LG Chem Agrees to $1.2 Million False Claims Act Settlement

Technology giant LG Chem announced earlier this month that it will pay $1.2 million to settlement claims under the False Claims Act. The settlement, which does not admit wrongdoing or liability, comes as a result of the government’s accusations that the company mismanaged federal funds and provided employees unnecessary benefits with taxpayer money.

The False Claims Act has proven to be a pivotal piece of legislation against any individual or corporate entity found to be defrauding the taxpayers of money. It is especially useful against the healthcare industry, but has also been used in a plethora of other cases, including those related to defense, lending or technology.

In essence, the FCA assesses triple damages against companies found to be engaging in fraud, which is designed to act both as a punishment and deterrent to others considering similar behavior. The FCA is thought to be so popular and effective due to its qui tam provisions, which allow whistleblower plaintiffs to receive up to 30 percent of the amount recovered by the government, assuming their information was original and not known to the general public.

Details of Case Against LG Chem

LG Chem is a Michigan-based electric car battery manufacturer working with a $150 million federal grant. The money was designated to be used to develop and manufacture energy-efficient, green car batteries and was awarded to the company by the Department of Energy. More specifically, the government contract called for LG Chem to make battery cells for the highly-touted Chevrolet Volt, which is a plug-in hybrid vehicle designed to go nearly 40 miles on battery power before resorting to a gasoline-powered generator. Despite slow sales, LG Chem remained bound by the contract and was to continue manufacturing the batteries with federal grant money.

In its Complaint, the U.S. Department of Justice alleges that not only was LG Chem not not manufacturing batteries in compliance with its contract, it wasn’t doing much of anything, despite maintaining a hefty payroll and regularly spending down its government contract money. Upon further inspection, the government came to realize that the LG Chem plant located in Holland, Michigan, was actually on hold pending the transfer of equipment and necessary components for battery manufacture from a company located in Korea. During the wait, the company allegedly paid employees to perform volunteer work, watch movies and play games during regular work hours.