Government Case Vs JM Eagle

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 1 of 70 Page ID #:1401
U.S. & States of California et al. ex rel. Hendrix v. JM Manufacturing Co. [UNDER SEAL]
Presentation to JM Eagle
Howard Daniels Assistant U.S. Attorney Central District of California
Confidential Settlement Material Subject to Rule 408 and Letter Agreement
1
Overview of Presentation
I. Four Major Production Changes A. Inferior Compound B. Increased Extruder Speed C. Screw & Barrel Replacement D. Other Changes to Production Processes HDB Testing & Evidence of Consistent Failures A. Testimony / Statements B. New Product Qualification C. Relationship to QB test results Longitudinal Tensile Strength Testing & Evidence of Consistent Failures A. Testimony / Statements B. Internal Test Results for Lobbying Efforts C. Claims Files D. New Product Testing Bonus System & Management Structure Damages
2
II.
III.
IV. V.
1990s - now, JM:

JMs Approach to Production and Testing

Materially alters and degrades its manufacturing processes Fails to re-qualify pipe Instead, claims initial qualification testing from the early days of JM as adequate Former Corporate QC Supervisor: Barry Lin and Kaushal Rao told QA personnel to ignore all failing test results because JM had originally obtained UL qualification for its pipe. When testing is necessary, cherry-pick samples and temporarily change manufacturing processes or falsify test results Former Head of R&D: JM cherry-picked samples to present to regulatory agencies. Former Q.C. Supervisor: When UL and NSF inspectors came to the plant, they were presented with falsified test records and with pipe that was cherry-picked for testing. The extruders were slowed down while the inspectors were present. Former Corporate QC Supervisor: Kaushal Rao and Barry Lin told witness to falsify his analysis of claims by customers so as to make it look as though JM was not at fault. Lin and Rao would then sign off on his reports, aware that they were falsified.
3
False Representations: Modes of Representing Compliance with Standards

Catalogs/website Warranties Stenciling Certifications for orders Letter certifications Letters of assurance
4
Post Take-Over, JM Institutes 4 Major Changes to Production

1.
2.
3.
4.
Switch to cheaper and inferior compound ingredients Increase production rates/quotas and extruder speeds Failure to maintain and replace screw & barrel units Other changes to production and QC processes
5
1. Changes to Compound Ingredients

Switched to cheaper ingredients to increase profits

Wax lubricants Stabilizers Resin
Changes degraded tensile strength
Changes in quality of compound caused regular test failures (Former Q.C. Supervisor) Switch to Luxco ingredients causes pipes to fail 7,000 psi LTS requirement (Former QC Supervisor) Switch to lower viscosity resin reduced tensile strength (Former Head of R&D) Switch from paraffin wax to multi-wax caused serious quality problems (Former Head of R&D)
All changes directed by management and done to increase profits
Testimony re: Changes to Compound Ingredients

Former manager of 3 plants: JM management began using cheaper compound ingredients, including wax lubricants, stabilizers and resin. Former Corporate QC Manager: Management ordered the use of compound ingredients from Luxco. These ingredients were inferior, and shortly after the changeover to Luxco the pipe could no longer meet the UL 1285 requirement of 7000 psi. Management refused to allow him to pursue the Luxco quality issue. Former plant QC Supervisor: Changes in the quality of the compound caused test failures on a regular basis. The compound ingredients were changed because management did everything on the cheap. Former Head of R&D: To reduce material costs, JM switched from paraffin wax to multi-wax. The multi-wax had extreme variations and inconsistencies. Eventually the company had to switch back because of the serious quality problems.
JM switched to a lower viscosity resin. Barry Lin made this decision to save money. Witness strongly opposed the change-over because the reduced viscosity reduced tensile strength.
Inherent Viscosity of Resin Reduced in 2002
Source: Witness Document
2. Increased Production Rates & Quotas
Increased Extruder Speed

