Japanese Fiber Manufacturer to Pay $66 Million for Alleged False Claims Related to Defective Bullet Proof Vests

Thursday, March 15, 2018

Toyobo Co. Ltd. of Japan and its American subsidiary, Toyobo U.S.A. Inc., f/k/a Toyobo America Inc. (collectively, Toyobo), have agreed to pay $66 million to resolve claims under the False Claims Act that they sold defective Zylon fiber used in bullet proof vests that the United States purchased for federal, state, local, and tribal law enforcement agencies, the Justice Department announced today.

The settlement resolves allegations that between at least 2001 and 2005, Toyobo, the sole manufacturer of Zylon fiber, knew that Zylon degraded quickly in normal heat and humidity, and that this degradation rendered bullet proof vests containing Zylon unfit for use.  The United States further alleged that Toyobo nonetheless actively marketed Zylon fiber for bullet proof vests, published misleading degradation data that understated the degradation problem, and when Second Chance Body Armor recalled some of its Zylon-containing vests in late 2003, started a public relations campaign designed to influence other body armor manufacturers to keep selling Zylon-containing vests.  According to the United States, Toyobo’s actions delayed by several years the government’s efforts to determine the true extent of Zylon degradation.  Finally, in August 2005, the National Institute of Justice (NIJ) completed a study of Zylon-containing vests and found that more than 50 percent of used vests could not stop bullets that they had been certified to stop.  Thereafter, the NIJ decertified all Zylon-containing vests.

“Bulletproof vests are sometimes what stands between a police officer and death,” said Attorney General Jeff Sessions.  “Selling material for these vests that one knows to be defective is dishonest, and risks the lives of the men and women who serve to protect us. The Department of Justice is committed to the protection of our law enforcement officers, and today’s resolution sends another clear message that we will not tolerate those who put our first responders in harm’s way.”

“This settlement sends a strong message to suppliers of products to the federal government that they must be truthful in their claims, particularly with regard to health and safety,” said Carol Fortine Ochoa, Inspector General of the General Services Administration.

This settlement is part of a larger investigation undertaken by the Civil Division of the body armor industry’s use of Zylon in body armor.  The Civil Division previously recovered more than $66 million from 16 entities involved in the manufacture, distribution or sale of Zylon vests, including body armor manufacturers, weavers, international trading companies, and five individuals.  The settlement announced today brings the Division’s overall recoveries to over $132 million.  The United States still has lawsuits pending against Richard Davis, the former chief executive of Second Chance, and Honeywell International Inc.

The settlement announced today resolves allegations filed in two lawsuits, one brought by the United States and the other filed by Aaron Westrick, Ph.D., a law enforcement officer formerly employed by Second Chance who is now a Criminal Justice professor at Lake Superior University.  Dr. Westrick’s lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The Act also allows the government to intervene and take over the action, as it did in 2005 in Dr. Westrick’s case.  Dr. Westrick will receive $5,775,000.

This case was handled by the Justice Department’s Civil Division, along with the General Services Administration, Office of the Inspector General; the Department of Commerce, Office of Inspector General; the Defense Criminal Investigative Service; the U.S. Army Criminal Investigative Command; the Department of the Treasury, Office of Inspector General for Tax Administration; the Air Force Office of Special Investigations; the Department of Energy, Office of the Inspector General; and the Defense Contracting Audit Agency.

The claims settled by this agreement are allegations only; there has been no determination of liability.  The lawsuits resolved by the settlement are captioned United States ex rel. Westrick v. Second Chance Body Armor, et al., No. 04-0280 (PLF) (D.D.C.) and United States v. Toyobo Co. Ltd., et al., No. 07-1144 (PLF) (D.D.C.).

 

Roofing Company Owner and Former Facilities Manager at Sierra Army Depot Indicted for Conspiracy to Defraud the United States

Friday, October 20, 2017

Government Seeks Forfeiture of Proceeds Resulting From Conspiracy

A federal grand jury in the Eastern District of California returned an indictment yesterday against two individuals for allegedly conspiring to defraud the United States, the Department of Justice announced.

The indictment alleges that Kenneth Keyes, a former facility manager at Sierra Army Depot (SIAD), and Leroy Weber, the owner of a roofing company, participated in a conspiracy to defraud the United States from as early as February 2012, and continuing through at least July 23, 2013, by obstructing the lawful functions of the United States Army through deceitful or dishonest means.

“Yesterday’s indictment demonstrates the Antitrust Division’s commitment to pursuing individuals who seek to enrich themselves by misusing federal programs at the expense of taxpayers,” said Assistant Attorney Makan Delrahim of the Justice Department’s Antitrust Division.

SIAD is a United States Army facility located in Northern California.  In 2012, SIAD earmarked $40 million for construction and renovation projects at its site using contractors who qualified under the Small Business Administration’s 8(a) Development Program.  The program provides assistance and benefits to small businesses owned and controlled by socially and economically disadvantaged individuals.

The indictment alleges that Keyes, Weber, and other unidentified co-conspirators:

  • Recruited eligible 8(a) contractors to work as primary contractors at SIAD;
  • Represented to those contractors that Weber controlled the work and allocation of SIAD contract awards;
  • Caused prime contracts to be assigned to selected 8(a) contractors;
  • Used proprietary government pricing information to inflate contract prices for the SIAD contracts;
  • Required selected 8(a) contractors to award work to companies owned or controlled by Weber; and
  • Required a contractor to pay Weber in exchange for being awarded certain subcontracts by 8(a) contractors.

The indictment also alleges that Weber caused a company under his control to issue weekly paychecks to a relative of Keyes, and himself caused $10,000 to be paid directly to Keyes.

The purpose of this conspiracy was to enable Keyes and Weber to unjustly enrich themselves and their family members by diverting government funds intended to rebuild and repair the SIAD Army facility to themselves and their companies.

An indictment merely alleges that crimes have been committed and all defendants are presumed innocent until proven guilty beyond a reasonable doubt.  Weber and Keyes each face a maximum penalty of 5 years in prison and a fine of $250,000.

The charges are the result of an ongoing federal antitrust investigation handled by the Department of Justice Antitrust Division’s San Francisco Office with assistance from the U.S. Small Business Administration Office of Inspector General, the U.S. Army Criminal Investigation Command, and the General Services Administration Office of Inspector General.  Anyone with information concerning the conspiracy should contact the Antitrust Division’s San Francisco Office at 415-934-5300.