chesapeake Bay is not the only place in the country with this sort of sand–California’s San Francisco Bay also has quite a bit of it. Guess what happened there?
You got it–numerous companies submitted false claims to the state by mining sand in areas of the Bay for which they had not been issued a permit, and by mining more sand than they reported to the state of California. Because the California statute is similar to the Virginia statute (in that both set a range of prices for one cubic yard of sand depending on the purpose for which it is mined) the companies also submitted false claims and made false records in order to decrease the price owed to the state for one cubic yard of sand.
I would say the odds of something similar happening here in the Chesapeake Bay are pretty high–if for no other reason that the value of the sand and the low prices set by the Commonwealth of Virginia. At a statutory price of $.20 to $.60 per cubic yard, the sand mined from the Chesapeake Bay is a real bargain.
In California, the state charges $3.30 for one cubic yard of sand mined from the Bay, and the “street value” or commercial value of such sand is around $12.50 per cubic yard. That means the incentive for a company to rip off the Commonwealth is almost too much to pass up.
To drop me a line and learn more about my firm or whether you might have a situation to which the Virginia Fraud Against Taxpayers Act applies, you may contact me here.
Zachary Kitts
Cook & Kitts, PLLC