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Designer to Pay $3M in ‘Buy American’ Case

Monday, January 25, 2016

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A Wisconsin-based design and construction firm will pay a $3 million settlement to resolve civil and criminal allegations that it used foreign materials on federally funded construction projects in violation of “Buy American” contract provisions, according to the U.S. Department of Justice.

Novum Structures LLC agreed to plead guilty and pay $500,000 in criminal fines and $2.5 million to settle related civil False Claims Act allegations, the Justice Department announced Jan. 5.

Based in Milwaukee, the global company is billed as “a specialty contractor for high-technology special architectural structures and enclosures,” according to its website. The Justice Department said the company designs and constructs glass space frames often used in roofs and atriums.

Buy American
© iStock.com / RiverNorthPhotography

Novum Structures allegedly repackaged materials and falsified documents to disguise its use of foreign-made building materials, in violation of various domestic preference requirements in federally funded project contracts.

The case documents were not immediately available for review Friday (Jan. 22).

Criminal Allegations

Novum agreed to plead guilty to one count of concealing a material fact and pay a $500,000 criminal fine in the case.

Federal prosecutors said Novum “repackaged materials and falsified documents relating to some federally funded construction projects in order to hide that it was using noncompliant foreign materials.”

Construction projects funded by the U.S. government are generally subject to laws requiring the use of domestic materials, such as the Buy American Act; the Federal Transit Administration’s Buy America provision; and §1605 of the American Recovery and Reinvestment Act, according to the Justice Department.

The company was reportedly using steel and other construction materials from China, Germany and Italy.

The contracts involved in this case covered both government buildings and transit projects partially paid for with federal funds. While the Justice Department did not identify specific projects in its news release, reports say one of the projects involved was the ground transportation hub near the Miami International Airport for the Florida Department of Transportation.

Civil Allegations

In addition to the criminal fine, Novum has agreed to pay $2.5 million to resolve civil allegations under the False Claims Act that its conduct caused the submission of false claims for payment, the Justice Department stated.

architect
©iStock.com / suphakit73

The company agreed to not challenge debarment, which makes Novum ineligible to conduct future business with the federal government.

Specifically, the civil settlement resolves allegations that Novum caused false claims by knowingly—and in violation of its contractual obligations—using noncompliant foreign materials on several federally funded construction projects from Jan. 1, 2004 through July 11, 2013.

As part of the settlement agreement, Novum has also agreed not to contest debarment from federally funded projects, the Justice Department adds.

Contractors on Notice

“When taxpayer dollars are provided for construction projects, the government expects contractors to comply with all requirements, including ones that ensure the money remains in the U.S. economy,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. 

“This settlement shows that the Department of Justice is committed to pursuing claims against contractors that put financial gain ahead of complying with the law.”  

Whistleblower

The case against Novum originated as a whistleblower lawsuit. Brenda King filed the lawsuit in 2012, under the whistleblower provisions of the False Claims Act.

King reportedly worked for the company from June 2004 to March 2012. When King allegedly brought up the fact that steel for government projects was coming from other countries without the required waiver, she was told that project managers were expected to lie about the origin of materials if asked, the Journal Sentinel reported, citing the lawsuit.

King will receive approximately $400,000 from the civil settlement, under the whistleblower provision.

“The claims resolved by the civil settlement are allegations only; there has been no determination of liability except to the extent admitted in Novum’s plea agreement,” the Justice Department noted.

Company Statement

"We take this matter very seriously and accept full responsibility for our actions," Novum vice president Travis Loften told the Journal Sentinel newspaper.

"We have also improved our internal procedures to ensure Novum will fully comply with contractual requirements going forward."

Loften also noted that there was never any concern about the quality of construction materials Novum used, only their national origin, and that the noncompliant materials represented less than 3 percent of the value of the work Novum did on projects subject to the “Buy American” requirements, the media outlet reported.

   

Tagged categories: Contractors; Government; Government contracts; Laws and litigation; Public Buildings; Public Transit; Regulations; Whistle blowing

Comment from Tom Schwerdt, (1/25/2016, 8:36 AM)

Secretly use foreign steel: pay $500,000. Openly flagrant safety violations that result in a death: Pay maybe $20,000. Something is wrong with these priorities.


Comment from M. Halliwell, (1/25/2016, 11:00 AM)

Tom, I agree it isn't right, but it's proportional to the savings: Bring in foreign steel, save $250,000-$1 million on a project (just get your employees to lie about the material source); don't buy safety gear, save $10,000-$40,000 on a job (and let insurance deal with the payout if someone dies). It's sick, but seems right for the "cost of doing business" model that so many companies seems to go by.


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