Home Depot Accused: U.S. Justice Department Investigates Company For Buy American Act Violations

SAN FRANCISCO — The photograph on Home Depot's website shows a line of smiling soldiers unloading a truck stacked with power tools and other company wares.

The company says this shows "federal dollars go farther at The Home Depot." San Francisco Attorney Paul Scott says the photo also shows the company providing Chinese-made products in violation of the Buy American Act, and the U.S. Department of Justice is investigating.

A federal judge in April refused Home Depot Inc.'s bid to toss a whistleblower lawsuit Scott and other attorneys filed against the Atlanta-based company. Now the country's largest home improvement retailer is the latest company accused of running afoul of the Buy American Act, a 1933 law aimed at protecting U.S. jobs. The law requires that all materials used in construction of public projects originate in the United States or "designated countries."

Like most protectionist trade provisions, the Buy American Act has its supporters and detractors.

Proponents support the act as a way to boost the economy and preserve U.S. jobs. Critics complain the law limits the government's ability to make the best purchase on price and quality. Further, they argue that complying with the letter of the law is difficult, given the many exemptions and the reality that the component parts of many products originate in multiple countries. In addition, the law's critics say it's especially difficult for large companies such as Home Depot that carry thousands of products to ensure it follows the law with every government transaction.

The law has been through many revisions, and trade agreements with Canada, Israel and several other countries allow for use of material made in those countries. In the decades after its enactment, the law was little used. But with the explosion of international trade a number of companies have been accused of violating the Buy American Act over the last several years.

Earlier this year, the national hardware distributor Fastenal Co. agreed to pay $6.25 million to resolve DOJ claims made after a government audit found among other things that it violated its contract with the General Services Administration by providing Chinese-made goods.

Fastenal said in a statement that it settled because "we continue to believe that we complied with our obligation under the GSA contract in all material respects. However, we felt a continuation of our dispute with the DOJ and GSA was not the best use of our resources."

In the last six years, Staples Inc., Office Depot Inc. and OfficeMax Inc. have paid a combined $22 million to settle government claims they violated the act. In 2008, the Department of Justice announced that W.W. Grainger Inc. agreed to pay $6 million to settle claims the company overcharged the government and provided it with Chinese and Taiwanese products in violation of the Buy American Act.

At issue in the Home Depot case are GSA "schedule" contracts. Those contracts authorize any government agency to purchase tens of thousands of products from the company's website.

The lawsuit alleges that up to half of those products are made in China and other non-designated countries. The lawsuit was filed by two employees of another government contractor in 2008 that claimed their employer, the Actus Lend Lease Co., supplied noncompliant material in several military housing projects.

Before Actus was dropped from the case this year after paying an undisclosed amount of money to settle, lawyers discovered allegations that one of its corporate partners – Home Depot – was also violating the law.

The two Actus employees initially filed the so-called whistleblower lawsuit under seal, as all such claims on behalf of the government are filed. That gives the DOJ a chance to investigate the claims and decide if it wants to take over the lawsuit, which seeks to recover damages on behalf of the government.

All damages recovered are split between the government and the plaintiffs filing the lawsuit, with the government always receiving a larger amount.

Last year, the judge denied the government's request to keep the lawsuit under seal so it could continue its investigation.

After the lawsuit was made public, Home Depot asked the judge to dismiss the case, noting the government's non-intervention in the case. In March, federal prosecutors fired back at Home Depot with a court filing stating that it "would be erroneous to assume that the government's lack of intervention reflects its conclusion that the case lacks merit."

The DOJ continues to investigate the issue and still has not decided whether to join the case.

In court filings and a brief interview, Home Depot officials argue they have complied fully with the terms of the contract and the Buy American Act.

"We would never knowingly sell prohibited goods under any circumstances, and we have been cooperating with the government to provide requested information," said Home Depot spokesman Stephen Holmes. "We believe the plaintiffs have an inaccurate view of the facts, so we look forward to presenting our side of this case as the process moves forward."

A judge has scheduled a trial for early next year.

___

Online:

Home Depot's "Solutions for Government Buyers" page: http://tinyurl.com/yw6329

Comments

[stack]

09:23 AM on 06/29/2011

Simple solution for Home Depot: Don't take taxpayer money from the govt. then defy federal law requiring purchases from U.S. taxpayer-employing industries

[MORAL SOLUTION]

07:06 PM on 06/28/2011

HOME DEPOT forced to be loyal while liberals cater to illegals and cannot wait to ship refugees here to damage patriots

[jackhammernyc]

09:23 AM on 06/28/2011

i bought a shopvac in home depot many yrs ago had a lot o power /recently i bought the same model
it had less power i had to finish with a broome . you got that right .made in china .amercian name.
a lot of ppl dont like the unions.thats why u dont see the union label made in america. i never bought a car unless it was made in this country WAKE UP AMERICA or enjoy your eggroll

[kamact]

09:49 PM on 06/27/2011

Only American consumers can save America,...and, of course, American workers.

[carnalmaster1]

05:58 PM on 06/27/2011

GOOGLE:
Does China Now Own the United States? (Newsweek, 2009)
According to Newsweek (2009), the United States is now currently $11 trillion in debt and $3.3 trillion of that is owned by foreign countries. 53 foreign countries now own the debt of the US and out of all of these countries, who do you think is the largest share holder? If you guessed China, then you would be correct. China comes in first on the list, owning $767.9 billion and Japan comes in second owning $686.7 billion of our national debt. Saudi Arabia, Iran, Iraq, Algeria and Russia now also own part of the United States, just to name a few.

[dano33334]

03:32 PM on 06/27/2011

This crazy article and some of the intuitive comments here are just a part of the reason I started my own Lamp manufacturing company. I make Wood Veneer lighting just like what I used to import from Spain. To ALL of you i say: If you want to SAVE America, Dont just BUY American... MAKE American!!!!

