Customs Fraud

October 30, 2020

Days and Towers, LLC will pay over $800,000 to resolve charges that it violated the False Claims Act between 2015 and 2019 through its submission of false tariff schedules to reduce its customs obligations on imported products.  USAO PR

September 25, 2020

A multinational industrial engineering company headquartered in Germany has agreed to pay $22 million to settle allegations of violating the False Claims Act.  In order to avoid paying certain import duties over a six year period, Linde GmbH and its Houston-based subsidiary, Linde Engineering North America LLC knowingly misrepresented the nature, classification, and valuation of its merchandise, which is used in the construction of natural gas and chemical manufacturing plants.  The misconduct was first brought to the government’s attention by a whistleblower, who will receive a $3.7 million share of the settlement proceeds.  The defendant later made a partial disclosure to the government prior to the government’s disclosure of its investigation.  DOJ; USAO EDPA

August 26, 2020

LA-based clothing company Ambiance Apparel and its owner Sang Bum “Ed” Noh have pleaded guilty to customs violations and tax offenses, agreeing to pay a total of $118 million, which includes $36 million in previously-seized cash.  Defendants evaded import tariffs by colluding with Asian manufacturers for the submission of invoices to CBP that fraudulently understated the value of imported clothing. The fraudulent invoices indicated payment terms by letter of credit; a second invoice for the balance of the actual price was paid by defendants by wire transfer. In less than five years, Ambiance undervalued imports by about $82.6 million and failed to pay more than $17.1 million in tariffs. In addition, defendants failed to properly report cash transactions and maintained a second set of books for cash transactions, evading nearly $17 million in taxes.  The company will be placed on probation for five years and will be ordered to undertake specific compliance procedures.  USAO CD Cal

Centric Parts – Customs Fraud ($8 million)

In a customs fraud victory, the Constantine Cannon team represented whistleblower Steve Hughes in his successful False Claims Act action against his former employer, auto parts distributor CWD, LLC.  Hughes alleged that CWD, which does business as Centric Parts, misclassified brake pads imported from Asia as “unmounted” brake pads when they were, in fact, brake pads mounted to a metal backing plate, and therefor subject to a 2.5% tariff.  When Hughes learned of the misclassification, he immediately advised the CEO and CFO to disclose the issue to U.S. Customs and Border Protection.  Instead, the company concealed the misclassification and retaliated against Hughes.  As a result of Centric’s alleged omissions and false statements regarding its imported products, the company knowingly evaded millions of dollars of customs duties it owed to the United States.  The $8 million settlement resolved the Hughes lawsuit and one other qui tam action filed by a different whistleblower.  The whistleblowers shared a $1.48 million whistleblower award, representing 18.5% of the government’s recovery.  Whistleblower Insider; Press release

July 22, 2020

Auto parts distributor CWD Holdings LLC, which does business as Centric Parts, will pay $8 million to resolve claims in False Claims Act cases brought by two whistleblowers, Steven Hughes and Jeffrey Hawk.  The government alleged that over the course of ten years the defendant imported brake pads, falsely identifying them as unmounted brake pads, which are not subject to any tariff, when they were, in fact, mounted brake pads, which are subject to a 2.5% tariff.  Defendant thereby knowingly evaded millions of dollars in customs duties.  The whistleblowers will share a $1.48 million whistleblower award.  USAO ED MI; USAO CD CA

April 14, 2020

Importer Blue Furniture Solutions, LLC, its successor XMillennium, LLC, and former executives Yingqing Zeng and Alex Cheng have agreed to pay more than $5.2 million to settle allegations that they violated the False Claims Act in conspiring to evade customs duties and fees on furniture imported from China.  In a qui tam complaint by whistleblower University Loft Company, which the United States elected to intervene in, the defendants were accused of declaring wooden bedroom furniture as “metal” or “non-bedroom”, manipulating packing lists and invoices, and directing manufacturers to mislabel boxes and falsify invoices to help defendants evade U.S. customs officials.  USAO WDTX

September 12, 2019

Italian textile company Miroglio Textile S.R.L. and its U.S. affiliate Miroglio Textiles USA, Inc. will pay $650,000 to resolve charges brought in a whistleblower action alleging that the companies fraudulently reduced their obligation to pay customs duties on fabrics, decals, and other products sold by the Italian company to U.S. customers. Without any bona fide business justification, the companies reported the imports as sales from the Italian company to the U.S. affiliate at discounted prices, and used those discounted prices as the basis to calculate duties.  These sales were shams, and Miroglio misrepresented their nature, and the relationship between the entities, in certifications to Customs & Border Protection.  USAO SDNY