Management regularly increases plants production quotas to maximize profit Increased production quotas accelerated extruder speed Extruders run at speeds exceeding rated capacity Accelerated extruder speed conforming pipe non-
Testimony re: Increased Production Rates/Quotas Increased Extruder Speed

Former Head of R&D: Barry Lin and Walter Wang repeatedly increased production quotas to maximize profits. The increase forced plant managers to speed up the extruders. Former Corporate QC Supervisor: Management constantly increased production quotas. That caused the plants to ramp up the speed at which the extruders were run. Former Q.C. Supervisor : The extruders were always run at faster than rated capacity, resulting in nonconforming pipe, including non-conforming tensile strength. Over time, production goals were increased significantly. This caused the plant managers to increase the speed of the extruders. That made it more difficult to keep the pipe within specification.
10
Screw & Barrel Units

The Extruder is the first and most important part of the pipe production line. The Barrel and Screws Are the Basic and Most Important Part of an Extruder
11
Source: JMM145413, JMM145422
3.
Failure to Maintain and Replace Screw & Barrel Units

screw & barrel
Increased extruder speeds units wear out faster
Maintenance & replacement schedule not increased to account for wear & tear
Amortization schedules dictate replacement
Use of worn screw & barrel units conforming pipe
non-
12
Testimony re: Failure to Maintain and Replace Screw & Barrel

Former Manager of Three Plants: The increased speed of the extruders meant that the screw & barrel units wore out faster, but maintenance and replacement schedules were not modified to take increased wear and tear into account. Former Corporate QA Supervisor at HQ: JMs screw and barrel units were constantly wearing out because of the high extruder speeds, and JM did not replace them often enough. This contributed significantly to producing non-conforming pipe. Former plant QC supervisor: JM far exceeded the screw and barrel life expectancy, and management would not allow replacement often enough. Former employee in R&D Department/engineer: The screw and barrel units were replaced according to an amortization schedule. This led to the use of worn screw and barrel units. In fact, JM far exceeded the life expectancy of the units. Management overruled plant managers who tried to replace the units. 13
4. Other Changes to Production and QC Process

Operators poorly trained

Line operators used false readings
Insufficient QC personnel Insufficient personnel on production floor

Wharton one employee for four lines Little or no testing on swing/night shifts at some plants
Intimidation of QC personnel Test equipment broken or improperly maintained

14
Insufficient Personnel
Several plants also reported that they have too little time to completely inspect even one pipe per unit. At David Chens request, Jack Hwang asked the plant QA representatives how many pipe [sic] they inspect in each unit in the 24-hour drop area. Several replied that with current production levels, staff levels, and assigned duties, they cannot inspect even one pipe in each unit.
15
Missing/Broken Equipment

Batchelor, Wilton, Pueblo & Butler do not have modern machines for stiffness test Quick Burst Testing
Only Pueblo has test temperature control for quick burst testing Four plants conducted testing improperly

Hydrostatic proof test some plants cant maintain stable test pressure Sustained pressure test equipment not functioning at some plants
16
Guide to PSI Calculations

Hydrostatic Design Basis (HDB): 4,000 psi Quick Burst (QB): 6,400 psi JM requirement = 7,200 psi Longitudinal Tensile Strength (LTS): 7,000 psi
17
HDB Testing

A qualification test Gold standard provides best indication of long-term tensile strength
Source: Witness Document (Email from Fassler to Jack Hwang, 11/13/03, re: Qualifying push-on CIOD joints under ASTM D3139 section 5.2)
18
Three Ways We Know JM Consistently Fails HDB

1.
Testimony/Documents re: HDB testing of one-inch IPS pipe New product qualification (NoThickened-Section pipe) QB results
19
2.
3.
1. Testimony re: HDB Testing on One-Inch IPS Pipe

Former Head of R&D: Beginning around 1997, JM began to experience regular failures on HDB and hoop stress testing. The witness viewed this as a serious problem for the quality of the pipe. However, management refused to give him the authority to look for the root cause(s) of the failures. In all probability the causes were the extruder speed and the use of cheaper materials.
20
In January 2000, JM had Rohm & Haas (R&H) perform HDB testing on two sets of samples of its one-inch IPS pipe from the McNary plant:
21
Email from Fassler to Maria Boitz (Corporate QC Supervisor):
22
2. HDB Failures During Trial Runs of No-Thickened Pipe

