State and local governments across the country may have to replace their water systems because of defective pipes, according to a whistle-blower lawsuit unsealed this week.
The whistle-blower, John Hendrix, accuses his former employer, one of the world’s largest pipe manufacturers, of falsifying test results about the quality of its products. Pipes that should last 50 years are in some cases rupturing in their very first year, according to Mr. Hendrix and some state documents. This can lead to explosions, leaks, fires and other dangers.
Read full New York Times story here.
Mr. Hendrix said he uncovered the problem after he was asked to oversee the certification of a new manufacturing process that put the pipes through a prescribed battery of tests. He concluded that JM Eagle had been selling substandard plastic pipe since 1996, and that it had subsequently manipulated test results.
When he told his superiors of his concerns, they said the problems were a normal “business risk,” according to the complaint. When he pressed harder, he was fired.
Mr. Hendrix, 31, of Clifton, N.J., then began a whistle-blower lawsuit under federal and state statutes that allow private citizens to file on behalf of government agencies if they suspect a fraud. In his lawsuit, he asserts that less than half of JM Eagle’s pipe would have qualified for sale if it had been properly tested.
Some states, cities and water districts have already experienced leaking, cracking and exploding pipes made of PVC, or polyvinyl chloride. Many are now joining Mr. Hendrix’s lawsuit, filed in United States District Court for the Central District of California.
Nevada, Virginia, Delaware, Tennessee and more than 40 water authorities in California have decided to take part.
Nevada recently spent $5 million replacing a three-quarter-mile section of a water main that supplies a large prison south of Las Vegas. The original pipe, made by JM Eagle, had been rupturing several times a year, baffling state officials and costing tens of thousands of dollars a year to repair.
JM Eagle, a successor to Johns Manville that was once based in Livingston, N.J., and now has its headquarters in Los Angeles, has operated a dozen manufacturing plants across the country, claiming about 60 percent of the nation’s market for new water pipes. It also sells to Mexico and Canada, suggesting problems could be more widespread.
If Mr. Hendrix’s allegations are borne out, it is not clear who will pay to repair the faulty water systems.
Standing behind JM Eagle is the Formosa Plastics Group, Taiwan’s biggest diversified industrial company, with factories spinning out textiles, semiconductors, oil, detergents and plastics in Asia and the United States.
Another large company with exposure to JM Eagle’s problems is the American International Group, which has provided some insurance to the company, according to Mr. Hendrix. The insurer has been trying to raise money to pay back its bailout by the government in 2008. Any large claim by municipal governments would be a setback.
JM Eagle was created in 1982, after the bankruptcy of Johns Manville, the first major corporation to seek protection from asbestos claims by filing for bankruptcy.
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