SAN DIEGO - An Ohio-based roofing company agreed to a $60.9 million settlement with the U.S. Department of Justice after a whistleblower came forward with allegations the company violated contract rules and sold defective roofing materials. Team 10 found the company worked on some government buildings in San Diego.
The accusations made against Tremco, and its parent company, RPM International, came from Greg Rudolph, a former Tremco vice president.
"I did it because this had to stop. It had to stop," Rudolph said.
In San Diego, Tremco roofing worked on five buildings at San Diego State University, a U.S. Post Office near Poway and the federal jail in downtown San Diego, according to the federal complaint.
Read the complaint: http://bit.ly/1gnsMEM
Rudolph traveled the country inspecting Tremco's roofs. He said many of the roofs were on government buildings.
"I could tell you our federal business at the time was probably 15 to 20 percent," he said.
Rudolph said he started noticing problems on newer roofs around 2007.
"Leaks were occurring, sometimes a lot of leaks," he said.
Rudolph said he expressed his concerns to his bosses. In February 2009, he sent them a memo "recommending immediate action." He wanted Tremco to inform customers about the problems and to stop selling the defective roofing materials.
Nothing changed, he said.
"And I just lost it. It's like a light switch. I lost it," said Rudolph.
In April 2009, he resigned.
Rudolph said Tremco's private customers were routinely given discounts as high as 30 percent.
Government customers were given 13.3 percent discounts.
"Most everyone was aware of it. It was general practice," he said.
Federal contract rules mandate the government always receives the best price.
Rudolph's lawsuit states Tremco sold government customers its most expensive materials even though identical products were available at a lower cost.
In total, it's alleged Tremco overcharged the federal government for close to 150 roofs on buildings in 32 states -- including California.
In August 2013, Tremco reached its settlement with the government -- for $60.9 million, one of the 100 largest False Claims Act settlements in U.S. history.
"It's the only real method we have to fight fraud," said Patrick Burns, the co-director of Taxpayers Against Fraud Education Fund, a nonprofit group that raises awareness about the False Claims Act. "A lot of these roofs that we're talking about where the fraud was occurring were on state school systems. So when you have junior highs, elementary schools, high schools with rotten roofs, or roofs that were more expensive than they should have been, most of that's going to be state money."
Tremco and its parent company, RPM, declined requests to be interview for this story.
A spokesman referred to the following news release which was published after the settlement was reached.
RPM International Inc. today announced that it has entered into a final agreement with the U.S. Department of Justice (DOJ) to settle claims regarding U.S. General Services Administration (GSA) Multiple Award Schedule (MAS) contracts held by the roofing division of the RPM Building Solutions Group. The company expects to pay a total of approximately $65.1 million in order to resolve the issues arising out of those contracts and other related costs. As previously reported, on April 4, 2013, RPM disclosed that it had taken an accrual of $68.8 million in anticipation of a potential settlement. Additionally, on July 22, 2013, RPM disclosed that it had reduced its estimated accrual by $3.7 million.
The settlement with the DOJ involved the Building Solutions Group's recognition that accurate information about commercial pricing and discounting practices was not always provided on a timely basis to the GSA, and that federal agencies purchasing under the GSA MAS contracts did not always receive the pricing required by the contracts. The majority of the incidents on which the settlement is based occurred between 2002 and 2008.
Frank C. Sullivan, RPM International Inc. chairman and CEO, stated, "Though our roofing division made mistakes in the administration of our GSA contracts, it has always delivered excellent roofing and weatherproofing solutions to its federal customers. The installed product performance, which was a subject of the investigation, accounted for less than 0.3% of the settlement value. We are fully committed to conducting business with the highest levels of compliance, and have taken a number of proactive actions to strengthen our administrative procedures and compliance systems to prevent future errors from occurring.