Testimony:
Former Head of R&D: For the No-ThickenedSection project, the pipe failed testing 14 times in a row and only passed on the 15th try because of luck of the draw.
Documented Test Results:

By August 2004, 6 of 7 samplings had failed HDB At least 2 more HDB failures between Dec. 2004 and Dec. 2005
Source: JMM114028, JMM121953, Witness Documents, JMM121916
23
24
25
How JM Obtained UL Qualification for No-Thickened Pipe

Samples were not produced under normal
manufacturing conditions
Extruder speed is slowed Torque increased Compound ingredients improved
Pipe was pre-screened to ensure QB results are above
7,200 psi to improve likelihood of passing HDB

have QB results > 7,200 psi
Pipe used for UL testing comes from same lot of pipe shown to
Fassler email, 6/29/06: Have the plants conduct their routine start-up QB tests to specimen failure. Hopefully, they can meet or exceed the 7,200 psi hoop stress benchmark. Pipe lots with less than 7,200 psi hoop stress at failure have a markedly higher rate of HDB failures. In recent years the HDB test success rate is below 50%.
26
Fasslers IRA Approving Production of No-Thickened-Section Pipe, 4/29/05:
Handwritten notation in Barry Lins signature block: In consideration of several test failures for No-Thick Section Project we propose to have PWI & PFO to produce non-thick-section product first. After both plant successfully produce C-900 product then we will apply to all plants. 5/10/05 Handwritten notation in Walter Wangs signature block: Agree to eliminate thickened section for C-900 Blue Brute (4 12) DR18 only; since this product line passed all agency requirements. Agree effective for all plants starting 6-01-05.
27
Since receiving UL listing in 2005 and 2006, No-Thickened-Section pipe is all that JM currently produces
28
3. QB Results as Predictor of Likelihood of Failing HDB

JM Internal Research concludes 7,200 psi on QB is
required to meet the HDB qualification category of 4,000 psi.

QB results less than 7,200 psi = suspect/questionable pipe QB results less than 7,000 psi = bad pipe
Source: Witness Document, JMM130479
AWWA Standard minimum requirement for QB
is 6,400 psi.
29
Comparison of QB Testing and HDB Data Sets

7156 6326 6196
Minimum to pass: 3,830 psi
3641 3645 3683
QB time HDB time
30
Email from Will Fassler to Jack Hwang (12/11/01):
31
Memo from Fassler to Jack Hwang, [1/25/02], re: Benefits of Quick-Burst Testing to 7,200 psi Hoop Stress
32
JM Is Well-Aware of Relationship Between QB and HDB

Johns-Manville policy to scrap pipe with QB < 7,200 psi JM draws connection from its own test results

QB & HDB testing of 1-inch IPS pipe in May 2000 R&D Data
JM uses QB results to cherry-pick pipe for HDB testing by third parties

No-Thickened-Section Project Audits by Outside Agencies

33
JM Test Data Showing Correlation

QB & HDB testing of 1-inch IPS pipe in May 2000:

Email from Will Fassler to Maria Boitz, 5/12/00
34
35
R&D Data: Memo from Will Fassler to David Chen (Plant Manager, Stockton), 4/17/02
36
Cherry-Picking for HDB Testing:

No-Thickened-Section Project: Qualification Attempts Email from Will Fassler, 6/23/06
37
Outside Agencies
Will Fasslers PowerPoint Presentation on HDB at 11/11/04 Quality Assurance Meeting
38
Fasslers Last Stand

On November 11, 2004, one week before the decision is made to reduce the QB requirement from 7,200 psi to 6,400 psi, Fassler does a presentation on HDB that highlights the connection between QB results below 7,200 psi and HDB failures. Fassler instructs his audience only to send R&D and outside agencies pipe samples prepared from pipe with a QB result of 7,200 or higher.
39
Lin Orders Yang to Have QB Requirement Lowered

