Whistleblower Sues Pipe Manufacturer


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Bursting Pipes Lead to a Legal Battle


Published: February 11, 2010


State and local governments across the country may have to replace their water systems because of defective pipes, according to a whistle-blower lawsuit unsealed this week.

The whistle-blower, John Hendrix, accuses his former employer, one of the world’s largest pipe manufacturers, of falsifying test results about the quality of its products. Pipes that should last 50 years are in some cases rupturing in their very first year, according to Mr. Hendrix and some state documents. This can lead to explosions, leaks, fires and other dangers.

Officials of the company, JM Eagle, dispute the allegations and say that the tests were done correctly.

Mr. Hendrix said he uncovered the problem after he was asked to oversee the certification of a new manufacturing process that put the pipes through a prescribed battery of tests. He concluded that JM Eagle had been selling substandard plastic pipe since 1996, and that it had subsequently manipulated test results.

When he told his superiors of his concerns, they said the problems were a normal “business risk,” according to the complaint. When he pressed harder, he was fired.

Mr. Hendrix, 31, of Clifton, N.J., then began a whistle-blower lawsuit under federal and state statutes that allow private citizens to file on behalf of government agencies if they suspect a fraud. In his lawsuit, he asserts that less than half of JM Eagle’s pipe would have qualified for sale if it had been properly tested. “It became apparent to me that this was being done intentionally,” he said in an interview.

Some states, cities and water districts have already experienced leaking, cracking and exploding pipes made of PVC, or polyvinyl chloride. Many are now joining Mr. Hendrix’s lawsuit, filed in United States District Court for the Central District of California.

Nevada, Virginia, Delaware, Tennessee and more than 40 water authorities in California have decided to take part.

“We will hold anyone who cheats Nevada taxpayers accountable,” said Catherine Cortez Masto, Nevada’s attorney general. Nevada recently spent $5 million replacing a three-quarter-mile section of a water main that supplies a large prison south of Las Vegas. The original pipe, made by JM Eagle, had been rupturing several times a year, baffling state officials and costing tens of thousands of dollars a year to repair. Other states and cities are still reviewing the allegations and deciding whether to participate. The cost of repairing or replacing the defective pipes is not known, but could run into many millions of dollars for each of the affected systems.

JM Eagle, a successor to Johns Manville that was once based in Livingston, N.J., and now has its headquarters in Los Angeles, has operated a dozen manufacturing plants across the country, claiming about 60 percent of the nation’s market for new water pipes. It also sells to Mexico and Canada, suggesting problems could be more widespread.

A company spokesman, Marcus Galindo, said the company “stands 100 percent behind the quality of our products.” He said that the company would not have been able to gain such a large share of the market if it had not been satisfying its customers year after year.

He said he believed that Mr. Hendrix had “cherry-picked” testing documents and e-mail messages to give the impression that the company had not followed proper testing procedures. Some of the requirements were ambiguous, he said, and Mr. Hendrix was interpreting them so strictly “no manufacturer could have met that standard.” Mr. Galindo said JM Eagle had worked with the relevant industrial associations to clarify the ambiguous language.

If Mr. Hendrix’s allegations are borne out, it is not clear who will pay to repair the faulty water systems.

Standing behind JM Eagle is the Formosa Plastics Group, Taiwan’s biggest diversified industrial company, with factories spinning out textiles, semiconductors, oil, detergents and plastics in Asia and the United States. Its founder, Wang Yung-ching, was known as the “god of management” in Taiwan, and was revered as a rags-to-riches legend who helped the province become one of Asia’s “tiger” economies.

SOURCE The New York Times

Read the full article here.



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