A massive lawsuit, alleging that a Taiwanese-owned company sold substandard water and sewer pipes across the US, has been brought in California.
A former employee said the JM Eagle company — controlled by Formosa Plastics Group (FPG) — deliberately cut corners to increase profits and made polyvinyl chloride (PVC) pipe with a tensile strength below the minimum required.
As a result, the suit says, the pipes will not last — failures must be anticipated — and the company should pay damages.
It is alleged that JM Eagle president Walter Wang (王文祥) “implemented a series of cost-cutting measures that undermined the quality” of the firm's PVC pipes.
The suit comes as the nine children of Wang Yung-ching (王永慶), founder of Formosa Plastics Group, battle in another US court over who should benefit from his vast estate following his death in the US in October 2008.
Walter, his youngest son, has been chief executive of JM Eagle since 1990.
“As if they didn't have enough problems, the family of the late Y.C. Wang now has an additional worry,” a spokesman for other members of the family said.
“While Winston Wong has no connection with JM Eagle, the lawsuit — which could result in huge financial penalties against JM Eagle and FPG if the allegations are true — is certain to complicate his efforts to settle his father's estate in an open and fair manner,” the spokesman said.
The allegations against Walter Wang and JM Eagle were originally made by John Hendrix, an engineer who worked in the company's Livingstone, New Jersey, offices.
Hendrix said he was fired less than two weeks after he wrote a memo to management expressing concern that the tensile strength of the PVC pipe was below minimum requirements.
Since then, Nevada, Virginia, Delaware, Tennessee and 42 cities and water districts in California have joined the suit.
Marcus Galindo, a spokesman for Los Angeles-based JM Eagle, said the company stands “100 percent by the quality of our products.”
“We've grown over the past 20 years to become the largest manufacturer of PVC pipe in the world and we wouldn't have been able to have that growth were it not for superior quality,” Galindo said.
A spokesman for Washington law firm Phillips & Cohen said that because the pipes were not made to full strength, they would have to be replaced sooner than expected, making it “a budget nightmare.”
“It is also more likely that the pipes will leak or break,” the spokesman said.
In an e-mail to the magazine Plastics News earlier this month, Walter Wang said: “It's frustrating to be accused of doing something wrong when we make it a fundamental practice daily to do the right thing, but in my heart I am confident that when the states review the definitive proof that we have already provided to the federal government, they will come to the same conclusion and also drop their probes.”
Plastics News reported that the lawsuit was full of details about JM Eagle.
It claims that Walter Wang replaced highly qualified local managers, such as Hendrix, with inexperienced people, “most of them Taiwanese nationals or recent college graduates.”
“Backed by this new crop of inexperienced managers, Mr Wang shifted JM's focus away from product quality to a single-minded mission of gaining market share and improving the bottom line, irrespective of quality,” the 70-page lawsuit says.
In related news, Wang Yung-ching's family is scheduled to pay a record NT$14.7 billion (US$460 million) in inheritance tax, a report said yesterday.
The billionaire, who built Formosa Plastics Group from scratch in 1954, left more than NT$60 billion to his family, the Chinese-language China Times daily reported.
The report cited unnamed sources as saying the Wang family met with their lawyers and accountants last week to discuss the huge tax payment ahead of the deadline for payment at the end of next month.
ADDITIONAL REPORTING BY AFP
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