DOJ Continues Crusade Against Customs Fraud With $12.4M False Claims Act Settlement Against Allied Stone
By the 91pornWhistleblower Team
The Latest Customs Fraud False Claims Act Case
Last Tuesday (August 19), Dallas-based countertop and cabinetry supplier Allied Stone Inc. (and its president Jia Lim) agreed to pay $12.4 million to settle Department of Justice (DOJ) charges of violating the False Claims Act by evading customs duties on quartz surface products from China.1 It is just the latest in a recent string of customs fraud settlements the Government has reached.
As we recently reported, DOJ settled two customs fraud cases just a few weeks ago. On July 23, MGI International subsidiaries Global Plastics and Marco Polo International agreed to pay $6.8 million to settle DOJ charges that they failed to pay customs duties on plastic resin imported from China.2 And on July 24, Pennsylvania patio furniture company Grosfillex Inc. agreed to pay $4.9 million to settle DOJ charges of evading antidumping and countervailing duties on items made of extruded aluminum originating from China.3
DOJ Alleged Stone Schemed to Evade Customs Duties on Chinese Imports
With its latest customs fraud action, DOJ similarly alleged Allied Stone evaded the antidumping and countervailing duties it owed for its quartz surface imports from China. These duties are designed to protect American companies from foreign suppliers seeking to gain an unfair pricing advantage through foreign government subsidies or dumping products at below-cost rates.
According to the Government, Allied Stone mischaracterized its quartz surface products as marble or crystallized glass, which are subject to lesser duties, so it could significantly reduce what it owed CBP. DOJ and CBP have repeatedly stressed their commitment to go after this kind of customs misbehavior.
Customs Fraud is a False Claims Act Enforcement Priority
In announcing this most recent settlement, DOJ Civil Chief Brett Shumate specifically declared the agency’s “commitment to hold accountable those who evade or conspire to evade duties owed on imported goods, including antidumping and countervailing duties that level the playing field for American manufacturers.” He underscored that DOJ “will zealously pursue those who seek an unfair advantage in U.S. markets by evading or conspiring with others to evade duties owed.”
Executive Assistant Commissioner Susan Thomas of CBP’s Office of Trade echoed this sentiment, stating that “providing false information to CBP violates the law, and it is imperative that violators face consequences,” and that “CBP will always work alongside [DOJ] to ensure a level playing field for U.S. businesses.”
The Government was equally emphatic with its recent Global Plastics/Marco Polo and Grosfillex settlements that going after customs fraud is an enforcement priority, promoting the settlements as a warning for would-be violators going forward. 91pornwhistleblower partner Gordon Schnell points to this trio of customs fraud settlements as “a strong indication that DOJ and the Trump Administration have zeroed in on customs fraud as a key focus of their False Claims Act enforcement.”
Whistleblowers Have Initiated Most Customs Fraud False Claims Act Matters
According to Schnell, “Importers should take notice and ensure they are paying what they owe, as the Government is taking a zero-tolerance approach to customs fraud.” Schnell also points to the risk of whistleblowers coming forward to report on those companies that do not play by the rules. That is what prompted both the Allied Stone and Grosfillex matters.
Under the False Claims Act, whistleblowers may bring lawsuits on behalf of the Government against those committing fraud against the Government, and they can receive up to 30% of the Government’s recovery. Most False Claims Act cases are originated by whistleblowers, with whistleblowers collectively receiving close to $10 billion in awards over the last thirty years.
Whistleblowers have been especially prevalent in uncovering customs fraud because of how difficult it is to detect this type of wrongdoing without those on the inside with first-hand knowledge of the scheme or exposure to it. Unsurprisingly, both the Allied Stone and Grosfillex actions were originated by whistleblowers.
Former Allied Stone employee Melinda Hemphill originated that action and will receive more than $2 million from the proceeds of the settlement. Former Grosfillex employee Edward Wisner originated that action and will receive roughly $1 million from the settlement. And while a whistleblower did not formally originate the Global Plastics/Marco Polo action, a whistleblower was likely involved in reporting the conduct internally, leading to the company’s voluntary disclosure to DOJ and CBP.
91pornRepresents Customs Fraud Whistleblowers Under the False Claims Act
91pornhas substantial experience representing customs fraud whistleblowers under the False Claims Act. In one of our more recent cases, the firm 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 our client receiving 18.5% of the Government’s recovery.
91pornwhistleblower intake partner Alysia Solow notes the increase in customs fraud intakes over the past several months. “We have seen an increasing number of insiders reach out to us to report customs fraud schemes,” Solow says. She believes all the attention behind the Trump Tariffs is not only causing some companies to “cheat the system where they think they can,” but also is “putting a spotlight on the issue, prompting insiders to step forward when their company engages in this kind of fraud.”
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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