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Former sales rep alleges Ohio roofing firm overcharged: Tremco denies civil charges of unfair business practices in its work for Indiana school corporations

May 7, 2007

A longtime sales representative for one of the roofing industry's largest manufacturers alleges his former employer defrauded Indiana public schools out of more than $1.5 million.

Brennen Baker charges that the company, Beachwood, Ohio-based Tremco Inc., circumvented Indiana's public bidding laws for school projects; overcharged for its services; and billed for materials, services and equipment it never delivered.

Baker was a Tremco sales rep for southwest and central Indiana from 1991 until January 2004. Baker, who later founded the Fishers-based roofing construction consultancy Moisture Management LLC, has been battling Tremco in court for more than two years, initially over whether his involvement with Moisture Management violated a noncompete agreement.

Baker, who filed the suit, said he hadn't committed a violation, since Moisture Management sells consulting services, not roofing materials. He also pursued damages for what he called defamatory and libelous comments made by his former managers.

Tremco countersued, claiming Baker, who'd been doing business outside of his old sales territory, simply wanted to back into it.

Things got uglier after that.

In legal filings by his attorneys at locally based Hoover Hull LLP, Baker argued that he should be freed from competition restrictions because he alleges Tremco has "unclean hands" due to its business practices.

He claims that because Tremco sold its goods and services to schools through an education purchasing co-op, it dodged public bidding requirements for school projects. He says the lack of oversight allowed Baker to grossly overcharge for roofing materials and services by using bait-and-switch tactics or charging for products that weren't used.

Baker claims he approached his Tremco supervisor with concerns about these issues, but was told "not to concern himself" and that he would be replaced if he refused to continue using the company's sales techniques.

Tremco denies the allegations.

"Mr. Baker's lawsuit, we believe firmly, is without basis," said Tremco spokesman Carl Zeitz. "We will refute that in court if need be. We'll demonstrate from the facts that his allegations are without merit, and that in fact Tremco ... is an outstanding American manufacturing corporation."

Tremco-owned by Medina, Ohiobased RPM International Inc.-has 1,900 employees and makes a variety of roofing materials and waterproofing sealants.

Baker's suit specifically cites as victims five Indiana school districts-including Westfield-Washington School Corp. in Hamilton County and Center Grove School Corp. in Johnson County. The others named are Rossville Consolidated School Corp. and Western School Corp. in north-central Indiana Howard County and Spencer-Owen Community Schools in southern Indiana.

"Baker uncovered an alarming scheme whereby Tremco and [its general contracting subsidiary Weatherproofing Technologies Inc.] would use the ... line item contract to charge Indiana public schools for roofing materials, services and equipment never supplied and to charge these schools grossly excessive amounts for what was actually provided," Baker's brief reads.

Not so, counters Tremco's local attorney, Krieg DeVault LLP partner Mark Merkle.

He noted that Tremco had gone through a competitive bidding process to become the co-op's supplier. That process, he said, ensures school districts get a good deal without having to bid out their contract.

"Anybody purchasing through [the coop] has a minimum 13-percent discount on Tremco materials, which is the best rate available, including the government rate. It can't get better than that," Merkle said.

He said Baker honored his employment agreement for about six months after his resignation, then began soliciting busi- ness in his former Tremco territory.

He said Baker and his attorneys cherrypicked evidence they believe bolsters their claims of overcharges to schools, ignoring instances where Tremco underestimated the amount of roofing materials, or the number of man hours, needed to complete a school roof job. In cases when its costs run higher than estimates, Tremco must swallow the loss.

"The sole intent and purpose of his lawsuit, in our minds, was to avoid a validly written restriction on competition," Merkle said. "When you get to the heart of the matter and cut to the chase, we believe the court will find that was the purpose."

He pointed out that the Indiana Attorney General's Office in 2005 decided against pursuing an investigation of Tremco after it received similar allegations from a Lafayette-based group called Taxpayers United for Fairness. The group had asked for a meeting to discuss its accusation of statewide school construction fraud.

One of the group's concerns was the same Rossville school project-the renovation of the high school and elementary school roofs-in which Baker now alleges fraud.

In a letter to Taxpayers United in late 2005, an official in the Attorney General's Office noted that a State Board of Accounts audit had raised concern about the bidding procedures used for the project. But the office opted not to investigate because the audit had not found "malfeasance, misfeasance or nonfeasance against school corporation officials."

Taxpayers United for Fairness is now defunct, Merkle said, and Tremco is pursuing a slander case against its individual members.

It will be up to Hamilton Circuit Court to decide the merits of Baker's and Tremco's claims against each other. Both sides are asking the court to rule in their favor without a trial. If those motions are denied, the matter will go to trial June 11.

In the meantime, two school corporations named in Baker's suit have stopped doing business with Tremco.

Spencer-Owen Superintendent Marsha Turner-Shear said that when her district renovated its high school last year, Tremco was the subcontractor that replaced the roof.

School officials were upset when they received the roof bill because it was twice what the general contractor had quoted, Turner-Shear said. After discussions, Tremco cut its bill in half, she said, but the experience left a bad taste.

"After that, we severed business ties immediately with Tremco," she said.

School districts depend on the honesty of their contractors, said Taffy Cooke, director of operations for Western School Corp.

She said the district worked with Tremco when Baker was with the firm. But when he left, Western broke ties and tried another roofing company.

"They were very upset we had switched to a different vendor," she said. "That would be an understatement."

Eventually, the district switched again, this time to Baker's Moisture Management.

Vendor relationships are key, she said, because on projects like roof replacements it's difficult for a district to assess whether it is getting what it paid for. She noted that replacing a school roof can cost several hundred thousand dollars.

"If we were overcharged, you're kind of at the mercy of trusting the person you're dealing with," she said. "It would be like you going to the dentist, and maybe they used a material that was substandard for your filling. You'd need another dentist to tell you."
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