APRIL 1998 VOLUME 18 NUMBER 4


NAMES IN THE NEWS

 
Leaky Fighting Vehicles
A federal jury in San Jose, California in April ordered FMC Corporation, the manufacturer of the Bradley Fighting Vehicle, to pay $310 million for submitting more than 14,000 false claims to the federal government over a 10-year period.

The verdict capped a 12-year battle that began in September 1986 when Henry Boisvert, a former FMC employee, filed a complaint under the False Claims Act against FMC.

The U.S. Justice Department declined to join as plaintiff, which left Boisvert to go it alone.

Under the False Claims Act, the U.S. Treasury stands to receive at least 70 percent of the verdict, or well over $250 million.

Boisvert's lawsuit set out to prove that FMC defrauded the government when it manufactured and sold the Army a fighting vehicle whose hull was made out of aluminum and was supposed to be able to swim.

Over more than a decade, FMC manufactured almost 7,000 of these vehicles at an average cost of $1 million per vehicle, claiming in documents sent to the Army that the vehicle had been extensively tested by FMC for swim operations and could undergo them safely.

But Boisvert's attorneys presented to the jury evidence showing that FMC did not test the vehicle extensively and that FMC was aware from the time the first vehicle was produced in 1981 that the vehicles leaked extensively.

The largest single portion of the damages awarded by the jury was allocated to Boisvert's claim that the technical manuals for the Bradley, prepared by FMC for the Army, were not accurate and failed to contain all necessary safety information for the troops in the field.

"Contractors need to be honest in dealing with the government," jury foreman Francisco Nazario told reporters. "They are going to be held accountable if they don't do that."

FMC called the verdict "outrageous" and said it would appeal.

Stealing from Steel
Agreeing to pay the largest fine ever in a U.S. antitrust case, the Danbury, Connecticut-based UCAR International, Inc. (UCAR), the largest producer of graphite electrodes in the United States, will pay $110 million in connection with an international conspiracy to fix the price and allocate the volume of graphite electrodes sold in the United States and elsewhere.

According to charges filed by the U.S. Justice Department, UCAR and the other companies began to fix prices and allocate their shares for graphite electrodes in the United States and elsewhere at least as early as July 1992, and continued until at least June 1997.

Graphite electrodes are large columns used in electric arc furnaces in steel-making "mini-mills" to generate the intense heat necessary to melt and further refine steel. Nine electrodes, joined in columns of three, are used in the typical electric arc furnace to melt scrap steel.

Because of the intensity of the melting process, electrodes are continuously consumed.

Total sales of graphite electrodes in the United States are estimated at $500 million for 1996 and more than $1.75 billion during the term of the charged conspiracy.

"UCAR International has done the right thing in accepting responsibility for its illegal activity and agreeing to cooperate with the investigation," says Joel I. Klein, assistant attorney general for antitrust.

Showa Denko Carbon, Inc., a United States subsidiary of a Japanese firm, and the Carbide/Graphite Group of Pittsburgh have previously pled guilty or entered cooperating arrangements with the Justice Department.

The criminal case against the conspirators charges they held meetings throughout the world at which they agreed to increase and maintain prices of graphite electrodes and to divide the world market among themselves and to designate on a region-by-region basis, including the United States, the conspirator who would fix the price that the others would follow.

Crossing Borders
The survival of independent bookstores in the United States is at risk. Illegal preferential deals afforded the two giant bookstore chains are putting independents at a competitive disadvantage. Those are the charges in a March antitrust lawsuit filed by the American Booksellers Association (ABA) against Barnes & Noble and Borders.

"We contend in our lawsuit that the chain stores are getting special deals and discounts from the publishers, and that these discounts are unavailable to the independent book stores no matter how many books they buy," says Avin Mark Domnitz, executive director of the ABA. "Fair and legal competition is fine and benefits everyone. But right now the independents are competing with one hand unjustly tied behind their backs. We are asking the court to restore a level playing field to ensure a healthy, competitive marketplace."

Domnitz says that as the national chains gain dominance in local markets, they have growing incentives to increase prices and stop stocking books that don't immediately contribute to the bottom line.

"Much is at stake in the struggle for the survival of the independent bookstores," says Clark Kepler, owner of Kepler's Books & Magazines in Menlo Park, California, one of the plaintiffs in the suit. "This fight is about preserving what America is able to read. A network of healthy independent bookstores spurs publishers to produce a diversity of literature."

-- Russell Mokhiber