MEDINA, Ohio—RPM International Inc. has reached a $61 million settlement with the U.S. Department of Justice over allegations that its subsidiary, Tremco Inc., overcharged the federal government for roofing products and services.
According to the settlement agreement, RPM and Tremco will pay the U.S. $60,958,963, plus simple interest of 2 percent from May 15, 2013, until the payment is made.
RPM said in a statement it expects to pay $65.1 million to settle the issues in the case. In early April, the Medina-based maker of coatings and sealants reported a $42 million loss in the third quarter and accounted for the potential loss by establishing a $68.8 million contingency. In July, RPM announced it had reduced the contingency by $3.7 million.
In a news release, Cleveland-based law firm McCarthy, Lebit, Crystal & Liffman Co. L.P.A. praised the whistleblower in this case, Gregory Rudolph of Rocky River, Ohio, a former vice president and 20-year employee at Tremco.
Rudolph quit Tremco in 2009, and in February 2010 he filed his lawsuit alleging Tremco had overcharged the government and sold defective roofing materials. McCarthy, Lebit, Crystal & Liffman and Washington D.C.-based law firm Murphy Anderson PLLC represented Rudolph.
Ann-Marie Ahern, a principal at McCarthy, Lebit, Crystal & Liffman, said Rudolph's actions led to a "tremendous recovery of taxpayer dollars."
Ahern said Rudolph quit the company after he raised concerns internally and felt he did not receive an adequate response.
After the federal government receives its payment, it will give Rudolph his share of the settlement: $10,911,654, also with interest of 2 percent from May 15 until payment. The settlement was reached Aug. 13 and unsealed Aug. 26.
The cost of the settlement is based on estimates regarding pricing issues with the U.S. General Services Administration, Ahern said. When companies sell goods and services to the federal government—in this case, roofing materials for buildings such as prisons or Veterans Administration hospitals—they are required to offer them the best prices they would offer a private customer. The lawsuit alleged that pricing practice did not happen.
According to a news release from the U.S. Department of Justice, Tremco also allegedly marketed expensive materials to government purchasers without disclosing the availability of the same materials at lower cost that were made and sold by the company.
"Companies that knowingly skirt the rules for securing government business undermine the integrity of the procurement process and create an unfair advantage against companies that are playing by the rules," Stuart F. Delery, assistant attorney general for the Justice Department's Civil Division, said in the news release. "We are committed to ensuring a level playing field and protecting taxpayer dollars."
RPM said the majority of the incidents involved in the lawsuit took place between 2002 and 2008.
The claims officially run from Jan. 2, 2002 through March 1, 2011.
In commenting on the settlement, RPM chairman and CEO Frank C. Sullivan said in a news release, "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 percent 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."