SC metal fabricator pivots focus as DOJ probe looms (2024)

SC metal fabricator pivots focus as DOJ probe looms (14)

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The founder of a Goose Creek metal fabrication firm that's helping to build parts for the Navy's next-generation nuclear submarine says his company isn't failing despite losing a big defense contract and undergoing scrutiny by the U.S. Department of Justice.

Ed Walker, CEO of W International, denied a recent report in Forbes magazine that stated his company "has almost entirely collapsed."

"We're extremely busy, we're still hiring and we fully expect to continue to be a premier supplier for many years to come," Walker said last week.

Walker said the welding and metal shop off Bushy Park Road is lining up new customers to either supplement or replace the shipbuilding contracts W International was created more than four years ago to fulfill. For example, the company recently built an 80-ton emergency gate for the Pinopolis lock that state-owned utility Santee Cooper operates at Lake Moultrie.

But the company has seen troubles in recent months.

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Newport News Shipbuilding, which hired W International to build modules for a new class of aircraft carriers, canceled its contract and is not currently doing business with the company.

Forbes reported this month that General Dynamics subsidiary Electric Boat, which hired W International to build submarine parts, will cut ties with the company after its current contract winds down in early 2026.

Walker would not discuss his company's work with Electric Boat. He said W International remains an approved supplier for Newport News Shipbuilding and he hopes to do work for the Virginia-based company in the future.

An Electric Boat spokeswoman declined to comment on W International. Todd Corillo, spokesman for Newport News Shipbuilding, said: “As a matter of policy, we do not discuss details of supplier relationships. We continually evaluate capabilities of our current and potential suppliers and align any current and future work scope accordingly.”

Perhaps most worrisome is a civil investigation the Justice Department initiated late last year into potential misapplication of federal dollars W International has received, including $55 million in Defense Production Act funding in 2020 to aid COVID-19 recovery efforts. Walker estimated that $150 million, much of it taxpayer money, has gone into making the Berkeley County site viable for complex manufacturing.

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The Justice Department's Civil Investigative Demand letter, which is similar to a subpoena, said the agency is looking into potential violations of the federal False Claims Act meant to deter and punish defense contractor fraud.

"When a company receives a CID, it generally means one of two things: the DOJ believes the company either has information that is relevant to an FCA investigation, or the company is the target of the investigation," according to Bloomberg Law. If such an investigation "results in any evidence of criminal misconduct, the agency may use it to pursue criminal charges," WestLaw stated.

Walker said he provided answers to the government's 12-page letter in November and has not heard back. Walker said he has not been informed of any criminal investigation into the matter. A Justice Department spokesperson did not respond to a request for comment.

Federal probe

The investigation appears to focus on payments W International made using federal funds to companies with possible ties to Walker, according to a copy of the letter obtained by The Post and Courier.

For example, investigators want to know Walker's relationship to W International supplier Precision Material Handling Equipment LLC. Walker said he once owned that company but sold it in early 2021 to Leona Burja, who was chief operating officer of a previous company Walker owned in Michigan. Walker declined to say how much W International has paid to Precision Material, adding contracts between the companies forbid financial disclosures.

"But I can assure you that what we've done has all been fair and reasonable," he said.

The Justice Department wants copies of each proposal, bid, quote and estimate that Precision Material has prepared for W International over the past five years. It also wants information about Walker's company and its relationship with other suppliers.

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    Investigators also want a wide range of documents, including all employee time sheets, pay rates, purchase orders, invoices and written communication with Precision Material and several other companies as well as information about employee qualification and training at W International and how the company determined costs for equipment including weld tables, weld curtains and power carts.

    The Forbes article also questions Walker's involvement with Vivid Empire SC LLC, which is W International's landlord at the Charleston International Manufacturing Center.

    Walker, who is the sole member of Vivid Empire, formed the limited liability company in December 2018, the same month the S.C. Department of Commerce announced W International's plan to build a metal fabrication plant in Berkeley County that would serve the nation's defense industry and create 600 jobs.

    Cooper River Partners, the developer of the industrial park, owns the land where W International is located, but Vivid Empire took ownership of about 481,000 square feet of industrial and office buildings on the site. The Walker-controlled company purchased the properties and all improvements in December 2018, and W International leases them back at an annual base rate of $7.96 per square foot— or about $3.8 million per year.

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    Walker said the relationship between W International is "a very typical business arrangement" and he believes the rental rate is below market value.

    "I absolutely push back on (any allegation) that I am in any way price gouging anybody through that transaction," Walker said. "It's just a typical business structure that almost everybody in this country uses. It's been portrayed very poorly."

    Changing course

    Walker also bristled at the notion that W International's work has not met quality standards set by the Navy's shipbuilders. Forbes, citing unidentified sources, reported "ugly performance issues" with some of the large modules W International built for the next-class aircraft carrier.

    "That's certainly not the case," Walker said. "We have a good scorecard with our customers. We build a good product, and we have great quality."

    But W International is diversifying beyond shipbuilding, and Walker said he's confident the company will prosper even if the Navy work goes away.

    "Nobody wants to have just one customer or a couple large customers that fully dictate your future," he said.

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    W International hopes to capitalize on demand from other customers for heavy-duty gates like the one it built for Santee Cooper. The company is also working on a large-scale space exploration project and is considering hydro-electric deals and construction of platforms for offshore use by cable installers and other companies.

    Although much of the high-tech gear that W International has installed over the past few years has been paid for with federal money meant to support the shipbuilding work, Walker said "we believe we've met all requirements for that equipment, and it would continue to stay here at this facility" if those contracts go away.

    The company's headcount took a hit when Newport News Shipbuilding canceled the contract for the carrier work, but W. International said it has since rebounded to 552. The number of hours worked nearly hit 600,000 in 2023, and the company projects it will double by 2026.

    "We have a couple of really large opportunities that are significantly larger than the work we're doing today," Walker said. "However the Navy work pans out, and our hope is that we'll have that as a good, core piece of work here for us, we see the other work being 70 percent of our work within the next three years. We're not just viable, but I expect us to continue to grow year after year."

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    “As a matter of policy, we do not discuss details of supplier relationships. We continually evaluate capabilities of our current and potential suppliers, and align any current and future work scope accordingly.”

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