A few weeks ago, a California federal court publicly unsealed a whistleblower case filed against JM Eagle in 2006.  As you may already know, JM Eagle is the largest PVC pipe manufacturer in the world, with annual sales estimated at $1.6 billion by Plastics News. The company is a major supplier of PVC pipe to government, municipalities and private interests.  The suit, filed by whistleblower John Hendrix, a former quality assurance engineer at JM Eagle headquarters, alleges that between 1997 and 2005, JM Eagle knowingly sold inferior PVC pipe products as a result of internal cost-cutting measures to governments, municipalities and private entities.  Governmental agencies from throughout the country have joined the suit, including Nevada, Virginia, Delaware, Tennessee, and 42 localities in California, including San Diego, Sacramento, San Jose and the Los Angeles Department of Water and Power.

The whistle blower lawsuit states specific details of JM Eagle’s cost cutting maneuvers.  Mr. Hendrix says that the company manipulated and falsified PVC strength testing to make it appear as if the PVC pipe was meeting minimum tensile strength standards.  The suit alleges that “backed by this new crop of inexperienced managers, Mr. Wang (JM Eagle president) shifted JM’s focus away from product quality to a single-minded mission of gaining market share and improving the bottom line, irrespective of quality.”

Recently, the New York Times reported on the whistleblower’s claims and wrote: “Pipes that should last 50 years are in some cases rupturing in their very first year. This can lead to explosions, leaks, fires and other dangers.” Nevada Attorney General Catherine Cortez Masto issued a news release on the litigation, stating, “We will hold anyone who cheats Nevada taxpayers accountable.” Virginia Attorney General Ken Cuccinelli echoed those comments, saying that, “dishonest companies who cheat the Virginia taxpayers will be held accountable.”

Taiwanese resin giant Formosa Plastics is also a Defendant in the lawsuit and is identified as the source of the PVC resin.  The lawsuit claims that Formosa required JM Eagle to use its resins and compounds for much of the PVC pipe at issue, and played a key role in producing the defective pipe. Recently, Formosa has come under fire by state and federal environmental health agencies for its many years of pollution violations at its plants in Texas, Louisiana and Delaware.

As this litigation progresses, we believe more stories of this fraud will come to light.  Our firm is investigating cases where private and municipality interests purchased JM Eagle’s substandard pipe. If you have any questions regarding this litigation, you can contact Rhon Jones or Parker Miller, lawyers in our firm, at Rhon.Jones@beasleyallen.com and Parker.Miller@beasleyallen.com, respectively, or at 1-800-898-2034.

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