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Auto Parts Distributor Centric Parts Settles Customs Fraud Whistleblower Lawsuits for $8 Million

Posted  July 22, 2020

Constantine Cannon is pleased to announce an $8 million settlement on behalf of its whistleblower client in a False Claims Act lawsuit against CWD, LLC. The Carson, CA-based company, which does business as Centric Parts, is one of the largest aftermarket brake and chassis parts distributors in North America. The qui tam suit alleges that Centric misclassified brake pads imported from Asia to avoid tariffs, and concealed the decade-long misconduct to avoid repaying millions of dollars in duties it owed the United States.

While importers pay no duties on unassembled brake pads, the duty on brake pads “mounted” to a metal backing plate is 2.5 percent. From at least September 2006 until approximately April 2017, the whistleblower lawsuit alleges, Centric misclassified its imported brake pads as unmounted, avoiding millions of dollars in tariffs, and failed to report the error later to avoid paying the tariffs owed and associated penalties.

Constantine Cannon represented Steve Hughes, a former Centric executive, in his qui tam lawsuit, which was filed in 2019 in federal district court in Los Angeles, California. After investigating the allegations, the federal government joined Hughes’s case and another whistleblower lawsuit that made similar charges.

Hughes, who has worked in the automotive-parts industry for nearly fifty years, alleged that he raised the brake-pad misclassification issue with Centric’s CEO and CFO immediately after he learned about it.  Hughes advised that Centric must disclose the misclassification to U.S. Customs and Border Protection (CBP). Instead, Hughes alleged, Centric leadership opted to cover up the decade-long misconduct.

Hughes further alleged that Centric leadership retaliated against him; unwilling to participate in a coverup and marginalized internally, Hughes was compelled to resign.

“When I originally discovered the misclassification, I presumed it was just an oversight that could be fixed.” Hughes said. “But I couldn’t stand by when management decided to hide the truth and ‘ask for forgiveness’ if they were ever caught. I was taught that honesty and integrity should always win out over arrogance and greed, so I realized I had to step forward.  The decision to become a whistleblower was one of the toughest I’ve ever made in my life.  But it was the only choice.  And I’m relieved now that money will be returned to the taxpayers.”

The False Claims Act is one of the most effective weapons in combatting fraud, waste, and abuse by those who do business with the U.S. Government. With the help of whistleblowers like Mr. Hughes, the government recoups millions of dollars every year related to customs fraud. The False Claims Act entitles whistleblowers like Mr. Hughes to receive a whistleblower reward of up to 30 percent of the government’s recovery.  In this case, the whistleblowers will share a reward of approximately $1.5 million.

“This case exemplifies how the federal government relies on brave whistleblowers to expose fraud hidden in the complicated nomenclature of global trade,” Constantine Cannon attorney Ari Yampolsky said.  “We need whistleblowers like Mr. Hughes to bring fraudsters to justice.  The government’s swift action in this case sends a clear message that customs fraud will not be tolerated.”

Constantine Cannon attorney Leah Judge said: “Steve Hughes is a dedicated executive who spoke up because he felt he had to. It wasn’t easy, but he did the right thing, for the right reasons. We are proud of our client and pleased that we were able to recover $8 million for taxpayers.”

Constantine Cannon thanked Stephen Tosini of the U.S. Department of Justice and Abraham Meltzer and Karen Paik of the US Attorney’s Office for the Central District of California for their work on the case.

Eric Havian, Ari Yampolsky, and Leah Judge of Constantine Cannon represented Mr. Hughes. Constantine Cannon is the largest international law firm dedicated to representing whistleblowers, with offices in New York, London, San Francisco and Washington, D.C.  You can read more about Constantine Cannon’s whistleblower practice and customs fraud on its website.

About Constantine Cannon LLP

Constantine Cannon has the world’s largest international whistleblower practice, with offices in New York, Washington, D.C., San Francisco, and London. The firm’s team of dedicated whistleblower lawyers represent whistleblowers under federal and state False Claims Acts as well as the whistleblower programs of the IRS, SEC, CFTC, DOT, and others.

Constantine Cannon‘s experience spans across multiple practice areas that include antitrust and complex commercial litigation, whistleblower representation, government relations, securities, and e-discovery. The firm’s antitrust practice is among the largest and most well recognized in the nation.

PRCG | Haggerty
Isaac Benjamin
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