W.W. Grainger pays $6M to settle gov't charges

Tool and maintenance products distributor W.W. Grainger Inc. has paid $6 million to settle charges that it defrauded the U.S. government, the Justice Department said Friday.

The Lake Forest, Ill.-based company allegedly sold supplies to government agencies at a markup greater than that allowed by the company's government contracts, the department said.

W.W. Grainger also allegedly sold to government agencies products from countries that do not have free trade agreements with the United States, such as China and Taiwan, the department said. That violated the company's government contracts and federal law.

The case stemmed from a False Claims Act filing by Brian Holbrook, a former Grainger employee, who will receive $70,400 of the recovery amount, the Justice Department said in a statement.

Under the False Claims Act, whistleblowers can file claims against government contractors on behalf of the United States and receive a portion of any settlement or judgment against a defendant.

James Ryan, the company's president and chief executive, said in a separate statement that Grainger "has continuously improved its compliance program" and that it believe it has complied with its government contract "in all material respects."

The company also said it settled the complaint to avoid further legal fees.

Grainger is continuing discussions with the Justice Department on a separate review of its compliance with other contract provisions, the company said.

The company said July 15 that its second-quarter results included a charge of 5 cents per share, or $6 million, for a legal reserve that it set up as it engaged in settlement discussions with the Justice Department.

W.W. Grainger shares fell 35 cents to finish at $88.