Email from Barry Lin to K.C. Yang, 9/3/04:
40
Internal Recommendation & Authorization (IRA), dated 11/19/04
41
Timeline of JMs QB Requirement
42
JMs QB Results Fell Below 7,200 psi
Source: Witness Document; see, e.g., JMM117103, JMM117088
43
Longitudinal Tensile Strength (LTS)

A qualification test Provides best indication of short-term tensile strength
44
Four Ways We Know JM Consistently Fails LTS

1. 2.
3. 4.
Testimony Internal testing for lobbying efforts to revise AWWA/ASTM/UL standards to make it easier for pipe manufacturers to pass LTS Claims Testing New product (30- and 36-inch pipe) testing
45
1. Testimony re: Percentage of LTS Failures

Former Corporate QC Supervisor:
From 1997 through 2005 when he departed, JM was unable to manufacture pipe that met the UL tensile strength requirement. During this period 100% of the pipe was non-conforming for UL 1285.
Former Head of R&D:
From 1991 through 2002, between 50-80% of the pipe produced by JM was non-conforming. From 2002 through 2005, 100% of the pipe was nonconforming. 46
Testimony re: Cause of LTS Failures

Switch to Cheaper Ingredients in Compound:
Former QC Supervisor:
Changes in the quality of the compound caused test failures on a regular basis. The compound ingredients were changed because management did everything on the cheap. Former Corporate QC Supervisor: To increase profits management ordered the use of compound ingredients from a company called Luxco. These ingredients were inferior, and shortly after the changeover to Luxco the pipe could no longer meet the UL 1285 requirement of 7,000 psi. Management refused to allow him to pursue the Luxco quality issue. Former Head of R&D: In 2000, JM switched to a lower viscosity resin. Barry Lin made this decision to save money. [R&D] strongly opposed the change-over because the reduced viscosity reduced tensile strength.
47
Testimony re: Cause of LTS Failures (contd)

Increased production rates/extruder speeds:
Former Head of R&D: Pipe produced with extruders that run too fast will often fail tensile strength tests. The non-conforming pipe was shipped anyway. This problem emerged around 1997 and continued until witness left in 2007. Former QC Supervisor: The extruders were always run at faster than rated capacity, resulting in non-conforming pipe, including non-conforming tensile strength.
48
2. Internal Testing for Lobbying AWWA/ASTM/UL to Ease LTS Requirements

In Jan. 2006, JM tested at least one sample of current production pipe from all of the plants
4 DR 18 pipe: ranged from 6,670 7,060 psi 4 DR 25 pipe: ranged from 6,660 6,680 psi Conclusion: The apparent longitudinal tensile strength of 4 DR 18 &
DR 25 pipe at all facilities is below the desired level of 7,150 psi.
In July 2006, JM tested three runs of 4 DR 25 pipe from Fontana

Each of the 3 trial runs failed LTS
1st trial: 6,610 psi 2nd trial: 6,680 psi 3rd trial: 6,550 psi

Source: Witness Document, JMM123744
49
3. Claims Testing
Occasionally, customers test pipe in
conjunction with a claim for non-conforming pipe

Pipe fails LTS in large percentage of these
claims
John Hendrix: During his 3 years at JM, LTS tests
conducted in 14 claims. Of 14 tests, 12 failed LTS

50
Examples of Failing LTS Results from Claims

Claim Name & No. Q00-H-41 Ferguson Cities Supply Brigman Construction Q00-H-14 Tec Utilities Q02-J-40 Westgate Resorts Q05-C-08 Sheldon Site Utilities Q05-H-21 Nevada High Desert State Prison LTS Results 6,600 psi Test Date 09/28/00
Sample 2: 6,680 psi Sample 3: 6,750 psi Sample 4: 6,940 psi 6,833 psi Sample 1: 6,777 psi Sample 2: 6,775 psi 6,349 psi
10/31/00
10/01/02 6/9/05 12/2/05
51
4. Attempted Qualification of 30-inch and 36-inch Pipe

