Monday, April 15, 2019

Government Settles Product Substitution Case for $545 Thousand

Fortinet is a Silicon Valley based cybersecurity vendor with significant Government sales. Jay Fang was a logistics specialist working out of Fortinet's Vancouver, Canada offices. In 2016, Fang filed a lawsuit under the qui tam provisions of the False Claims Act, accusing Fortinet of mislabeling some of the products it sold as manufactured in the United States when in fact, the products were manufactured in Taiwan and China. These products were in turn, sold to the Government or resold to other vendors for ultimate use by the Government. Mislabeling products is a violation of the TAA (Trade Agreements Act) which mandates that products on Government contracts be manufactured or substantially transformed in the U.S. (or another designated country).

The Justice Department intervened in the qui tam lawsuit and just recently announced a settlement whereby Fortinet agreed to pay the Government $400 thousand plus provide $145 thousand in TAA compliant equipment to replace non-compliant equipment.

Fortinet blamed the problem on a "rogue" employee who has since been fired.  The employee directed certain other employees and contractors to change product labels so that no country of origin was listed, or to include the phrases "Designed in the United States and Canada", or "Assembled in the United States". That doesn't ring entirely true. Why would an employee take such illegal action upon himself when there was no apparent incentive for him to do so. Why would a "rogue" employee involve other employees in the scheme knowing that to do so would increase the chances of someone blowing the whistle, when there was no apparent incentive for him to do so. We suspect there is more to this story. We suspect company management exerted some kind of pressure on the "rogue" employee.

The Justice Department press release can be found here.

No comments:

Post a Comment