Real life David and Goliath: How northeast Ohio man helped recover millions of misspent tax dollars

CLEVELAND - It is a real life David and Goliath story. 

In August, Tremco, a Beachwood based roofing company, and its parent company, RPM International, based in Medina, Ohio, agreed to a $60.9 million settlement with the U.S. Department of Justice.

The company was accused of violating government contract rules and selling defective roofing materials. The allegations against the company were brought to light by former vice president Greg Rudolph.

"I did it because this had to stop. It had to stop," he said. Rudolph was awarded $10.9 million under the False Claims Act as a result of the settlement.

"If I am one small spoke in the wheel that prevents this from happening in the future, it's all worth it," said Rudolph.

Rudolph went to work at Tremco in 1988. Though only a high school graduate, he worked his way up to vice president.

"My career there, 20-plus years, it was passion. I felt all the time, I'm doing the right thing," he said.

Rudolph traveled the country inspecting Tremco's roofs. He said many of the roofs were on government buildings, including three at the NASA Glenn Research Center in Cleveland.

"I could tell you our federal business at the time was probably 15 to 20 percent," he said.

Rudolph said he started noticing problems on newer roofs around 2007.

"Leaks were occurring, sometimes a lot of leaks," he said.

Rudolph said he expressed his concerns to his bosses. In February 2009, he sent them a memo "recommending immediate action." He wanted Tremco to inform customers about the problems and to stop selling the defective roofing materials.

Nothing changed.

"And I just lost it. It's like a light switch. I lost it," said Rudolph. In April 2009, he resigned.

Greg went to a Cleveland law firm to review his separation agreement. Attorney Ann-Marie Ahern thought it was odd Rudolph was offered a severance package since he had resigned.

"It was never his first thought to become a whistleblower," said Ahern.

"When we started to delve into the details of the circumstances surrounding his resignation, it became clear to me that the False Claims Act might be involved," she said.

The False Claims Act is the oldest whistleblower law on the books. It was created during the Civil War to stop contractors from overcharging the government for munitions and supplies. The act allows whistleblowers to sue on behalf of the government and to collect a share of any settlement.

Ahern encouraged Rudolph to file lawsuit, but when the pair presented their case to federal investigators, U.S. attorneys seemed to take little interest in the issues involving roofing materials.

But federal investigators were interested in something else going on inside Tremco.

"A few times I questioned it and I was kind of told, 'Don't worry about it,'" he said.

Rudolph said Tremco's private customers were routinely given discounts as high as 30 percent.

Government customers were given 13.3 percent discounts.

"Most everyone was aware of it. It was general practice," he said.

The problem: federal contract rules mandate the government always receives the best price.

Rudolph's lawsuit also states that Tremco sold government customers its most expensive materials even though identical products were available at a lower cost - another violation of federal contract rules.

In total, it's alleged Tremco overcharged the federal government for close to 150 roofs on buildings in 32 states.

"These roofs are all across the country. We're talking about VA hospitals, federal prisons, military installations, government buildings," said Ahern.

In August 2013, Tremco reached its settlement with the government - for $60.9 million, one of the 100 largest False Claims Act settlements in U.S. history.

"It's the only real method we have to fight fraud," said Patrick Burns, the co-director of Taxpayers Against Fraud Education Fund, a non-profit group that raises awareness about the False Claims Act.

In spite of legislative efforts backed by Attorney General Mike DeWine in 2011, Ohio is one of 21 states that does not have a False Claims Act.

"Quite frankly, the legislatures have dropped the ball," said Burns.

"A lot of these roofs that we're talking about where the fraud was occurring were on state school systems. So when you have junior highs, elementary schools, high schools with rotten roofs, or roofs that were more expensive than they should have been, most of that's going to be state money," he said.

"It's a missed opportunity, in my opinion, for the state of Ohio," said Ahern.

Rudolph opened RaW Solutions, his own roofing company, after resigning from Tremco. The Rocky River-based company got off to a rocky start.

"There were times I thought I'd have to close this place up," said Rudolph. The former Tremco vice president had traded his six figure salary for financial struggles.

His financial struggles soon ended.

The False Claims Act gives the whistleblower a percentage of the settlement, and Rudolph was awarded $10.9 million.

"The lesson in Greg's story, as far

as I'm concerned, is a fantastic one. Sometimes it really does pay to do the right thing," said Ahern.

Rudolph plans to continue running his roofing company.

"My life has not changed greatly, nor do I want my life to change greatly," he said.

"If I am one small spoke in the wheel that prevents this from happening in the future, it's all worth it," said Rudolph.

Tremco and its parent company, RPM, declined NewsChannel5's request for an on-camera interview and statement.

A spokesman referred us to a news release sent out after the settlement was reached.

It said:

RPM International Inc. today announced that it has entered into a final agreement with the U.S. Department of Justice (DOJ) to settle claims regarding U.S. General Services Administration (GSA) Multiple Award Schedule (MAS) contracts held by the roofing division of the RPM Building Solutions Group. The company expects to pay a total of approximately $65.1 million in order to resolve the issues arising out of those contracts and other related costs. As previously reported, on April 4, 2013, RPM disclosed that it had taken an accrual of $68.8 million in anticipation of a potential settlement. Additionally, on July 22, 2013, RPM disclosed that it had reduced its estimated accrual by $3.7 million.

The settlement with the DOJ involved the Building Solutions Group's recognition that accurate information about commercial pricing and discounting practices was not always provided on a timely basis to the GSA, and that federal agencies purchasing under the GSA MAS contracts did not always receive the pricing required by the contracts. The majority of the incidents on which the settlement is based occurred between 2002 and 2008.

Frank C. Sullivan, RPM International Inc. chairman and CEO, stated, "Though our roofing division made mistakes in the administration of our GSA contracts, it has always delivered excellent roofing and weatherproofing solutions to its federal customers. The installed product performance, which was a subject of the investigation, accounted for less than 0.3% of the settlement value. We are fully committed to conducting business with the highest levels of compliance, and have taken a number of proactive actions to strengthen our administrative procedures and compliance systems to prevent future errors from occurring.

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