DOJ press releases announcing FCA settlements indicate a possible trend involving alleged customs fraud. In recent months, the government settled two noteworthy cases, United States ex rel. Krigstein v. Siouni and Zarr Corporation and United States ex rel. Jimenez v. Otter Products, LLC, which asserted claims under the FCA based on alleged false statements made to the U.S. Customs and Border Protection.
In Siouni and Zarr Corporation, on April 9, 2014, Dana Kay, Inc. and Siouni and Zarr Corporation, two importers of women’s apparel, settled an FCA suit alleging customs fraud for $10 million. The case involved the alleged failure to pay millions of dollars in customs duties over an approximate ten-year period. According to the DOJ’s press release, as part of the settlement, the defendants “have admitted, acknowledged, and accepted responsibility for:
- presenting to the Government commercial invoices for women’s apparel being imported into the United States that reported less than the total value of the goods imported;
- paying apparel manufacturers an amount in excess of that recorded on the commercial invoice;
- paying the excess amount pursuant to a second invoice referred to as a ‘debit note’; and
- failing to disclose to the Government the amounts paid pursuant to the second invoices, instead reporting only the lesser amounts listed in the commercial invoices, which the Government then used to assess customs duties.”
(See http://www.justice.gov/usao/nys/pressreleases/April14/DanaKayandSiouniandZarSettlementPR.php?print=1). The relator who brought this qui tam case under the FCA received approximately $2.1 million.
Otter Products, a company that imports and sells protective cases for phones and tablets, paid $4.3 million to settle an FCA suit alleging that Otter Product’s import practices violated the FCA and the Tariff Act of 1930. Otter Products allegedly underpaid customs duties owed to the United States by undervaluing their imported goods. Of the $4.3 million Otter Products paid to the United States, $830,000 was apportioned to relator, Bonnie M. Jimenez. (See (http://www.justice.gov/usao/co/news/2014/apr/4-21-14.html).
These cases depict the government’s continuing interest in pursuing alleged fraud through FCA actions in more and more industries. Companies with obligations under the customs laws need to be cognizant of the potential exposure under the FCA.