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Highway Guardrail Fraud Verdict: $525M to Gov't, Whistleblower

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By Mark Wilson, Esq. on October 21, 2014 1:28 PM

The United States and Joshua Harman will split a $525 million jury award following a fraud suit in Texas federal court against Trinity Industries, a company that makes those metal highway guard rails that are supposed to stop cars. Key words: supposed to.

As it turns out, some of the rails instead turned into metal skewers, slicing through car bodies and killing at least five people, injuring even more.

Trinity and the Deadly Inch

Here's the problem: The guard rail "head" -- which absorbs the impact of a car hitting it -- is supposed to slide along the rail track, safely out of the way. But in 2005, Trinity redesigned the guard rail without informing the Federal Highway Administration like they were supposed to. The new design caused the head to jam inside the guard rail, and rather than slide out of the way, "the rail can pierce an oncoming vehicle like a harpoon, endangering occupants," The New York Times reports.

Trinity expected that the new design would save the company $2 on every rail head. It also made the rail systems harder to reuse after an accident, meaning the government would have to purchase new ones. Earlier this year, Trinity told Bloomberg Businessweek that the design changes were only cosmetic, so the company didn't have to report them to the FHA. Although, there is some question about whether even these small changes -- reducing the guide channel from 5 inches to 4 -- were disclosed to the FHA.

Blowing the Whistle

The government was alerted to the change by Harman, an employee of a competing company. Harman will get a cut of the award as a whistleblower under the False Claims Act, a Civil War-era law designed to encourage regular people to report waste, fraud, or abuse in government contracts.

Trinity insisted that the litigation was about retaliation, as Harman's company has two patents on designs similar to Trinity's, and in 2011, Trinity sued for patent infringement. (Even in calling out his motives, they never said he was wrong.) It was this patent infringement litigation that led Harman to take a closer look at Trinity's design. Trinity actually tried to get Harman tossed out of the suit as a whistleblower because his allegations were all based on public information, but Judge Rodney Gilstrap said he could stay because of his expertise. The False Claims Act's financial incentives to report fraud allow Harman to recoup about a third of the judgment.

The jury's award on Monday amounted to $175 million, but that automatically triples to $525 million under federal law, Reuters reports. In a statement, Trinity suggested it would be challenging the award in court.

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