Between 2001 and 2004, JM conducted 11 LTS tests: 97 samples were tested All 97 were below 7,000 psi 100% failure rate
52
Source: JMM122179, JMM117882, JMM117886, JMM116146, JMM116148, JMM116109, JMM116110, JMM116106, JMM116107, JMM122050-51, JMM122068-69, JMM122079, JMM122080, JMM122083, JMM122095-96, JMM122100, JMM122178, JMM122181, JMM122154, JMM122158, JMM116265
53
Types of Cherry-Picking and Process Modifications Used:

Changes to Extrusion Process

Increase shear/torque on extruder (to work compound more
thoroughly) Slow down extruder speeds Replace used Screw & Barrel with new ones
Changes to Specimen Preparation

Change the directional cut from tangential to radial Change the dimensions to equal the thickness of the pipe wall
Changes to Compound
Use JM90R compound instead of JM90 Eliminate use of Luxco brand multi-wax Try single-batch compounding (instead of double-batch)
Source: JMM122179
54
Example of Process Modification JM Has No Intention of Actually Implementing

Single-batch compounding: All the resin goes into the hot mixer with all the additives Contrast with double-batch compounding half the resin goes through the hot mixer with all the additives and remainder gets added in cold mixer Cost Prohibitive To switch to hot-batching, JM would have to retrofit or replace mixers on extruders at 12 plants
55
Email from Fassler to Jack Hwang, 5/12/03, re: Single-batch trial [on 36-inch pipe]
56
After 11 consecutive failures, JM abandons 30- & 36-inch project and withdraws qualification file at UL.
57
Significance of Failure to Obtain UL Listing for 30- and 36-inch Pipe

Although JM never ended up selling UL listed 30- and 36-inch pipe, these
failures translate directly to JMs other UL-listed products.

What the failed pipe and JMs UL-listed pipe sold during this time period
have in common: Both were made using the same JM90 compound Both were made at the same plants Both were made using the same extruders and processes
What JM should have done upon seeing this level of failures in products
made using the same compound, extruders and processes as UL-listed pipe: Remedy known problems with current production Suspend use of the UL listing/notify UL & customers
58
Comparing LTS Results from Johns-Manville and JM

Johns-Manville: Results of LTS testing done in 1974 for UL qualification Range from 7,560 8,765 psi
Source: UL03116, UL03119, UL03122
JM: Results from Claims, Lobbying and 30- & 36-inch UL Qualification Testing Range from 5,976 7,060 psi
Source: Witness Document, JMM123744, JMM111171, JMM111174, JMM111177, JMM122179, JMM122122 , JMM122129, JMM122068, JMM122079, JMM122095, JMM122158, JMM116265, JMM117882, JMM116146, JMM116109, JMM122050
59
Forces That Underpin the Fraud

1. Perverse Bonus System 2. Managerial Structure Where Plant
Managers Override QC
60
1. Bonus System
All of plant managers income is in the form of bonuses

Plant managers subject to ever-increasing production quotas
Incentives to Ship Rejected Pipe

Targets are set for rejects and scrap If targets are exceeded, cost of additional loss of material is subtracted
from bonuses
Incentive to Falsify Testing/Analysis of Claims

Failures determined to be the plants fault are charged to that plant Subject pipe is tested by the plant that made the pipe
61
Testimony re: Bonus System

Former Head of R&D:

Management used the bonus system to control employees. The bonus system put pressure on plant managers to ship more and more pipe regardless of impact on quality.
Former Manager of Three Plants:

Employees in the QA departments were compensated in significant part through bonuses, which created a conflict of interest because they had a personal incentive to overlook pipe that should have been rejected. On various occasions, witness approved the shipment of non-conforming pipe because of the bonus system. Witnesss predecessor at one of the plants did this on a regular basis.
62
Conflict of Interest re: Claims

