Government And Whistleblowers Target Contractors On Trade Agreements Act Compliance

Originally published in V&E Government Contracts E-communication Update, July 18, 2012

On May 8, 2012, the Department of Justice (DOJ) announced that federal contractor Direct Resource, Inc., had agreed to pay $450,000 to resolve allegations that the company had violated the Trade Agreements Act (TAA), 19 U.S.C. § 2501, et seq. The TAA and its implementing regulations require that products sold to the federal government under certain contracts be wholly manufactured or "substantially transformed" in the United States or in certain "designated countries." Direct Resource settled allegations that it had sold products made in China pursuant to contracts it held with the General Services Administration. China is not a "designated country" under the TAA.

DOJ's agreement with Direct Resource is only the latest in a series of settlements of TAA-related cases brought by whistleblowers under the qui tam provisions of the False Claims Act (FCA), 31 U.S.C. § 3729, et seq. Several of the settlements resulted from qui tam cases brought by competitors or former employees who received a portion of the settlement amount.

In recent years, contractors have paid the following amounts to settle FCA allegations that included allegations that the contractors made false claims or false statements in connection with TAA violations:

Contractor

Date

Settlement Amount

Cablexpress Corp., d/b/a CXtec

April 2012

$2,000,000

Home Depot, Inc. and Home Depot USA, Inc.

October 2011

$2,250,000

Fastenal Company

January 2011

$6,250,000

Furuno U.S.A. Inc.

August 2010

$695,000

Oce North America

September 2009

$1,200,000

J Squared Inc., d/b/a/ University Loft Company

June 2009

$400,000

Mitel, Inc.

February 2009

$1,300,000

Tifco Industries, Inc.

February 2009

$1,600,000

W.W. Grainger Inc

July 2008

$6,000,000

These settlements followed a series of multi-million dollar payments by office supply product vendors Corporate Express, Staples, Office Depot, and OfficeMax to settle FCA/TAA allegations in 2005 and 2006. Like...