“Not Guilty” Verdict for Former Sapa Profiles Employee Charged with Fraud

Dennis Merkel, a former production manager for Sapa Profiles Inc. in Portland, Ore., was recently found not guilty of two charges of fraud against the U.S. government in a scheme to falsify tensile test results of aluminum extrusions between 1996 and 2006. Merkel was charged in April 2018.

“Depending on the particular customer that ordered aluminum extrusions from the company, the company generally certified that its products met a variety of ASTM or AMS specifications. Those included ASTM or AMS specifications for three mechanical properties: yield strength, ultimate tensile strength, and elongation,” read the initial indictment.

In July 2017, Dennis Balius, a former supervisor at Sapa, pleaded guilty to
the fraudulent certification of mechanical properties for parts manufactured
by his former employer.

According to the U.S. Department of Justice, Balius admitted that, as a lab supervisor at the company’s aluminum extrusion manufacturing facility from 2003 to 2015, he routinely trained and directed lab technicians to falsify mechanical property test results for extrusions that failed to meet industry specifications.

“Balius also admitted that he made, or directed lab technicians to make, alterations to failing test results if the shipping department asked him to rush an order because ensuring on-time delivery of aluminum helped him and other employees receive bonuses,” reads the release.

The case was being investigated by the NASA Office of Inspector General. According to Oregon Live, NASA and the U.S. Missile Defense Agency awarded Sapa contracts to provide aluminum extrusions for rockets. Balius’ defense lawyer argued that the case was driven by a company culture to get the metal out. Sapa paid out at least $2 million as refunds to impacted customers concerned about the reliability of the products.

Sapa determined that Balius and the lab technicians altered the mechanical properties of the aluminum extrusions more than 4,000 times, allowing the company to gross more than $6.8 million in total sales basedon altered test results.

In August 2018, Balius was sentenced to 37 months in prison, followed by two years of supervised release. He was also ordered to pay $170,825 in restitution.

Sapa was acquired by Hydro Extrusion North America in July 2017.

“Upon learning of the misconduct in 2015, we immediately stopped it and reported the details to government officials. Over the past several years we have undertaken aggressive remediation actions and have invested significant time and resources to completely overhaul our quality and compliance organizations,” the company said in a statement to USGlass magazine. “This includes the implementation of more than $14 million
in state-of-the-art testing equipment across our North American operations that automates the tensile testing process. Throughout this process our primary focus has always been, and continues to be, our customers.”

A company spokesperson said Sapa proactively reached out to customers in-person, through email and via mail, and established a technical response team to inform customers of any testing issues that were discovered.

“As part of this process, material for certain customers was retested and there was further dialogue with them to assess the potential impact, if any, on their end products,” reads the company statement. “In some situations, this analysis warranted returns, credits and/or replacement material for impacted customers. As a policy, we do not discuss the specifics of customers or markets affected by this situation.

Suit Over Leaning Tower Aims to Stop Curtainwall Work, Seeks Redesign

General contractor Pizzarotti filed G a suit against developers FPG Maiden Lane and Fortis Property Group in the New York Supreme Court in March, alleging that 161 Maiden Lane in downtown Manhattan is leaning 3 inches to the north due to settlement of the foundation. It claims that the settlement has caused the buildings superstructure, including the curtainwall, to lean, making any further work on the curtainwall unsafe.

Pizzarotti claims that FPG primarily considered cost when determining to proceed with a soil improvement foundation method rather than deep foundation piles driven into bedrock, despite a consultant warning that the soil improvement method would result in additional settlement of the foundation.

In June 2018, Pizzarotti‘s curtainwall subcontractor, AGM Deco, advised that the curtainwall frame, already installed, showed approximately 2 inches difference to the north from floor 11 to 21.

Pizzarotti claims in the suit that, based on expert engineering information and analysis, the increased load from heavy construction elements yet to be added to the structure, such as curtainwall, will cause additional settlement and movement.

The complaint lists several of Pizzarotti’s service and safety concerns, including the “strength of the cladding attachments not only in the static lean condition but also in a design wind storm condition. As the change in lean has not been predicted, it cannot be incorporated in the facade panel engineering. The impacts of this can range from inoperable windows to breaking windows and components falling to the street.”

