Networking Equipment Company Pays $2 Million to Partially Settle a Qui Tam Whistleblower Lawsuit

On April 16 2012, the U.S. Department of Justice (DOJ) announced that Cablexpress Corp, which operates under the name CXtec, agreed to pay $2 million to settle allegations that it violated the Trade Agreements Act (TAA). The lawsuit claims that CXtec unlawfully sold to the federal government counterfeit gigabit interface converters (GBICs) as well as networking and voice communication equipment  that were manufactured in countries prohibited by the TAA .

Timothy Kuney, a former high-ranking employee at CXtec, brought the law suit under qui tam provisions of the False Claims Act (FCA). The FCA allows a private citizen with knowledge of an organization committing fraud against the government to file a lawsuit against the organization on behalf of the government in order to recover fraudulently obtained federal funds.

Kuney filed the complaint in 2008 with the U.S. District Court for the Northern District of New York, claiming that CXtec  knowingly violated the TAA by selling products that were manufactured in China, Taiwan, Indonesia, Malaysia and Thailand, to federal agencies. The contract between CXtrec and the government required that all products be compliant with TAA. According to the complaint, CXtrec also established a specialized operation to sort, test and repackage counterfeit GBICs in order to deceive the government that they were authentic products.

Kuney will receive an award of $380,000 as a result of the settlement. The $2 million settlement resolves some claims in the complaint, but not all. The lawsuit will continue to move forward on additional allegations that CXtec sold to the government other products that violated the TAA .

“We are gratified that the government’s attorneys and investigators aggressively pursued our client’s allegations with respect to the unlawful sale of cables and counterfeit GBICs in violation of the False Claims Act, and we intend to continue our investigation and litigation of the remaining qui tam claims in the case,” said Jonathan Tycko, one of Kuney’s attorneys.

The Employment Law Group® law firm is a leader in the field of whistleblower law and has an extensive nationwide whistleblower practice representing employees who have exposed illegal activity by their employer.

Tagged: False Claims Act (FCA), Whistleblower Laws (Federal)