R&D raised the issue that HQ should evaluate the
claim samples; having the plants evaluate the claim samples is an inherent conflict of interest. The plant managers objected vigorously. Kaushal Rao advised that not only does HQ lack the staff but also he agrees with the plant managers and trusts them to make the right decision. He then ended this conversation and stated that there will be no change in this matter and the plants will continue to evaluate their own complaint samples.
63
Shortage of QC Personnel
The quality supervisors asked if they could
have more auditorsLin advised that the number of auditors is set by the budget. No promises of any more quality auditors. Barry Lin stated that plant managers have the authority to modify the quality auditors duties as they see fit.
64
Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 65 of 70 Page ID #:1465 Date of Entry
Text of Entries from Stocktons Quality Emergency Report

Called Barry Lin to report the tags on the 200 200 x 20 20 S/E were pulled and the units were found in the shipping bays. Also told Barry that this was a common practice practice over the past few years. He asked if I had told David Chen [Stockton plant manager] & Arnel Siojo. Siojo. I said I have issued letters. I told David Chen that I had notified HQ that out out of spec pipe is being released by tags being pulled. I told him to call Barry. David said he had and he was instructed to correct the problem. problem. I found a total of five units that were rejected for thin wall in in the Shipping Bay. 2 2 Sch40 S/E purple pipe. The reject tags had been removed and the marking on on the units were removed with acetone. Alberto was seen by Victor Demande putting the units in the Bay. I told David Chen about this and he asked what the product was and walked away away from me and went to his office and sat down without saying anything. I talk with Jim Reichert Reichert about this and he said he would follow up. I retagged the units in the Bay. It appears the practice of pulling reject tags is still going on. It also appears this is going on with the Plant Manager [knowledge it is being] done. I have sent David Chen letters telling him this is going on and even called Barry Lin and told him. However, it is still happening. happening. On 22-4-04 Steve Adams and myself saw David Chen and Joe Salas going to the reject bay at about 3:10 p.m. The pipe they went to see was the 6 6 SCH 40 S/E made in 12/03 and was being held for large O.D. (+ .005 .005 to .025 .025 over max). David stood by while Joe measured some pipe. pipe. We left the parking lot at that time. The next morning (2(2-5-04) I found out from shipping that David Chen released 55 unit of 6 6 SCH 40 S/E claiming they could not find any large O.D. The morning of 22-5-04 after finding out what was done I went to the Shipping Bay and and found a large O.D. (+ .013 .013) pipe after checking about 5 pipe. Some of the units were still still marked with large O.D. O.D. I told Jim Reichert what I found and said it its no use to tell [illegible] when I tell him. Shipping was also made aware that the pipe still has large O.D. in the unit to be shipped. The releasing of out of spec pipe from the reject and holding bays bays by David Chen is still a problem after he told me it would stop. Still no use to notify HQ because Barry did nothing the last time I called him. him.
Author
8/30/02
Steve Javete (QC Supervisor at Stockton) Steve Javete
12/6/02
2/5/04
Steve Javete
Source: JMM123768-123798
65
JM Corporate Culture
Former Manager of Three Plants: J-M management conveyed to witness that it did not care about the quality of pipe that was shipped and cared only about profits. Overall, he concluded that J-M is a slick company run in an unscrupulous manner. Former Corporate QC Supervisor: Witness quit because management would not let him do his job and cared only about profit, not whether the pipe that was shipped was non-conforming. Those employees who brought issues of pipe quality to managements attention were labeled as troublemakers. Lin and Rao blocked investigation of causes of non-conformity and instead withheld test results from company personnel.
Former QC Supervisor: Witness complained to three individuals at headquarters about the plants refusal to perform all required testing, but he was ignored. Witness was instructed to falsify inspection and test records. Former Head of R&D: Managements general attitude was that pipe is good if a customer does not return it. In Witnesss experience with management, they lived by the motto there is no shame in lying but there is shame in getting caught lying. Managements approach is that pipe is good if customer doesnt return it.
66
JM Pipe Poses a Safety Hazard

