On July 26, 2018, DOJ announced that Saint Paul, Minnesota-based 3M Company would pay $9.1 million to settle allegations that it knowingly sold defective dual-ended “Combat Arms” earplugs to the United States military without disclosing defects that made the devices ineffective and may have caused thousands of soldiers to suffer significant hearing loss and tinnitus (or ringing in the ears). Caught for its misdeeds and compelled to enter a settlement other defense contractors will hear loud and clear, 3M is our Catch of the Week.
The settlement resolves allegations in a lawsuit brought in 2016 by Moldex Metric, Inc.-a family-owned business in Culver City, California that manufactures and sells BattlePlugs, a competitor earplug product-under the qui tam provisions of the False Claims Act. Moldex will receive 21% of the settlement amount, or $1.91 million, for bringing to light details about 3M’s defective products.
The United States alleged that from January 2006 through December 2015 3M and a predecessor company sold to the military “Combat Arms” earplugs 3M knew were too short for proper insertion in users’ ears, and did not perform well in certain individuals as a result. The United States also alleged 3M did not disclose this information to the United States and delivered the earplugs to the United States knowing they contained defects that impaired their serviceability. 3M did not admit liability.
“The Department of Justice is committed to protecting the men and women serving in the United States military from defective products and fraudulent conduct,” said Acting Assistant Attorney General Chad A. Readler of the Department’s Civil Division. “Government contractors who seek to profit at the expense of our military will face appropriate consequences.”
This settlement is another example in a growing list of False Claims Act cases brought by a whistleblower that is a business competitor of the government contractor accused of fraud. More and more, businesses see that the False Claims Act is a powerful vehicle to level the playing field against competitors who have an unfair advantage because they commit fraud. Companies forced to compete for government contracts against fraudsters can be the perfect whistleblowers because they know their industries inside and out, and have multiple monetary incentives to take down dishonest competitors. Of course, not every company can or should bring sue a competitor under the False Claims Act. For corporate whistleblowers and others, a whistleblower lawsuit is full of perils that experienced attorneys who specialize in the practice can help would-be whistleblowers avoid.
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