(Adds details from FHWA letter, Trinity comment, whistleblower allegations, stock price, byline)
By Jonathan Stempel
Oct 21 (Reuters) - The U.S. government on Tuesday asked Trinity Industries Inc to conduct more crash testing of a highway guardrail system, a day after a federal jury found the company liable for fraud related to the product, or else risk losing federal funding.
Gregory Nadeau, acting administrator of the Federal Highway Administration (FHWA), said new tests of Trinity’s ET-Plus product for the ends of guardrails, which is intended to protect vehicle occupants in crashes, are needed in light of the verdict and to help the regulator evaluate how well the system works.
In a letter to Trinity, Nadeau said the government may suspend or revoke eligibility for federal reimbursement dollars for ET-Plus if the company does not submit a crash testing plan by Oct. 31.
Some states have also raised concerns about ET-Plus, and the FHWA this month began asking all state departments of transportation to provide relevant crash data.
“We look forward to working with the Federal Highway Administration and having further conversations about additional testing of the ET-Plus system,” Trinity spokesman Jeff Eller said. “It is important to us that our nation’s roads are safe for drivers across the country.”
On Monday, a jury in Marshall, Texas, found that Dallas-based Trinity defrauded the government in its sale of ET-Plus to U.S. states, which in turn got federal reimbursements.
Jurors awarded $175 million, which under the federal False Claims Act would be tripled to $525 million.
The case had been brought by a whistleblower, Joshua Harman, who claimed that Trinity had failed to make required disclosures to the FHWA of design changes to the ET-Plus between 2002 and 2005.
Harman said the changes could cause the guardrail to pierce crashing vehicles rather than absorb their impact, putting occupants at risk of being seriously injured or killed.
The U.S. Treasury collects much of a False Claims Act award, while a whistleblower gets a minority share.
Trinity on Monday said it believed the jury’s decision “cannot and will not withstand legal scrutiny.”
Shares of Trinity on Tuesday closed up $2.66, or 8.4 percent, at $34.29, after falling 12.3 percent on Monday. (Reporting by Jonathan Stempel in New York; editing by G Crosse and Leslie Adler)