The suit seeks a declaration that Pizzarotti‘s Construction Management Agreement has been properly terminated due in part to more than 120 consecutive days of stopped work. It also seeks a permanent in- junction prohibiting defendants and their agents from proceeding with work on the project until an adequate, safe and proper redesign is provided.

A spokesperson for Fortis refuted the claims in a statement provided to Commercial Observer, which originally reported on the suit.

“The fact that Pizzarotti has had more than 70 of its own employees and subcontractors working through- out the building over the past several months substantiates Pizzarotti‘s duplicity and underlying intent to defame the project. This is simply a matter of a slight redesign of the buildings curtainwall, which is already being worked on by our new general con- tractor, Ray Builders,” said the statement.

Appeals Court Upholds Ruling that Chinese Curtainwall is Subject to AD/CVD Orders

The U.$. Court of Appeals for the Federal Circuit has affirmed a decision by the Court of International Trade (CIT) that ruled Chinese curtainwall is subject to U.$. tariffs on aluminum extrusions imported from China. Jangho Curtain Wall Americas Co., Permasteelisa North America Corp., Permasteelisa South China Factory and Permasteelisa Hong Kong Ltd.jointly appealed the ClT’s decision from December 2017. The decision upheld an earlier scope determination by the U.S. Department of Commerce for the antidumping (AD) and countervailing duty (CVD) orders on aluminum extrusions from China.

Background

In 2013, Shenyang Yuanda Alumi- num industry Engineering Co. and Yuanda USA Corp. sought a scope ruling from Commerce that the AD/CVD orders do not cover curtainwall units when imported under a contract for an entire curtainwall. Commerce solicited participation by interested parties Jangho and Permasteelisa.

In March 2014, Commerce rejected their position and ruled that the AD/CVD orders cover curtainwall units. The companies challenged the ruling with the CIT, which confirmed Commerce’s determination. Jangho and Permasteelisa appealed to the Appeals Court. Yuanda choose not to appeal.

Grounds for Appeal

First, the Appeals Court explained its decision to grant Jangho and Permas- teelisa an appeal. The government said it had grounds to dismiss the appeal because the original case focused on Z A federal Appeals Court ruled that aluminum extrusions imported from China are subject to antidumping and countervailing duty orders. Yuanda’s merchandise and that Jangho and Permasteelisa were not affected by the original rulings. The Appeals Court decided that there were no grounds for dismissal because the March 2014 ruling from Commerce stated that as a result of Commerce’s scope ruling, Jangho and Permasteelisa’s curtainwall systems and curtainwall units are now subject to the aluminum extrusions orders.

The Ruling

The Appeals Court upheld the CIT ruling. At issue was the question of whether curtainwall units could be excluded from the AD/C\/D orders because they are part of an overall curtainwall.

The ruling reads, “Commerce concluded that the ‘finished goods kit’ definition applies to curtainwall units ‘only if all of the necessary curtainwall units are imported at the same time.’ In its narrower ground of decision, adopted after several remands, Commerce interpreted the definition as requiring, at least, that a subassembly include ‘all the necessary hardware and components’ for, and not ‘require further finishing or fabrication prior to,’ installation in an overall finished product (here, the curtainwall).”

In its ruling, the Appeals Court says it agrees with both of Commerce‘s definitions and its finding. The ruling says that substantial evidence supports that finding. “Commerce compared Yuanda‘s technical drawings of its curtainwall units to its import documentation and found that the material imported would not complete the curtainwall unit because it did not contain hangers, lock panels, shims, and embeds necessary to piece the curtainwall units together,” reads the ruling. “Once the curtainwall units are hung, Commerce added, the purchaser would need to waterproof the connection between adjacent units and trim and punch the units to ensure that they fit next to each other.”

Response

Architectural Glass & Aluminum Co., Walters & Wolf, Bagatelos Architectural Glass Systems and the U.S. were defendants in the appeal.

In a release from the Curtain Wall Coalition, Tom Black, president and COO of Walters & Wolf in Seattle, said, “We are pleased with the Court’s decision in this case. After years of litigation tactics by the Chinese companies, the courts have conclusively ruled that aluminum extrusions are covered by the AEC‘s orders in curtainwall end-use applications. Our efforts now turn to enforcement to derail the circumvention stunts employed by the Chinese companies to avoid paying the tariffs and duties.”

At press time, Permasteelisa had not responded to USGlass magazine’s request for comment.

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