Once upon a time, North Carolina was the source of much of America’s furniture. Today, many of those manufacturing jobs have gone offshore. We can’t stop furniture from being imported from China and other foreign countries but the government has constructed an elaborate customs and duties regime to try and keep the playing field level. Some companies, however, try to gain a competitive advantage by importing products and not paying customs duties. Thanks to an alert whistleblower, one company must now pay $1.5 million for its illegal actions.
Daniel Goldman, Ecologic Industries and OMNI SCM
According to the Department of Justice and the original whistleblower lawsuit, Goldman controlled both Ecologic Industries and OMNI SCM. The companies sold wooden dorm room furniture to universities. The furniture was made in China. To avoid custom duties, however, the furniture was misclassified as office furniture.
Goods coming into the United States are frequently the subject of tariffs and custom duties. In some instances, the government levies “anti-dumping duties” on imported goods that have been found to have been produced by foreign manufacturers receiving unfair subsidies. Their purpose is to counter the unfair trade practice of dumping or selling goods at a price lower than their cost of manufacture.
Some foreign industries do this to temporarily drop the price of goods so low that legitimate U.S. companies are forced out of business. Once all competition is removed, these same foreign companies can than raise their rates. In the long run, both U.S. jobs and consumers lose.
According to the complaint, the dorm bedroom furniture imported by the defendants was subsidized by the Chinese government and was being “dumped” in the U.S. at below market prices. In 2004, U.S. furniture makers successfully petitioned the U.S. International Trade Commission to impose special tariffs on wooden furniture made in China.
The lawsuit against the defendants began when the whistleblower – called a “relator” under the False Claims Act – accompanied Daniel Goldman to China. There he observed furniture being made for Goldman’s companies.
While at the factory, he saw that the furniture was mislabeled to conceal that it was subject to the special anti-dumping tariffs. After returning to the U.S., he learned that the same furniture was being called “office furniture” on U.S. Customs forms. By mislabeling the goods, Goldman hoped to avoid being the tariffs and duties.
Our whistleblower in this story, Matthew Bissanti, first went along with the scheme but later thought better of it and filed a claim under the False Claims Act
Whistleblower Awards and the False Claims Act
Under the False Claims Act, a whistleblower, such as Mr. Bissanti, can earn an award for providing information about fraud involving federal funds or a federal program. Because Goldman’s scheme was depriving U.S. Customs of tariffs and duties, both a federal program and funds were involved.
To qualify for an award, the whistleblower must have inside information. That means you can’t base an award application on something you read in a newspaper or hear from a friend of a friend. Because Bissanti actually saw the mislabeled furniture and phony invoices, his information qualified as “original source.”
Normally, one might expect that someone involved in the wrongdoing would not be eligible for an award but Congress understands that often those with the best information are those closest to the fraud. As long as the whistleblower wasn’t the kingpin behind the fraud or materially benefitting from it, there are no restrictions on receiving an award.
And just how large are those awards? If the government takes over the case, the awards are typically 15% or 16%. If the government declines prosecution, however, and leaves that to the whistleblower’s own lawyers, the award goes up to 30%. (The award in this case was exactly 15%.)
In announcing the award, Austin’s United States Attorney, Richard Durbin, said “Customs duties are meant to protect domestic companies and American workers from unfair competition from abroad. Those who import goods into the United States must comply with the law.”
Are You Eligible for the Next Big Award?
Billions of dollars of goods are brought into the United States illegally. Whether goods are simply smuggled in or brought in with phony paperwork, American jobs are being lost. Taxpayers are also paying the price too. Every dollar not brought in from custom duties must come from somewhere else.
In certain cases, the losses are much more severe. In recent years we have found several instances of fake pharmaceutical products being brought into the country. That is a fraud against Medicare and Medicaid (a large percentage of prescription drugs are paid with tax dollars) and a fraud against Customs. It also endangers human life.
If you have inside information about fraud involving trade tariffs or customs duties (or any other type of fraud), call us. The whistleblower lawyers are MahanyLaw have the experience, knowledge and drive to help you stop greed and fraud, help you collect the maximum award possible and protect you from illegal retaliation.
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