[kamact]

09:48 PM on 06/27/2011

Well done,...and we must

[anigma47]

12:31 PM on 06/27/2011

Lowes is just as bad,I worked in a number of Lowes as a vendor and almost everything is from China and elsewhere in SE Asia. Even the wooden handles for wheelbarrels come from the Phillipines. We don't make much here anymore,thats why we have so many unemployed and our debt is out of control.

[abinglewood]

11:51 AM on 06/27/2011

Well this is interesting, a law since 1933 but we only see it apply ever so often. I can't remember being able to pick up anything at Home Depot or any other store of that type and be able to find everything I need to complete a job and all made in America. What makes this funny is that we allowed Corporate America to make their so call American product in other countries. So how in the world can Home Depot comply. Everything I consume has somekind of product in it made somewhere else. We cry about oosing our jobs overseas but we don't want to buy American made products because they cost more. We need to pay a bit more as long as we can support American companies that produce in America, these are the companies that will bring us back. All the others they will just keep getting richer and keep outsourcing our jobs to the cheap labor countries. Bottom line the US goverment needs to reachout to our home gorwn producers and stop supporting large companies liek Home Depot who will not be able to assure the Goverment that all 100% of the product was made in America.

[demannmarine]

11:43 AM on 06/27/2011

Google, HomeDepot credit card issues, Read the thousands of complants. THAT IS WHY I DONT SHOP THERE, 12 months free interest on CERTAIN items and if you mess up on reading the TRICKY statement they blast you for BACK INTEREST (28%) on those itmes. The statement is harder to read than a phone bill !!!!!!!!!!!. Please GOOGLE IT FOR YOURSELF

[nmsidewinder]

11:00 AM on 06/27/2011

What a bunch of back stabbing hypocrites (our government and justice department). This violation of the Buy American Act issue seems a little lame in the light that our government is the one that made the trade deals with China in the first place. We import three times as much as what we export to China (look it up). Now they are going to go after Home Depot for a violation of buying goods from China instead of made in America. Don't get me wrong, I'm all for " Buy American " but lets face it folks we can't afford it with the unions choking the manufacturing businesses (what ones that are left here and haven't left the country).
If they are going to enforce " buy American " how about going after Wal-mart, they sell so much China Cheap crap they might as well change their store name to something Chinese. I know the article is just talking about what " Our government agencies/military " can buy, not you and I as consumers. Wonder what Home Depot did to the Obama administration to get Eric Holder on their backs (besides the Buy American Act )? Hmm, let me see, Home Depot workers are not Unionized are they? Food for thought?

[tdnesn]

10:37 AM on 06/27/2011

"The ruthlessness of Wall Street in determining an ever tightening and increasing spiral upwards of ever more demanding results is simply unsustainable, and so it has proved. Moving the entire production for U.S. consumers to China, or elsewhere, has in fact proved a false economy. Wall Street, simply put, is far too preoccupied with short terms gains. It’s partially this tendency and inherent structural fault in this most capitalistic of structures that has forced companies to shift production – and jobs – overseas. In doing so, U.S. manufacturers have ended up not really selling a U.S. product at all. They’ve been attempting to sell on little more than a well-known brand, while all the component parts that made that brand so iconic and valuable have been outsourced away. Corporate America would do well to examine Wall Street’s determinants for success or failure and allow companies some breathing space when expanding instead of brandishing a whip if their results don’t constantly improve every three months."

http://www.china-briefing.com/news/2011/06/24/u-s-multinationals-reconsider-china-based-manufacturing.html

[liquidwallpaper]

10:21 AM on 06/27/2011

With the way things are in our country I can understand that up holding the law is important. It may be hard to get some products that are only American made but if it is a question of quality Home Depot is kidding themselves if they are saying that Chinese quality is superior than some American products. Where did the bad drywall come from? Shame on them for not being completely supportive of a law that tries to help our country and bring back patriotism. I love my country and do what I can to help the economy. And with all the tax breaks why aren't the rich spending more and creating more jobs?

[se72748]

10:10 AM on 06/27/2011

Ask not what america can do for you.Ask what you can do for america.JFK.
What you can do for america is ,buy american made products and pay your damn taxes an invest in america instead of foreign country's like china,ect.If you consider yourself a patriot ,act like one

[nmsidewinder]

11:04 AM on 06/27/2011

Yep, even though you can't afford the products made in the Union States Of America.

[smp276dp]

10:09 AM on 06/27/2011

Detractors are republicans of course.
Anything good for America they are against.

[Inspiringangela]

10:07 AM on 06/27/2011

The Buy American Act of 1933 wasn't so much to save American jobs as it was to boost the economy after the Great Depression. After reading the act, amendments in recent years not withstanding, it seems the law required our GOVERNMENT to procure American made goods whenever possible for use in public projects. However, through World Trade Organization's Government Procurement Agreement, and the "understandings" our DOD has in place with 21 other countries, our government has the authority to procure materials/equipment without scrutiny under the Buy American Act. Now, private industry WAS NOT subject to the Buy American Act of 1933. At any rate, it seems the government has provided itself a complete safety shield in so far as buying materials from sources outside the U.S., but for private industry there are no exceptions or protections... only phenomenal, multi-million dollar federal fines for not following a law which originally applied, and should still apply (sans amendments) to the government's procurement of materials for public use. I may be incorrect in my understanding of these laws, so please be kind to me. But I do have to put this out there: Is it fair, or right, that a government does not have to follow the same laws its country's private industry has to follow in order to boost a flailing economy and save domestic jobs? How do materials procurement restrictions on private industry undermine capitalism, and a free & open market?