Failure to promptly disclose FCA lawsuit triggers government fraud case

posted on:
November 10, 2017

author:
Archie Grubb

category:
Fraud

archie grubb1 Failure to promptly disclose FCA lawsuit triggers government fraud caseU.S. District Judge Amy Berman Jackson, of the U.S. District Court for the District of Columbia, rejected an Ohio-based chemicals and roofing company’s attempt to have a U.S. Securities and Exchange Commission (SEC) whistleblower lawsuit dismissed, according to Law360. The SEC filed the lawsuit against RPM International after the company violated antifraud regulations following an investigation of claims that it had gouged the federal government.

In 2010, Gregory Rudolph filed a lawsuit as a qui tam whistleblower under the False Claims Act (FCA) against RMP International subsidiary Tremco. Rudolph worked for the company for 20 years before he resigned as its Vice President of Product Systems a year earlier, the National Law Review explained. He claimed the company charged the government higher prices than it charged its private-sector clients and sold the government more expensive, brand-name and top-of-the-line roofing systems when less expensive alternatives would have been just as effective.

The U.S. Department of Justice (DOJ) launched an investigation in 2011 in response to Rudolph’s claims. Two years later, the company agreed to pay $61 million to settle the lawsuit and end the investigation. However, the story doesn’t end with settlement, but takes a turn down a trail of more reported fraudulent activity, which led to the filing of the current SEC lawsuit.

Edward W. Moore was RPM’s general counsel and Chief Compliance Officer (CCO) who directed the company’s response to the DOJ investigation and the resulting settlement. After learning of the of the FCA lawsuit and DOJ investigation in August 2012, Moore was legally required to alert investors and markets that “RPM faced a material loss that was probable and reasonably estimable” in connection with the DOJ investigation. Yet, he failed to do so, and RPM also failed to “record an accrual on its books.”

The defendants argued that their failure to obey the anti-fraud regulations did not impact the company’s stock price. The court, however, found that the issue was much larger than the price of the stock, LawyersandSettlements.com explained. The other part of the impact equation was “whether the disclosure would have mattered to a reasonable investor.”

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Are you aware of fraud being committed against the federal government, or a state government? If so, you may be protected and rewarded for doing the right thing by reporting the fraud. If you have any questions about whether you qualify as a whistleblower, please contact an attorney at Beasley Allen for a free and confidential evaluation of your claim. There is a contact form on this website, or you may email one of the lawyers on our whistleblower litigation team: Archie Grubb, Larry Golston, Lance Gould or Andrew Brashier.

Sources:
Law360
Securities and Exchange Commission
National Law Review
LawyersandSettlements.com

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