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A $4.5 million settlement has been reached in a whistleblower suit that accused Collegeville, Pa.-based Vortec Corp. of exploiting for financial gain a contract it had with the U.S. Department of Energy. According to the qui tam complaint filed by whistleblower Donald Eastmond in United States ex rel. Eastmond v. Vortec Corp., members of the extended Hnat family, who run the company, submitted reimbursement forms to the DOE for equipment that was never purchased and for various personal expenses — including hotel rooms, jewelry, clothing and car maintenance. In 1992, Vortec had secured a DOE contract to develop recycling technology. Eastmond, who had worked at Vortec as an accounting manager, alleged in his complaint that he had been fired by the company for questioning its billing practices. Under terms of the settlement in Vortec reached Thursday, Eastmond will receive $1.08 million, or 24 percent of the overall settlement, and will get $100,000 in attorney fees. Eastmond was represented by Marc Raspanti and Michael Morse of Miller Alfano & Raspanti. Assistant U.S. Attorney Cedric Bullock, who led the government’s investigation in the matter, said that he believes the settlement is the largest ever reached for the DOE in this type of case. Named as defendants in Eastmond’s complaint were company officers James Hnat, Vortec’s president and chief shareholder; Patricia Hnat, James’ wife and Vortec’s vice president and treasurer; Yvonne Eglinton, the Hnats’ daughter and Vortec’s marketing manager; and Glenn Eglinton, Yvonne’s husband and Vortec’s purchasing director. Vortec employed 25 workers as of the complaint’s December 2000 filing. The company’s recycling technology development mainly involves researching how to convert hazardous and residual waste into valuable products such as ceramic tile and glass fibers, according to the complaint. In 1998, its gross sales amounted to roughly $7.1 million; 90 percent of its business has come from government customers. Under its 1992 contract with the DOE, which was worth $10.1 million, according to the complaint, Vortec was to furnish all personnel, equipment and supplies for building a research facility that would develop “fossil fuel fired vitrification technology for soil remediation.” As of the complaint’s filing, the project had not been completed and its cost had risen to $33 million. The contract permitted Vortec to seek DOE reimbursements for costs incurred during the project, including travel and other business expenses, according to the complaint. During the latter half of 1998, according to the complaint and the settlement agreement, Vortec submitted vouchers seeking over $2.3 million in reimbursements for equipment orders. “In reality,” the complaint alleges, “Vortec canceled the purchase orders and pocketed the government’s money.” Vortec also submitted vouchers for personal expenses that included bills accrued by the Hnats during a vacation to Ireland for a family wedding, according to the complaint. Other expenses for which Vortec sought remuneration included thousands of dollars in jewelry, New York City hotel and restaurant bills, and airline tickets for the Hnats’ college-aged son. Additionally, according to the complaint, the costs of a 1999 Ford Expedition used by Glenn Eglinton and a 1994 Range Rover used by the Hnats’ son — both allegedly for personal use — were billed against the contract. Finally, Eastmond claimed in the complaint, the defendants billed to the contract time spent vacationing, traveling or engaging in unrelated business activities. Eastmond’s suit was brought under the federal False Claims Act. According to the settlement agreement, the entire settlement amount is to be paid within seven years. Vortec is prohibited from selling any property or assets with a fair market value of over $25,000 without approval from the federal government and Eastmond. While the settlement agreement notes that the Hnats and Eglintons have not been released from any potential criminal case arising from the alleged defrauding, Bullock said that his office is not currently pursuing criminal charges. “[Vortec is] not barred from applying for future grants or contracts,” Bullock said. “Of course, if they do so, then they have to comply with the statutes and regulations that the Department of Energy would apply.” Raspanti said that Eastmond, who filed the qui tam after being fired by Vortec, had provided the government with documents later used in the investigation and had also helped interpret those documents. The government had been “in and out of negotiations with the defendants over the last six to nine months,” Raspanti said. Dechert partner Thomas Lee was lead counsel for Vortec and the Hnats, Bullock and Raspanti said. Lee, who was traveling abroad, could not be reached for comment. Calls to Vortec’s offices seeking comment were not immediately returned.

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