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The Honolulu Advertiser
Posted on: Tuesday, January 31, 2006

South Korea company to pay U.S. $1.2 million

By Curtis Lum
Advertiser Staff Writer

A South Korean electronics company has agreed to pay the U.S. government $1.2 million to settle a lawsuit that accused the company of falsifying fire inspection records on U.S. military bases in that country.

Shinwha Electronics Corp. was accused in a 2002 lawsuit of filing thousands of fraudulent claims with the U.S. government under a one-year, $5 million contract to inspect, test, maintain and repair fire alarms and safety equipment on military facilities. The federal lawsuit was filed Feb. 14, 2002, by attorneys Thomas Grande and Warren Price of Honolulu on behalf of an American hired by Shinwha as a regional manager.

The plaintiff asked that his name not be revealed, Grande said yesterday.

The lawsuit was filed under the False Claims Act, which allows private citizens with knowledge of fraud against the government to sue and share whatever damages are recovered. The U.S. government also was a party to the lawsuit, which resulted in the first settlement against a foreign company for false billings under the act, Grande said.

From September 2000 to October 2001, Shinwha submitted inspection and maintenance "checklists" that were "blatantly falsified," according to the lawsuit. The company did not have the equipment to test fire safety systems, such as sprinklers and alarms, but recorded that the equipment was in good working condition, the suit said.

The American employee said he sat in on meetings with Shinwha's chief executive officer in which these issues were discussed, according to the suit. Shinwha's actions threatened the well-being of thousands of Americans, the lawsuit alleged.

"The fire protection systems in place at the U.S. military facilities in Korea covered by the contract were invariably old, poorly maintained and were the only form of protection for the U.S. service personnel living and working in what were often times rickety wooden structures that were very vulnerable to fire," the lawsuit said. "Inspection, testing and repair of these older systems was critical to the safety of American overseas military personnel stationed in Korea."

When the American complained of the inspection problems, he began to fear for his safety, resigned and later moved to Hawai'i.

Shinwha will pay the U.S. $1.2 million and dismiss a $407,564 claim against the U.S. for nonpayment. Shinwha also will pay the worker $240,000.

Grande yesterday praised his client for taking action.

"The case also is significant because it means that fraud against the government even when it takes place in foreign countries is not beyond the reach of the American justice system," he said.

Reach Curtis Lum at culum@honoluluadvertiser.com.