On the morning of July 26, 2024, Federal authorities raided Fuyao Glass America’s plant in Moraine, OH, along with twenty-seven other locations in and around Dayton, OH. While federal officials have provided little information about the raids, Special Agent in Charge Jared Murphy confirmed that allegations of money laundering, labor exploitation, financial crimes, and potential human smuggling were being investigated.
Fuyao Glass America (FGA) is a subsidiary of Fuyao Glass Industry Group Co., Ltd., a leading global manufacturer of automotive and architectural glass. Fuyao Glass Industry Group, headquartered in Fuzhou, China, was founded in 1987 by Chinese entrepreneur Cao Dewang, and the U.S. subsidiary was founded in 2014. The company is one of the largest glass manufacturers in the world, supplying customers such as General Motors, Ford, BMW, Honda, and Bentley.
There have been no official statements made by any federal agencies at this time; however, news media outlets have reported that the federal agents conducting the raids were from the Department of Homeland Security and the IRS. In a statement made to Dayton Daily News, Lei Shi of Fuyao Glass America stated that the company believes that the government raid’s focus was on certain Fuyao third-party contractors rather than the company itself. At this time, no official arrests have been made and the federal government has not filed any charges against Fuyao Glass America. This is not the first time that the company has been involved in a federal action. In 2019, the company faced a $724,380 fine from Occupational Safety and Health Administration for alleged violations involving machine safety, electrical hazards, and lack of protective gear.
Investigations conducted by U.S. federal government, including the Department of Homeland Security (“DHS”), are multifaceted and can vary widely in duration, depending on the type and complexity of the investigation. DHS encompasses a broad range of responsibilities, including national security, immigration enforcement, and disaster response, which means its investigations can cover areas such as terrorism, cyber threats, human trafficking, immigration fraud, and border security. For routine matters, such as verifying compliance with immigration regulations or responding to minor security breaches, investigations might be relatively swift, taking only a few weeks or months. In contrast, more complex investigations involving national security threats or sophisticated criminal networks can extend over several years.
Additionally, government investigations are very secretive, often leaving the subject of the investigation with no indication that they are being investigated. Companies or organizations can be left stunned when they are blindsided by federal charges or subject to a search warrant after a multi-year government investigation. Whether the IRS, DHS, or any federal agency investigates a company, allegations of wrongdoing by employees, citizens, or anonymous sources can all be considered in an agency’s decision to investigate. Companies who have received penalties from the federal government in the past could be looked at with increased scrutiny, making federal agencies more likely to investigate.
If Fuyao’s third-party contractors were indeed the target of the government investigation, this provides a very important lesson: hiring third-party contractors presents several risks that can significantly impact a business's reputation and operations. The reputation of a business can be tarnished if a contractor's actions lead to negative publicity or legal troubles, such as pending litigation or regulatory action. Strategic risks arise if a contractor fails to align with the company’s goals, potentially undermining business strategies. Operational risks arise when ineffective or unreliable contractors disrupt business processes.
When selecting a third-party contractor, extensive due diligence investigations are essential to mitigate these risks. Proper due diligence includes conducting comprehensive audits to assess financial stability, compliance with relevant laws, as well as cybersecurity measures. Red flags such as reports of cybersecurity breaches, a decline in business reputation, or inadequate compliance controls should be carefully scrutinized. In addition, clear contractual agreements outlining performance standards and compliance expectations are vital for maintaining proper oversight on third-party contractors. In the end, establishing clear communication channels and responsibilities between parties, along with rigorous monitoring, can help manage a company’s risks and protect the business from potential operational and reputational harm.
Co-Authors: Earvin Chionglo (Senior Partner) and Jacob Carruthers (Summer Associate)
