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Corning Pays $5.65 Million to Settle Whistle-Blower Case

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March 8 (Bloomberg) -- Corning Inc. agreed to pay $5.65 million to settle allegations that it overbilled the U.S. government for lab research products sold to federal agencies.

The Justice Department, in an e-mailed statement today, said Corning’s life sciences division knowingly made false statements to the General Services Administration about its sales practices and discounts offered to other customers.

The whistle-blower case, filed in federal court in Washington in October 2010 by a former Corning account manager, was unsealed yesterday after the government told a judge it had reached a resolution with the company.

“At a time when our political leaders are making tough choices about how to rein in federal spending, government contractors need to understand that they will not get away with overbilling the taxpayer,” Ronald Machen, the U.S. attorney for Washington, said in an e-mailed statement. The government intervened in only part of the lawsuit by Jones, according to to court records.

Kevin Jones, an account manager for Corning from 2001 to December 2009, alleged in his complaint that the company relied on discount and pricing schemes to charge the government more than large-volume private customers.

Since 2005, the company, the world’s largest maker of glass for flat-panel televisions, had a federal supply service contract with the GSA that involved the National Institutes of Health, National Cancer Institute and the Food and Drug Administration.

Gift Cards, Corningware

Jones also alleged Corning engaged in an illegal kickback scheme in which company sales staff provided federal employees with gift cards from American Express, Apple iTunes and other retailers in exchange for large Corning orders, according to the complaint.

The value of the gift cards ranged from $25 to $100. Some laboratory employees received Corningware dishes and other kitchen items, which they selected from an online catalog, for placing large orders of equipment.

Jones will receive $904,000 from the settlement, according to the Justice Department.

Daniel Collins, a spokesman for the Corning, New York-based company, said it disagrees with the government’s interpretation of the contract terms. Still, the company determined it would be best to settle and move on, he said in an e-mail.

“This is a result of the government in our opinion, reinterpreting the requirements of a contract late into the life of the contract,” Collins said. “We had been operating under a different interpretation.”

The case is U.S., ex rel. Kevin Jones v. Corning Inc., 10-cv-01692, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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