The U.S. Attorney's Office in Los Angeles in 2008 presented to JM Eagle information it had gathered from numerous former employees who were interviewed by federal agents investigating allegations in a whistleblower lawsuit that JM Eagle had manufactured and sold substandard PVC pipe used in water and sewer systems.
According to the federal agents' notes, quoted in the U.S. Attorney's Office presentation:
- JM's former head of R&D told agents, "From 1991 through 2002, between 50-80% of the pipe produced by JM was non-conforming. From 2002 through 2005, 100% of the pipe was non-conforming." (Presentation at p. 46). He also told them that JM "lived by the motto, 'There is no shame in lying but there is shame in getting caught lying.'" (p. 66).
- A former plant quality control supervisor told the agents, "Changes in the quality of the compound caused test failures on a regular basis. The compound ingredients were changed because management did everything 'on the cheap.'" He also said he "was instructed to falsify inspection and test records." (pp. 7 and 47).
- JM's former corporate quality assurance supervisor at HQ told agents that he "quit because management would not let him do his job and only cared about profit, not whether the pipe that was shipped was non-conforming. Those employees who brought issues of pipe quality to management's attention were labeled as 'trouble-makers.'" (p. 66).
- A former research and development department employee told the agents that "JM far exceeded the life expectancy of the [equipment]. Management overruled plant managers who tried to replace the units." (p. 13).
The government's presentation is available through PACER (subscription required), US District Court for the Central District of California. Case No. 5:06-cv-00055-GW. See No. 128 on docket sheet (Memorandum In Opposition To Ex Parte Application To Expedite Discovery), item no. 7 (exhibit 6).
The federal government provided a letter to JM's lawyers explaining that its decision not to join the lawsuit at this time "should not be construed as a statement about the merits of the case. Indeed, the Government retains the right to intervene at a later date upon a showing of good cause."
Qui tam (whistleblower) lawsuits are brought under the False Claims Act and similar state laws that allow private citizens to sue companies that are defrauding the government or state or local government entities to recover funds on their behalf and receive a reward. The whistleblower may proceed with the case even if the government doesn't join. The case against JM Eagle is being brought by Phillips & Cohen LLP on behalf of a whistleblower. The whistleblower lawsuit has been joined by several states and numerous municipalities and water districts.