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Contractor Pays $500,000 for Not Buying American

The loss of American jobs over the past decade due to companies moving operations overseas has given rise to a strong preference by American consumers, including the United States Government, for products made in America.  Congress has codified its preference for U.S. goods in what is known as the Buy American Act, 41 U.S.C § 10a-10d, and what are referred to as Little Buy American Acts.

These domestic preference statutes govern procurement by the federal government and require that only American-made components be used for projects funded with federal money.  The American Recovery and Reinvestment Act (“Recovery Act”), the so-called “stimulus” law, is the most well-known of the Little Buy American Acts.  Its purpose was to revitalize the American economy in the wake of the 2008 recession.  This law provides that funding under the Act cannot be used for a project involving “the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.”  2 CFR § 176.70.

Companies that do business with the U.S. Government have to certify their compliance with these Buy American Act requirements when they bid on government contracts.  If those companies then fail to use American made goods, they can be held liable under the False Claims Act (“FCA”), which provides for treble damages, penalties, and attorney’s fees.  And whistleblowers who come forward with reports of fraud are entitled to 15-30% of any recovery.

Last week, the Department of Justice announced that Jett Industries, Inc. paid the United States $500,000 to settle allegations that Jett had violated the FCA by installing a tank manufactured in France as part of its work on a federally-funded project to construct a water pump station.  Because the project was funded by Recovery Act dollars, the steel components of the tank were required to be manufactured in America.  Notwithstanding concerns raised by Jett employees that the tank was not compliant with the Recovery Act’s buy American provisions, Jett installed the non-compliant tank and then, according to a former Jett employee, proceeded to “cover up [its] violation” by falsely certifying that the tank was manufactured in America.

Although the case against Jett was not initiated by a whistleblower, if you have information about federal-funded dollars being spent on foreign-manufactured goods, and would like to discuss your options with an attorney, please contact the experienced qui tam lawyers at Tycko & Zavareei LLP.

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