Constantine Cannon Client Slams the Brakes on Customs Fraud in $8 Million Settlement Against Auto Parts Distributor Centric Parts

Steve Hughes, a whistleblower represented by Constantine Cannon, slammed the brakes on a long-running scheme by his former employer to evade customs duties, resulting in an $8 million settlement of the whistleblower’s 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 settlement resolves allegations 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.

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

Steve Hughes filed his qui tam lawsuit in 2019 in federal district court in Los Angeles, California. A former Centric executive, Hughes 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 the government. 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.

After investigating the allegations, the federal government joined Hughes’s case and another whistleblower lawsuit that made similar charges.  The settlement resolves both cases.

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.

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