Buy American Act Fraud: Contractor To Pay $3 Million

A government contractor will pay a total of $3 million to resolve civil and criminal allegations that it violated the Buy American Act by using non-compliant foreign materials on federally funded construction projects–and falsified documents in an attempt to hide its violations.

According to a Department of Justice Press release, Novum Structures LLC not only will pay $3 million, but will be debarred from federal contracting.

The Buy American Act, which is implemented (in part) through FAR Part 25, imposes a preference for domestic end products and construction materials on covered federal projects.  The Buy American Act is intended to promote domestic businesses and protect the national economy.

Novum specializes in the design and construction of glass space frames.  According to the DOJ press release, Novum violated the Buy American Act under certain projects funded by the Department of Transportation by repackaging foreign materials in order to create the impression that those materials were manufactured in the United States.  The DOJ also states that Novum “falsified documents relating to some federally funded construction projects in order to hide that it was using noncompliant foreign materials.”

A whistleblower initiated the proceedings against Novum by bringing a qui tam False Claims Act action in federal court.  The Department of Justice then intervened in the False Claims Act case, and brought criminal charges against Novum.

In a global settlement, Novum agreed to plead guilty to a single criminal charge and pay a $500,000 criminal fine.  Novum also agreed to pay $2.5 million in civil penalties under the False Claims Act (although Novum did not concede civil liability).  The whistleblower will receive approximately $400,000 as her share of the settlement.  Finally, Novum agreed not to contest its debarment from federal contracting.

Any violation of the Buy American Act can lead to penalties.  However, the stiff penalties in this case are likely due, in large part, to Novum’s apparent knowledge of its wrongdoing.  After all, according to the press release, this was no innocent mistake–Novum is alleged to have knowingly and purposefully violated the Buy American Act.  Now it will pay a heavy price.

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