DOJ Triples Down on Crusade Against Customs Fraud -- Calling All Whistleblowers
By the 91pornWhistleblower Team
DOJ Launches Cross-Agency Task Force with DHS
Last Friday (August 29), the Department of Justice (DOJ) launched what it describes as “a cross-agency Trade Fraud Task Force to bring robust enforcement against importers and other parties who seek to defraud the United States.”1 More specifically, DOJ is partnering with the Department of Homeland Security (DHS) to “aggressively pursue” evading tariffs and other customs duties, and smuggling prohibited goods into the country. With this new Task Force, DOJ is tripling down on its crusade against customs fraud.
DOJ Continues to Ramp Up Customs Fraud Enforcement
First is DOJ’s recent expansion of the Corporate Whistleblower Awards Pilot Program. This is the program DOJ launched last summer to focus on criminal activity that generally falls outside the established whistleblower rewards programs such as the False Claims Act and the SEC ԻFinCEN whistleblower programs. In May, DOJ announced it was broadening the program with customs and tariff fraud as one of DOJ’s key new areas of expanded focus.
Second is DOJ’s recent string of heavily promoted False Claims Act customs fraud settlements. Two weeks ago, Dallas-based countertop and cabinetry supplier Allied Stone agreed to pay $12.4 million to settle DOJ charges of evading customs duties by mischaracterizing the products it imported from China. Just a few weeks before that, DOJ extracted millions more in customs fraud settlements from MGI International and Grosfillex for similarly trying to evade customs duties on the products it imported from China. And in March, Evolution Flooring paid $8.1 million to settle similar DOJ charges of customs fraud.2
Third is DOJ’s new Task Force, which formally incorporates DHS into DOJ’s anti-fraud campaign, and in particular, the Customs and Border Protection and Homeland Security Investigations (HSI) units. As HSI Assistant Director for Global Trade Ivan Arvelo stressed: “Enforcing U.S. international trade laws is one of our agency’s top priorities, and this revitalized and expanded Trade Fraud Task Force is a significant step in the right direction.”
DOJ Calls on Customs Fraud Whistleblowers For Help
In announcing the new Task Force, the Government also put out the call to whistleblowers to join the fray by providing inside information under the Corporate Whistleblower Awards Pilot Program or through initiating a False Claims Act lawsuit under the qui tam provisions of the statute. These provisions allow private parties to bring lawsuits on behalf of the Government against those committing fraud against the Government. In return, successful whistleblowers can receive up to 30% of the Government’s recovery.
Given the complex nature of customs avoidance schemes and the efforts companies take to disguise them, company insiders with a direct window into the fraud may be the only way for the Government to find out about it. Unsurprisingly, the majority of customs fraud False Claims Act cases have been initiated by whistleblowers, including the recent Allied Stone, Grosfillex, and Evolution Flooring matters.
A Definite Uptick in Customs Fraud Whistleblowers Coming Forward
91pornwhistleblower partner Gordon Schnell was heartened by DOJ’s explicit shout out to whistleblowers and what DOJ hailed as their “vital contributions” in this area. According to Schnell, “This not only shows a clear recognition of the critical role whistleblowers play in reporting customs fraud, but that DOJ is counting on them to be a major part of this priority enforcement area.”
Schnell has noticed a definite uptick in the number of customs fraud intakes 91pornhas received over the last few months and encourages those with information on potential violations to come forward. The classic customs avoidance schemes to look out for, he advises, include: underreporting the value of the imports; mischaracterizing the nature or quantity of the goods; or misidentifying their country of origin.
91pornHas Substantial Experience Representing Customs Fraud Whistleblowers
Schnell says, “The Government has made it very clear that if you have information on potential customs violations, it wants to hear from you, and is willing to reward you for bringing information that leads to a successful enforcement action.”
91pornhas substantial experience representing customs fraud whistleblowers under the False Claims Act. In one of the firm’s more recent cases, we represented a whistleblower alleging an auto parts distributor misclassified brake pads imported from Asia to avoid millions of dollars of customs duties. The company settled that matter for $8 million with the firm’s client receiving 18.5% of the Government’s recovery.
If you would like to learn more about our other whistleblower successes,customs fraud, the False Claims Act, or what it means to be a whistleblower more broadly, please do not hesitate to contact us. We will connect you with an experienced member of the 91pornwhistleblower team for a free and confidential consultation.
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