Novum to Pay $3 Million for Use of ‘Non-U.S. Origin’ Materials on Fed Projects
Wisconsin-based Novum Structures will pay $3 million to resolve its liability arising from improper use of foreign materials on federally funded construction projects. The company violated contractual provisions that apply domestic preference statutes, recognized as “Buy American” requirements, according to the Department of Justice (DOJ). Novum allegedly repackaged materials and falsified documents relating to some federally funded projects in order to hide that it was using noncompliant foreign materials. The company will plead guilty to one count of concealing a material fact and pay a $500,000 criminal fine.
Novum also agreed to a $2.5 million civil settlement under the False Claims Act. This resolves allegations that it caused false claims by knowingly using noncompliant materials on projects from January 1, 2004 through July 11, 2013, according to the DOJ.
“As is made clear by the settlement, we take this matter very seriously and accept full responsibility for our actions,” Travis Loften, vice president of global finance and U.S. operations at Novum Structures, told USGlass magazine in a statement. “We have also improved our internal procedures to ensure Novum will fully comply with contractual requirements going forward.”
The allegations originally were brought by ex-employee Brenda King under the whistleblower provisions of the False Claims Act.
According to Brian Mahany, King’s attorney, Novum “admitted to a complex scheme of substituting structural components manufactured in the People’s Republic of China and elsewhere as ‘Made in the USA’ in government buildings and projects. … Novum’s fraud included habitually repackaging foreign steel products to reflect a ‘Made in USA’ origin, fraudulently falsifying records with material test numbers taken from legitimate U.S. products, and demanding employees lie if questioned.”
Construction projects funded by the U.S. government normally are subject to laws requiring the use of domestic materials, such as the Buy American Act; the Federal Transit Administration’s Buy America provision; and Section 1605 of the American Recovery and Reinvestment Act. The contracts involved in this case covered government buildings and transit projects partially paid for with federal funds.
“It is important to note that the noncompliance relates solely to the country of origin of the products. At no time was there an issue with the quality of materials used,” said Loften. “We have taken action to resolve the vast majority of the noncompliance issues, in many cases replacing non-compliant foreign-sourced products with Buy American-compliant counterparts.”
He adds, “… the Buy American requirements applied to a very small part of Novum’s business. Additionally, the noncompliant materials used represented a small fraction—less than 3 percent—of the value of the work on the few projects that were subject to Buy American requirements.”
The False Claims Act permits private parties to sue on behalf of the government those who falsely claim federal funds. The act also allows the whistleblower to receive a share of any funds recovered through the lawsuit. King will receive approximately $400,000 as her share of the civil settlement.
Loften said Novum “look[s] forward to putting this issue behind us and continuing to provide the same high level of customer service and quality that our clients have come to expect.”
Appropriations Act Takes
on Tax Issues, Trucking Rules
Congress and President Obama took action on a bill in late 2015 that affects glazing businesses and manufacturers, among other small- and medium-sized companies.
The legislation (H.R. 2029) passed with strong bipartisan support and includes the permanent extension of the Section 179 deduction, multi-year extensions of tax incentives for energy-efficient improvements and bonus depreciation, suspension of the Health Insurance Tax (HIT), continued relief from commercial trucking rules, and the permanent extension of the research and development tax credit.
Provisions in the overall legislation that could impact industry businesses include:
• Extension of Section 179 Deduction: Permanently extends the limit for the Section 179 Deduction to $500,000, which allows small businesses to deduct the full purchase price of qualifying property and software placed in service;
• Bonus Depreciation Extension through 2019: Extends bonus depreciation for another five years (2015-2019). For 2015-2017, it allows businesses a 50-percent bonus depreciation for property placed in service. The amount phases down to 40 percent in 2018 and 30 percent in 2019;
• Energy Efficiency Tax Incentives Extended Through 2016: Extends the tax credit for energy-efficient improvements for existing residential homes (25C), tax credit for energy-efficient improvements for new residential homes (45L), and deduction for energy-efficiency improvements for commercial buildings;
• Suspension of the Health Insurance Tax in 2017: One-year suspension of the Health Insurance Tax (HIT) in 2017. The tax is levied annually on fully insured health care plans and is offered by many small- and medium-size businesses. In 2015 and 2016, the federal government is expected to collect $22.6 billion from the HIT;
• Continued Relief from Hours of Service Rules for Commercial Trucking: Continues the suspension of the 34-hour restart requirement as part of the Department of Transportation’s (DOT) Hours of Service (HOS) rules regulating the amount of time a commercial truck driver can spend behind the wheel, and;
• The Research and Development Tax Credit: The provision permanently extends the research and development tax credit. Additionally, beginning in 2016, eligible small businesses ($50 million or less in gross receipts) may claim the credit against alternative minimum tax (AMT) liability, and the credit can be utilized by certain small businesses against the employer’s payroll tax (i.e., FICA) liability.
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