Campbell v. JM plaintiff injured by exploding pipe OBarto v. JM plaintiff injured by exploding pipe Giles v. JM plaintiff injured by exploding pipe Orange County, FL explosive rupture National Waterworks catastrophic blow out,
scattered pieces City of Reno Project buried pipe exploded Sheldon Site Utilities pipe section exploded
67
Johns-Manville Recognition of Hazard
68
Damages: Contract Price Trebled

One Measure of benefit of the bargain Case law support

U.S. v Midwest Specialties, Inc. 134 F.3rd 373 (6th Circuit, 1998) U.S. v Aerodex, Inc. 469 F.2nd 1003 (5th Circuit, 1972)
U.S. v. Bornstein, 423 U.S. 303 supplies overarching principles

69
Estimate of Contract Price Method Damages

Estimated federal sales in subset of drop
shipments = $ 10.2 million Estimate of drop shipments as percentage of all sales = 40% Extrapolated single damages = $25.5 million Extrapolated treble damages = $76.5 million
70

Government Case Vs JM Eagle

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Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 1 of 70 Page ID #:1401

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 2 of 70 Page ID #:1402

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 3 of 70 Page ID #:1403

1990s - now, JM:

JMs Approach to Production and Testing

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 4 of 70 Page ID #:1404

False Representations: Modes of Representing Compliance with Standards

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 5 of 70 Page ID #:1405

Post Take-Over, JM Institutes 4 Major Changes to Production

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 6 of 70 Page ID #:1406

1. Changes to Compound Ingredients

Wax lubricants Stabilizers Resin

Changes degraded tensile strength

All changes directed by management and done to increase profits

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 7 of 70 Page ID #:1407

Testimony re: Changes to Compound Ingredients

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 8 of 70 Page ID #:1408

Inherent Viscosity of Resin Reduced in 2002

Source: Witness Document

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 9 of 70 Page ID #:1409

2. Increased Production Rates & Quotas

Increased Extruder Speed

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 10 of 70 Page ID #:1410

Testimony re: Increased Production Rates/Quotas Increased Extruder Speed

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 11 of 70 Page ID #:1411

Screw & Barrel Units

Source: JMM145413, JMM145422

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 12 of 70 Page ID #:1412

Failure to Maintain and Replace Screw & Barrel Units

Increased extruder speeds units wear out faster

Amortization schedules dictate replacement

Use of worn screw & barrel units conforming pipe

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 13 of 70 Page ID #:1413

Testimony re: Failure to Maintain and Replace Screw & Barrel

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 14 of 70 Page ID #:1414

4. Other Changes to Production and QC Process

Operators poorly trained

Line operators used false readings

Insufficient QC personnel Insufficient personnel on production floor

Intimidation of QC personnel Test equipment broken or improperly maintained

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 15 of 70 Page ID #:1415

Source: Witness Document

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 16 of 70 Page ID #:1416

Source: Witness Document

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 17 of 70 Page ID #:1417

Guide to PSI Calculations

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 18 of 70 Page ID #:1418

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 19 of 70 Page ID #:1419

Three Ways We Know JM Consistently Fails HDB

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 20 of 70 Page ID #:1420

1. Testimony re: HDB Testing on One-Inch IPS Pipe

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 21 of 70 Page ID #:1421

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 22 of 70 Page ID #:1422

Email from Fassler to Maria Boitz (Corporate QC Supervisor):

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 23 of 70 Page ID #:1423

2. HDB Failures During Trial Runs of No-Thickened Pipe

Documented Test Results:

Source: JMM114028, JMM121953, Witness Documents, JMM121916

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 24 of 70 Page ID #:1424

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 25 of 70 Page ID #:1425

Case 5:06-cv-00055-GW-PJW Document 128-7 Filed 02/25/10 Page 26 of 70 Page ID #:1426

How JM Obtained UL Qualification for No-Thickened Pipe

Extruder speed is slowed Torque increased Compound ingredients improved