Once again, another example of the limitless areas that can get a defendant into qui tam trouble: A whistleblower has accused pipe manufacturer JM Eagle (“World’s Largest Manufacturer of Plastic Pipe”) of falsifying test results concerning the quality of its products. The whistleblower, John Hendrix, claims that the company’s pipes have ruptured after one year when they are supposed to last 50 years. This can lead to fires, explosions, and, of course, leaks. The big problem for JM Eagle stems from the fact that the company has sold pipe to a plethora of state and local governments, as well as the federal government.
Mr. Hendrix is a former employee of JM Eagle and discovered the problems when he was asked to oversee the company’s quality control process. When he realized that the company had been manipulating its cerfification test results, he pressed management to do something, but it refused and Hendrix was eventually fired.
Although the federal government declined to join Hendrix’s lawsuit, numerous states and municipalities have signed on. They include Nevada, Delaware, Tenessee, and more than 40 water authorities in California (and if you live in California or other parts of the west, you know that water is something you don’t mess around with!). Nevada has been particularly hard hit with expenses related to faulty pipe. The state has already spent about $5 million to replace JM Eagle pipe that was supposed to supply water to a prison complex. Apparently, the pipe exploded several times per year. Even darker times may be ahead, however: the state has spent $57 million on PVC pipe from JM Eagle for use in government buildings and other projects.
JM Eagle has an interesting back story. The company’s parent is Formosa Plastics Group, which is Taiwan’s biggest diversified industrial company. The company’s founder, Wang Yung-ching, helped make Taiwain into an economic “tiger,” and he died the second richest man in the province. His children, including JM Eagle’s CEO, continue to fight over Yung-ching’s massive fortune (Yung-ching died intestate, i.e., without a will).
One of the central claims of Hendrix’s suit is that JM Eagle hired inexperienced workers to save money, thereby reducing the quality of the piping and necessitating the company to engage in a coverup. As more governments realize that they may have been duped into buying faulty pipe, they may join the suit in an effort to shore up their dwindling budgets. Keep an eye out for more on JM Eagle in the future.