October 20, 2014 / 8:58 PM / 3 years ago

UPDATE 1-Trinity faces $525 mln in damages after U.S. guardrail trial

(Adds background, comments from Trinity, plaintiff's lawyer)

By Nate Raymond

Oct 20 (Reuters) - Trinity Industries Inc may need to pay $525 million or more, mostly to the U.S. government, after a federal jury found the company liable on Monday for failing to tell a highway agency about changes it made to a guardrail system.

The jury in Marshall, Texas, found Trinity liable in the civil lawsuit for violating the False Claims Act, according to court records. The jury said those violations caused the U.S. government to incur $175 million in damages.

The damages award, which was based on the amount the federal government reimbursed states for thousands of Trinity's energy-absorbing guard terminals, automatically triples to $525 million under the law.

Trinity said in a statement it "believes the decision cannot and will not withstand legal scrutiny," adding it "strongly believes the courts will affirm its position."

Shares of Trinity closed down 12.3 percent at $31.63 on the New York Stock Exchange.

The award was confirmed by Nicholas Gravante, a lawyer at the law firm Boies, Schiller & Flexner representing the purported whistleblower who brought the case, Joshua Harman, a guardrail installer in Virginia.

Gravante in a statement said the verdict "will, in large part, go to the just pursuit of saving lives and recalling and replacing each and every secretly modified Trinity product still on our nation's roads and highways."

The sum is potentially just the beginning of the company's liability. A judge can order penalties for each of the false claims submitted for payment, as well as award interest and attorneys fees.

Most of any judgment imposed in the case would go to the federal government. Harman, as a whistleblower, is entitled to up to 30 percent of it under the False Claims Act.

Harman filed the lawsuit on behalf of the U.S. government in 2012. The U.S. Department of Justice in 2013 declined to intervene in the lawsuit, which was originally filed under seal, leaving Harman to pursue it by himself.

The lawsuit said that Trinity did not disclose to the Federal Highway Administration (FHWA) changes it made to the design and specifications of a guardrail end treatment called ET-Plus and did not properly test units containing the modifications.

Despite the lack of approval, Trinity falsely certified that the modified ET-Plus was approved for federal reimbursement, the lawsuit said.

As a result, the federal government paid millions of dollars to reimburse states for buying thousands of devices that were not approved, Harman's lawyers said.

Trinity denied the allegations. It said despite Harman's allegations, the FHWA had continued to allow the ET-Plus to be eligible for federal reimbursement.

The trial, which followed an earlier mistrial in July, came as several states raised concerns about the Trinity guardrail.

Nevada prohibited purchases of the ET-Plus in January, and Massachusetts and Missouri similarly banned it in September. Virginia this month threatened to stop buying it.

The case is U.S. ex rel. Joshua Harman v. Trinity Industries Inc, U.S. District Court, Eastern District of Texas, No. 12-89. (Reporting by Nate Raymond in New York; Editing by Meredith Mazzilli, David Ingram and Diane Craft)

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