Just over two years ago, LawCustoms published an article Antidumping Whistleblowers Beaware! The article involved allegedly false declarations by importers designed to avoid antidumping duties, namely pencils. Article emphasized the difficulty of proving false declaration activities to prevail under False Claims Act claim. False Claims Act allows private whistleblowers to bring suit on behalf of federal government if they have knowledge of fraud, or failure to pay proper customs duties due to the Government. Government may or may not intervene. If court agrees with whistleblower’s allegations, that whistleblower is entitled to a portion of recover.
While the previous article described unsuccessful whistleblower, this one focuses on relative success. University Loft Company blew the whistle on its competitor University Furnishings for misclassification of wooden bedroom furniture from China. Chinese wooden bedroom furniture is subject to some hefty antidumping duties. With the help of Department of Justice, University Furnishings settled, and University Loft Company got $2.25 million for reporting alleged duty evasion activities.
Perhaps, False Claims Act tide is turning in the antidumping duty world. Perhaps University Loft had overcame hurdles that it’s pencil predecessor could not overcome: whistleblower’s statements must not have been publicly disclosed; whistleblower’s information should be based on direct (i.e. through own efforts) and independent (i.e. no reliance on public disclosure).
Copy of Justice’s press release is available at this link, and is also reproduced below.
Texas-Based Importers Agree to Pay $15 Million to Settle False Claims Act Suit for Alleged Evasion of Customs Duties
The Department of Justice announced today that University Furnishings LP and its general partner, Freedom Furniture Group Inc. (collectively University Furnishings) agreed to pay $15 million to resolve a lawsuit brought under the False Claims Act alleging that the companies made or conspired with others to make false statements to avoid paying duties on wooden bedroom furniture imported from the People’s Republic of China. Texas-based University Furnishings sells furniture for student housing.
“Those who introduce goods into the United States must comply with the law, including the payment of customs duties meant to protect domestic companies and American workers from unfair competition abroad,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice will zealously pursue those who seek an unfair advantage in U.S. markets by evading the duties owed on goods imported into this country.”
The government alleged that between 2009 and mid-2012, University Furnishings knowingly misclassified or conspired with others to misclassify wooden bedroom furniture on documents presented to U.S. Customs and Border Protection (CBP) to avoid paying antidumping duties on imports of wooden bedroom furniture manufactured in the People’s Republic of China. Specifically, University Furnishings allegedly classified the furniture as office and other types of furniture not subject to duties while selling the furniture in the student housing market for use in dormitory bedrooms. The Department of Commerce assesses and CBP collects antidumping duties to protect U.S. businesses by offsetting unfair foreign pricing and foreign government subsidies.
“Companies that cheat, by fraudulently mislabeling their imports, undermine U.S. manufacturers and others that obey the rules, and hurt consumers and taxpayers,” said U.S. Attorney Richard L. Durbin Jr. of the Western District of Texas. “We are hopeful that today’s settlement will help deter others from this type of scheme.”
The allegations resolved by the settlement were originally brought by University Loft Company under the qui tam or whistleblower provisions of the False Claims Act. The act permits private parties to sue on behalf of the United States those who falsely claim federal funds or, as in this case, those who avoid paying funds owed to the government or cause or conspire in such conduct. The act also allows the whistleblower to receive a share of any funds recovered through the lawsuit. University Loft Company will receive $2.25 million as its share of the settlement.
The case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of Texas, CBP’s Office of Field Operations, Office of Regulatory Audit and Office of Chief Counsel; and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.
The lawsuit is captioned United States ex rel. University Loft Company v. University Furnishings, LP, et al., No. A13-CV-678 (W.D. Tex.). The claims resolved by this settlement are allegations only; there has been no determination of liability.