Fitness Company Settles False Claims Act Customs Case Initiated by Whistleblower

By the Constantine Cannon Whistleblower Team

The U.S. Attorney’s Office for the Eastern District of Tennessee recently announced that Echelon Fitness Multimedia agreed to pay $2,100,000 to settle a False Claims Act case alleging that it knowingly undervalued fitness equipment imported into the United States to lower the tariff payments owed to the government.[1]

What Was the Alleged Fraud?

Echelon is a company that sells fitness equipment that can connect to live and on-demand fitness classes.  The government alleged that over a multi-year period Echelon violated the False Claims Act by engaging in customs fraud.  In particular, the government alleged that Echelon (i) “knowingly submitted inaccurate invoices to U.S. Customs and Border Protection (CBP) that underreported the cost of equipment purchased from a China-based manufacturer-assembler,” and (ii) “repeatedly failed to include the cost of computer tablets incorporated into packaged equipment shipped from China to the [U.S.] when declaring the total values of the imported equipment to CBP, improperly reducing tariffs and other import assessments.”  These customs fraud allegations follow a well-established theory of liability under the FCA.

Was a Whistleblower Involved in this Case?

As with the majority of False Claims Act cases, this settlement is the result of a lawsuit filed by a whistleblower under the qui tam (or whistleblower) provisions of the False Claims Act.  Those provisions allow private parties to file lawsuits on behalf of the government and receive a portion of any monetary recovery.  In this case, the relator (or whistleblower), who was an employee of the company, will receive an award of about 20% of the settlement amount, as well as possibly additional sums as permitted under the FCA.[2]

How Can Whistleblowers Fight Tariff Fraud?

When companies attempt tariff fraud, they risk liability under the False Claims Act. Whistleblowers, especially insiders or other employees at the company, can be instrumental in uncovering fraud and prompting enforcement proceedings.

According to Constantine Cannon partner Dan Vitelli, “This intervention and settlement is yet another reminder that the government continues to bring enforcement actions, including under the False Claims Act, to go after alleged tariff fraud.  The government counts on whistleblowers, who often have the most valuable information regarding fraud and misconduct, to come forward and help put a stop to it.”

Our Firm Helps Whistleblowers

Our firm has extensive experience representing whistleblowers, such as current or former employees, other insiders, contractors, customers, suppliers, or importers, who have knowledge or information about customs fraud or other types of fraud.  If you believe you have a case, please contact us and we will connect you with an experienced member of the Constantine Cannon whistleblower team for a free and confidential consultation.

Speak Confidentially With Our Whistleblower Attorneys

Sources:

[1] See https://www.justice.gov/usao-edtn/pr/echelon-fitness-multimedia-llc-agrees-settle-false-claims-act-allegations-2100000.

[2] See Id.

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