New Tariffs Create Greater Incentives for Customs Fraud

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New Tariffs Create Greater Incentives for Customs Fraud

Domestic importers are paying record amounts in customs duties due to a recent surge in the number of new tariffs, according to a recent article in the Wall Street Journal. In October, American companies paid $6.2 billion in duties, including $2.8 billion in new tariffs, according to Tariffs Hurt the Heartland, a lobbying group comprised of companies in the manufacturing, farming and technology sectors. Since May, the amount of import duties has doubled, including an increase of more than 30% from August to October.

Buy American and Hire American for Whistleblowers

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President Trump is signing an executive order today to implement a more muscular Buy American Act. This measure likely signals strengthened enforcement of the Buy American Act under the False Claims Act.

5 Areas Where President Trump Will Pay Whistleblowers

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There has already been much commentary on the impact that President Trump and his administration will have on government enforcement efforts. Trump has made it clear that he intends to streamline government regulation of business in order to spur the economy. He’s also promised to dismantle Dodd-Frank, the law that started the SEC and CFTC whistleblower programs. If Trump succeeds in getting government off the back of businesses, then that will likely mean less enforcement actions against these businesses for running afoul of regulations that don’t fit into Trump’s plan.

False Claims Act Yields $519 Million for Whistleblowers in FY2016

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The Justice Department announced the third highest annual recovery in the history of the False Claims Act yesterday – $4.7 billion for the federal government for fiscal year 2016 (ending Sept. 30th). Whistleblowers received awards of $519 million for their assistance recovering $2.9 billion – more than half of the funds returned through settlements and judgments. During President Obama’s Administration, the Government paid more than $4 billion to whistleblowers for their information and assistance in the recovery of nearly $24 billion through qui tam lawsuits.

McEldrew Young Purtell Merritt Client Exposes Customs Fraud by Military Contractor

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We are pleased to announce that our client, Todd Mihajlovic, exposed the concealment of the origin of goods imported into the United States by ECL Solutions Limited, Inc., a British company doing business with the U.S. military as Ban-Air Storage Systems (“ECL”). Yesterday, the U.S. Department of Justice announced that ECL pleaded guilty to conspiring to smuggle goods into the United States and was ordered to pay a forfeiture money judgment of $1,066,132.10 in the criminal prosecution in the U.S. District Court for the Eastern District of Pennsylvania. The Government’s press release announcing the success in the criminal matter can be found on the DOJ’s EDPA website here.

We represented Mr. Mihajlovic, who filed a civil qui tam lawsuit under the False Claims Act in the U.S. District Court for the District of Delaware in 2012. Mr. Mihajlovic’s complaint alleged that ECL violated the False Claims Act because of false representations made by the company that products it sold to the United States complied with the Buy American Act (BAA) and the Trade Agreements Act (TAA). According to the Complaint, ECL obscured the fact that its steel racking systems sold to the U.S. military were actually imported from China.

Mr. Mihajlovic has our profound gratitude for bringing the company’s scheme to the attention of the U.S. Government.  Here at McEldrew Young Purtell Merritt, Attorney Brandon Lauria took the lead on the case and spent countless hours on the case to see it to a successful resolution.  We were assisted by United Kingdom Solicitor-Advocate Howard S. Brown, who is associated with Shepherd, Finkelman, Miller & Shah, LLP.

This case is an example of the rise of international whistleblowing, as our client is located outside the United States.  Fortunately, the whistleblower laws incentivize reporting by individuals regardless of their location and citizenship.  The False Claims Act, as well as the SEC, CFTC, and IRS whistleblower programs, do not restrict the U.S. Government from rewarding international whistleblowers.  Otherwise, in the era of transnational commerce, fraud might go unchecked simply because the evidence of the corporate wrongdoing is located in a foreign country.

If you are a whistleblower, located here in the United States or abroad, interested in reporting customs fraud in America or the bribery of customs officials abroad, contact our office for a free initial legal consultation concerning your case.

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False Claims Act Case Over Customs Duties Near Settlement

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When the Department of Justice reported its Fiscal Year 2013 results, it put the use of the False Claims Act to fight health care fraud front and center.  Whistleblowers are not limited to bringing lawsuits against hospitals and drug companies, however.  The False Claims Act applies broadly to fraud against the government.  A number of companies operating outside the health care industry, including J.P. Morgan, have found that out.  Symantec, for example, recently reported potential liability of $145 million under a False Claims Act investigation.  Another wasn’t even providing services to the government under a contract.  Instead, it violated the False Claims Act by underreporting the value of imported products for customs duties.

When companies import products, they must pay duties according to the value of the imported merchandise.  The customs value is not merely the material costs of manufacturing.  It also includes the value of additional materials and services involved in making the imported merchandise, known as assists.  The value of an assist is apportioned across all of the products manufactured with the assist.  If a company intentionally excludes the assist from the value reported to U.S. Customs and Border Protection, it violates the False Claims Act.

OtterBox, a maker of smartphone and tablet cases, is now in settlement talks in the False Claims Act lawsuit brought against it by Bonnie Jimenez in 2011, according to court documents providing additional time to finalize a settlement.  Jimenez, the former Supply Chain Director at OtterBox, accused OtterBox of understating the value of imported items to Customs from 2007 to 2011.  As a result, OtterBox paid lower customs duties to the U.S. Government on imported smartphone cases.

As Otterbox would import smartphone cases from a Chinese manufacturer, it did not report engineering and tooling costs performed overseas in the value of its products.  In one example cited in the lawsuit, Otterbox imported 3,000 cases for Blackberry phones at a cost of $2.13 from a Chinese manufacturer in April 2010.  The additional value was estimated at between $2,500 and $12,000 per mold, which should have been apportioned across the manufactured products.  Because it did not report the additional value of the assist, it did not pay the proper amount of import taxes.

Any settlement must be approved by the Department of Justice, the U.S. Attorney’s Office and the Department of Homeland Security.   United States Customs and Border Protection is a division of the Department of Homeland Security.

McEldrew Young Purtell Merritt represents whistleblowers reporting fraud to the government through the False Claims Act.  For a free confidential consultation, please call Eric Young, Esq. at 1-800-590-4116 or complete our online contact form.

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