False Claims Act whistleblower lawsuits may be filed for failure to pay marking duties on unmarked or improperly marked imports, the U.S. Court of Appeals for the 3rd Circuit said Oct. 5 as it resurrected a whistleblower lawsuit filed by a company founded to investigate customs fraud (here). Reversing the dismissal of Customs Fraud Investigations’ (CFI) lawsuit against pipe fitting importer Victaulic by the U.S. District Court for the Eastern District of Pennsylvania in September 2014 (see 1504290070), the Appeals Court sent the case back down with instructions to allow CFI to amend its complaint to include new evidence of Victaulic’s alleged fraud.
Customs fraud whistleblowers
Customs fraud includes undervaluation, misclassification, and transshipment to avoid paying customs duties or antidumping fees. Under the False Claims Act of 1863, individual whistleblowers may file lawsuits alleging a company or individual is committing customs fraud, and allow the government to recoup three times the amount in unpaid duties and fees. The whistleblower is entitled to a portion of the damages.
Federal prosecutors filed a civil complaint against a garment importer, its executive and a clothing wholesaler for an alleged customs duty evasion scheme, the U.S. Attorney's Office for the Southern District of New York said in a Sept. 23 news release (here). The importer, Yingshun Garments, "avoided paying millions of dollars in customs duties" by undervaluing garments on false invoices, the USAO said in the complaint (here). The complaint was the result of an investigation by CBP and ICE's Homeland Security Investigations, ICE said (here).
A federal judge unsealed documents related to antidumping duty evasion allegations brought by a third party after the Department of Justice declined to get involved, recent court filings show. The lawsuit, brought by Customs Fraud Investigations (CFI), claimed that Mueller Industries and a subsidiary schemed to "fraudulently import its standard pipe as line pipe" to avoid antidumping duties on the product. The complaint, filed in 2014, was unsealed on Sept. 15 in U.S. District Court for the North District of Illinois Eastern Division.
Cellphone case maker OtterBox paid $4.3 million to settle a whistleblower suit brought by a customs broker and former employee that alleged the company failed to account for the value of assists when it paid customs duties, said the U.S. Attorney’s Office for the District of Colorado on April 21. The broker, Bonnie Jimenez, alleged that her former employer knowingly disregarded the value of engineering work and molds on entry documentation it submitted between 2006 and 2011. The government agreed, and decided to intervene on her behalf. Jimenez will receive $830,000 out of the settlement for her trouble. OtterBox did not admit guilt as part of the settlement, and a company spokesman later denied the charges in the complaint.
A $6.3 million settlement was reached Monday to resolve claims that companies misclassified auto parts manufactured in China and imported to the U.S. to evade $2.5 million in duties, said Immigrations and Customs Enforcement. Six companies from the U.S. and China, as well as two named individuals, allegedly violated the False Claims Act by knowingly misclassifying auto manifolds to obtain a duty rate of zero, ICE said, while charging its customers the correct duty of 2.5%, and retaining as "profit" the duty that should have been paid to U.S. Customs and Border Protection. Between June 2004 and June 2011, the U.S. alleged that the company evaded $2,549,000 worth of duties on 706 entries involving manifolds valued at $102 million.
The U.S. Justice Department said it intervened in a lawsuit against Japanese company, Toyo Ink Manufacturing Co. Ltd., that is accused of misrepresenting the country of origin on documents presented to U.S. Customs and Border Protection to avoid paying antidumping and countervailing duties on imports of the colorant carbazole violet pigment number 23 (CVP-23).
On January 3, 2012, the Justice Department announced that Maersk Line Limited has agreed to pay the government $31.9 million to resolve allegations that it submitted false claims to the U.S. in connection with overcharging for transporting cargo in shipping containers for U.S. troops in Afghanistan and Iraq. This lawsuit was filed under the whistleblower provisions of the False Claims Act.
The Justice Department has issued a press release announcing it has intervened in a whistleblower lawsuit1 against Kellogg Brown & Root (KBR), Panalpina Inc. and others which alleges that employees of two freight forwarders doing business with the companies provided unlawful kickbacks to KBR transportation department employees.
The Department of Justice reports that in May 2008, apparel companies Intertex Apparel Group, Ltd., J.J. Basics, Inc., and Ben's Clothing Inc. dba Red Zone, as well as their principals, Jack Setton, Marc Setton, Vivek Bendre, Jacob Bensadigh, and Steve Bensadigh, agreed to pay a total of $2,798,872.50 to resolve civil charges that they defrauded the U.S. Government by making false statements in connection with the importation of wearing apparel into the U.S.