Instec Agrees to Pay $625,000 for Alleged False Claims Act Violations

The Department of Justice announced Sept. 7 that Boulder company Instec Inc. and Instec’s owner and president Dr. Zhong Zou have agreed to pay $625K to resolve allegations the company and Zou violated the False Claims Act by failing to comply with the requirements of the Buy American Act when selling scientific instruments to federal agencies and national laboratories.

The BAA was enacted in 1933 and created a preference for domestic products when the federal government purchases supplies. The U.S. alleged Instec and Zou knowingly violated the BAA by falsely certifying that goods sold to the government for contracts that had domestic-preference requirements were of domestic origin, when these goods were actually manufactured in China.

“Those who contract with the government must comply with all applicable terms,” said Principal Deputy Assistant Attorney General Brian Boynton, head of the DOJ’s civil division, in a press release. “This settlement demonstrates the department’s commitment to protect American businesses by enforcing domestic preference requirements.”

The civil settlement includes the resolution of claims brought by a former Instec employee under the qui tam provisions of the False Claims Act. The DOJ noted the provisions allow a private party to file an action on behalf of the U.S. and receive a portion of any recovery. In this case, the party will receive $124,500 as part of the settlement.

The DOJ noted in its press release the resolution in this case was coordinated by the department’s civil division, commercial litigation branch and fraud section and the U.S. Attorney’s Office for the District of Colorado with assistance from the Department of Energy Office of Inspector General, the Defense Criminal Investigative Service, the National Aeronautics and Space Administration Office of Inspector General and the Army Criminal Investigation Division.

“When companies commit to manufacture their goods in the United States, then shirk that commitment, they violate the law and undermine American manufacturing jobs, too,” said U.S. Attorney Cole Finegan for the District of Colorado in a press release. “The U.S. Attorney’s Office for the District of Colorado is committed to enforcing the Buy American Act and pursuing companies that violate it.”

“The Buy American Act promotes American businesses and protects U.S. economic interests,” said Robert Steinau for the NASA Office of Inspector General in a press release. “This agreement reflects NASA OIG’s commitment to work with our law enforcement partners in identifying and holding accountable those who engage in deliberate disregard of contractual requirements.”

The DOJ noted this case was handled by trial attorney Jason Crawford of the DOJ’s civil division and Assistant U.S. Attorney Jacob Licht for the District of Colorado.

The DOJ went on to note claims resolved by the settlement are allegations only and there’s been no determination of liability.  The case is captioned United States ex rel Swanton v. Zou, et al, No. 20-cv-01742 (D. Colo.).

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