– Marc Gravely, July 30th 2020
The use of cheap, foreign construction materials often results in defects that can put both buildings and human lives at risk. It is no secret that general contractors and construction companies are prone to cutting corners, but there is a big difference between using a slightly cheaper, but safe material, and constructing unstable buildings, putting lives at risk, and defrauding the government.
Construction defects can pose public safety risks. For example, Chinese drywall has had a devastating impact on people and buildings all over the country. Releasing toxic gases and damaging appliances, this cheap foreign material has been mentioned in numerous multimillion-dollar lawsuits.
When contractors use defective foreign materials in private construction projects, building owners are entitled to either get the buildings redone by the same contractor or to receive costs of repair so they can hire a new contractor to do it. On the other hand, if the government funded the project, whistleblowers who sound the alarm about the use of potentially harmful foreign materials can be eligible for cash awards.
The danger of cheap foreign materials in U.S. construction projects is nothing new. As far back as 1963, the Supreme Court of Texas stated in an opinion that “foreign steel is sometimes rusty, it is sometimes improperly or defectively threaded, it is often difficult to test foreign materials at the place of manufacture, sometimes foreign steel is improperly marked.”
The world has changed dramatically since 1963, but foreign construction materials are still an issue all over the country. Today, just like in 1963, steel manufactured overseas can be cheaper than American steel. And when contractors opt for low-quality imported materials to save money, their behavior often results in construction defects for U.S. homes, bridges, schools, and other private and public properties.
Buy American Act Violations
The use of foreign-manufactured construction materials often involves violations of the Buy American Act. Passed in the depression era to boost a devastated U.S. economy, the Act establishes “a general preference for the use of materials manufactured in the United States on public works projects funded by the U.S. Government. . . Contractors on public works projects are required to certify the materials used are manufactured in the United States,” the Justice Department has stated.
The Buy American Act helps keep jobs on U.S. soil. At the same time, it also protects our country’s population from defective materials and equipment commercialized by China and other countries with dubious quality standards.
A case that Jett Industries settled in 2014 offers an example of a typical Buy American Act violation. A general contractor working on federally-funded construction projects, Jett was hired to build a water pump station in the Village of Briarcliff Manor. The project included the construction of a tank, which required the purchase of steel. Under the Buy American Act, the company was required to buy U.S.-made steel, but it decided to buy cheap steel imported from France. Allegedly, the contractor also falsified documents to misrepresent the steel used in the tank as U.S.-made.
Lying about the origin/specifications of materials used in construction projects funded by the U.S. government is one of the most common violations that can potentially lead to multimillion-dollar Buy American lawsuits.
How to Get a Whistleblower Award
Any individual with information about construction defects resulting from the use of shoddy foreign materials in a federally-funded building project can file a lawsuit under the False Claims Act (FCA). Insiders can also sue if they are aware that a contractor misrepresented construction materials as U.S.-made or otherwise lied about their quality standards. The FCA provides that whistleblowers can receive between 15 and 30 percent of any recoveries resulting from their information.
As policymakers envision more stringent Buy American/Hire American regulations that can boost our ailing post-pandemic economy, we are seeing a large number of successful seven-figure lawsuits involving the use of foreign and defective materials in government-funded construction projects and Department of Defense contracts.
Harmful and Problematic Chinese Materials
Cheap imported steel from China has been linked with significant construction defects in numerous U.S. schools. Defects resulting from the use of shoddy Chinese steel in the construction of one Los Angeles school’s gymnasium once prompted a spokesperson for Los Angeles Unified School District to say, “This [Chinese] steel. . . used on the San Pedro gym. . . contained defective seam welds.” In California alone, over 15 schools were affected and required costly repairs. This means that U.S. schoolchildren were put at risk because contractors opted for cheap Chinese steel instead of quality U.S.-manufactured steel.
Chinese steel is only the tip of the iceberg. Laminate flooring imported from China by Lumber Liquidators was found to contain dangerous levels of formaldehyde. This led to a nationwide recall of the product. In 2015, the company agreed to a $36 million class-action settlement. According to the CDC, “certain Lumber Liquidator flooring from China could have triple the amount of cancer-causing formaldehyde than originally thought.”
Cast-iron piping of Chinese origin has been linked to major construction defects. Between 2000 and 2008, especially in San Diego, the Chinese products were extensively used in local high-rise building projects. Its substandard quality and improper coating have caused major leaks and massive property damage. If a contractor installed this type of piping in your property, you may sue for compensation relating to any resulting damage to the property and cover the cost of replacing it.
Besides laminate flooring and cast iron piping, construction defect lawsuits and FCA whistleblower cases have exposed many other problematic Chinese materials and parts, including black metal piping and corrugated stainless-steel tubing. All of these may be present in buildings dating as far back as 2000.
False Claims Act Cases Involving Cheap Foreign Materials and Products
When cheap foreign materials are used in a construction project, you can sue contractors, designers, insurers, and other parties for remedial work and/or financial compensation to cover needed repairs. In the case of government-funded projects, you may file an FCA lawsuit to expose fraudsters and seek a whistleblower award. Over the years, dishonest contractors have paid billions of dollars in FCA settlements relating to defective imported construction materials and Buy American violations.
- Defendant: Taishan Gypsum Ltd.
- Settlement amount: $248 million
Details: Taishan sold toxic Chinese drywall all over the U.S. starting in 2009. The settlement resolved a class action lawsuit filed by affected homeowners, largely from Florida.
Year resolved: 2020
- Defendant: Bradken Inc.
- Settlement amount: $10.9 million
Details: The DOJ alleges Bradken “produced and sold substandard steel components for installation on U.S. Navy submarines” and falsified lab test documentation to misrepresent the components as adhering to the government contract’s requirements. Bradken’s former Director of Metallurgy, Elaine Thomas, was charged with “Major Fraud Against the United States.” Thomas was allegedly instrumental in allowing U.S. Navy submarine hulls to be built using castings that had failed required lab tests. “Thomas falsified results for over 200 productions of steel, which represent a substantial percentage of the castings Bradken produced for the Navy,” the DOJ stated.
Year resolved: 2020
- Defendant: Energy & Process Corporation
- Settlement amount: $4.6 million
Whistleblower award estimate: $900,000
Details: The Georgia-based company “knowingly failed to perform required quality assurance procedures and supplied defective steel reinforcing bars (rebar) in connection with a contract to construct a Department of Energy (DOE) nuclear waste treatment facility,” the DOJ wrote. “One-third of the rebar supplied by E&P and used in the construction was found to be defective.”
Whistleblower: Deborah Cook, former employee of an Energy & Process subcontractor.
Year resolved: 2017
- Defendant: Novum Structures LLC
- Settlement amount: $3 million, including a $500,000 criminal fine
Whistleblower award: $400,000
Details: Novum Structures, a Wisconsin-based contractor specializing in glass frames, allegedly falsified documentation relating to foreign-manufactured materials and violated the Buy American Act between 2004 and 2013.
Whistleblower: Brenda King, former Novum employee. King filed an FCA lawsuit alleging her former employer had illegally used materials made in Italy and China in projects for which the Florida Department of Transportation paid $15 million.
Year resolved: 2016