A recently-unsealed False Claims Act lawsuit, brought by a qui tam whistleblower, against Tremco, Inc., has reportedly settled for approximately $60 million.  This case is particularly interesting, because the whistleblower alleged in his complaint not only that Tremco (and its parent company RPM International, Inc.) violated various rules governing federal contracts, but also that at least one of the products sold by Tremco—namely, BURmastic roofing systems—was defective.  If this allegation of defective roofing systems is accurate, then Tremco’s liability could extend beyond this particular case, since it presumably sold BURmastic roofing systems to private-sector customers as well.

The whistleblower in this case was Gregory Rudolph, who worked for Tremco for more than 20 years.  According to the complaint, Mr. Rudolph eventually became Vice President of Product Systems, before resigning in 2009.  He filed his qui tam lawsuit in July of 2010.

The complaint alleges that Tremco routinely engaged in various practices intended to artificially inflate the prices paid by government entities, both federal and state, for roofing services and roofing products.  For example, when negotiating contracts with the General Services Administration (GSA), a contractor is required to provide the government with its “best price” for the product or service.  The complaint alleges that Tremco lied to GSA by providing a purported “commercial price list” that did not actually reflect the prices charged by Tremco to its private-sector clients.  The complaint also alleges that Tremco had a practice of selling “expensive brand-name, top-of-the-line roofing systems” to government entities, when all that was needed was “identical lower-cost alternatives, which lack only the fancy names and labels.”

The complaint also alleges that Tremco mislead customers about the fire protection qualities of its roofs.  According to the complaint, Tremco had an “in-house” fire-testing facility, which it used to “rate” its own products.  Indeed, the complaint states that “[f]or many years and until about 2007, Tremco was certified by UL Laboratories to do its own fire testing.”  But, at that time, “Tremco lost its in-house certification and its higher fire code rating after UL Laboratories independently tested and examined Tremco roofing at its own facility and could not duplicate the Tremco in-house results.”  Put otherwise, these allegations suggest that, at least until 2007, Tremco was selling roofing systems with fire ratings that were higher than could actually be established through independent testing.

Finally, in the portion of the complaint of greatest interest to Tremco’s future liabilities, Mr. Rudolph alleges that “since the summer of 2005, Tremco knew that its BURmastic roofing systems installed over insulation board had the potential to fail and that many of these roofs had failed or were failing.”  Indeed, the complaint alleges that “in internal documents, Tremco estimated that the failure rates could be as high as 80% is some regions.”  The complaint asserts that, despite knowing about these problems, Tremco failed to inform its government customers.

Did Tremco also fail to inform its private-sector customers about the known problems with its BURmastic roofing systems?  The allegations of the complaint certainly suggest so.  Mr. Randolph claims that he repeatedly raised the issue, and tried to get the company to address the problems that were causing leaks and water intrusion through its roofs.  But he hit a roadblock.  The complaint alleges that “Roofing Division President Kratzer opposed [Mr. Rudolph’s] recommendations that the roofs be repaired prior to costly leaks occurring because he did not want to have to disclose to customers and shareholders the extent of the defects in these roofs.”

Mr. Rudolph, as the qui tam whistleblower in this case, reportedly will receive an award of approximately 18% of the amount of the settlement, for a relator’s share of almost $11 million.  That is a fantastic result for Mr. Rudolph.  But it is an even better result for the American taxpayers, who will keep almost $50 million that they would not have recovered but for Mr. Rudolph’s moral courage.