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Vortec Corporation and its officers will pay $4.6 million to settle claims that they defrauded the Department of Energy

The United States Attorney’s Office for the Eastern District of Pennsylvania announced today that Vortec Corporation and its Officers, James Hnat, Glenn Eglinton and Yvonne Eglinton agreed to pay $4.5 million to settle a whistleblower lawsuit alleging that they defrauded the United States Department of Energy in connection with a contract for the development of recycling technology.

The whistleblower lawsuit alleged that Vortec, the Hnats and Eglintons defrauded the Department of Energy by obtaining reimbursement for: (1) equipment that was never actually purchased; and (2) personal expenses, including vacations to Europe, luxury hotel rooms, jewelry, and automobile repairs.

In the “equipment” scheme, Vortec, the Hnats and the Eglintons submitted to the Department of Energy fictitious purchase orders for materials and equipment. Based on these invoices, the Department of Energy reimbursed Vortec for the full amount requested. After receiving reimbursement, Vortec, the Hnats and the Eglintons either canceled the purchase orders that had already been placed or did not place the orders at all. Rather than returning the money paid by the Department of Energy for these materials, Vortec, the Hnats and the Eglintons retained the money.

Vortec, the Hnats and the Eglintons attempted to hide their fraudulent over-billing by setting up a Deferred Revenue account on their books in the amount of $2,186,543. After the creation of this account, the Hnats and the Eglintons then devised a separate scheme designed to reduce the Deferred Revenue account in an effort to permanently deprive the United States of the illegally acquired funds.

The aforementioned scheme was alleged to have been perpetrated by Vortec over-billing the Department of Energy on its monthly invoices by inflating the hours actually worked on the contract. Vortec, the Hnats and the Eglintons then submitted or caused to be submitted these inflated invoices to the Department of Energy. Vortec, the Hnats and the Eglintons used the unpaid balance from these inflated invoices in an attempt to completely reduce the Deferred Revenue account. In so doing, Vortec, the Hnats and the Eglintons were able to reduce, on their books, the liability owed to Department of Energy for the canceled and never purchased materials and equipment.

In the “personal expenses” scheme, Vortec, through the Hnats and the Eglintons, fraudulently billed the Department of Energy for personal expenses, such as family vacations, luxury hotel rooms, jewelry, and vehicle maintenance and repairs. These expenses were billed to the Department of Energy contract via indirect rates that Vortec applied to each invoice submitted to the government. These purely personal expenses were submitted to, and ultimately paid for, by the Department of Energy.

The whistleblower lawsuit was filed under the Federal False Claims Act. The False Claims Act allows individuals and entitles to sue companies that defraud the federal government and recover funds on behalf of federal taxpayers. Under the False Claims Act, whistleblowers (otherwise known as “relators”), in intervened cases, are awarded between 15 percent to 25 percent of the amount the government recovers as a result of their lawsuit. Mr. Eastmond, the relator in this case, will receive 24 percent of the $4.5 million settlement, or $1,080.000. Vortec also agreed to pay an additional $100,000 to reimburse the whistleblower’s attorney’s fees and costs and to settle allegations that it unlawfully terminated the whistleblower for actions taken to investigate and report the alleged fraud.

Trial counsel, Marc S. Raspanti, Esquire, and Michael A. Morse, Esquire, in commenting about the settlement on behalf of Mr. Eastmond, stated that:

“My client is extremely gratified because this settlement returns millions of dollars back into the federal treasury, and ultimately to all federal taxpayers. This settlement could not have been possible without the sacrifices of my client and the close cooperation between our team, the United States Attorney’s Office, the Department of Energy, and the Federal Bureau of Investigation.”

For more information about the False Claims Act and whistleblower cases, we invite you to visit the False Claims Act Resource Center at www.falseclaimsact.com.

For more information about this case, we invite you to visit the internet site for the United States Attorney’s Office for the Eastern District of Pennsylvania, located at www.usdoj.gov/usao/pae/.

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