Information About False Claim Act (FCA) Investigation and Violations

The False Claims Act, in particular, has become a favored statutory tool of the DOJ in Customs enforcement matters since the statute both (a) grants the government broad investigatory powers (see Government Investigations) and (b) provides for significant monetary liability. 

Indeed, Companies often become aware of FCA investigations when a Assistant U.S. Attorney with the Department of Justice (DOJ) begins to exercise that broad investigative power by the issuance of a Civil Investigative Demand (CID).

As to the later, the FCA provides for the imposition of treble damages, plus civil fines per occurrence (see below for more detail), plus interest accruing, and legal costs (not including the potential for other criminal and civil repercussions).

Moreover, the statute of limitations in false claims act violations is significantly longer than in ordinary sec. 1592 negligence cases, and is subject to waiver during periods of 'wartime.'   

The FCA is also unique in that it permits private individuals to initiate a lawsuit (as a whistle-blowers acting on behalf of the government) and accordingly, it provides monetary incentives to that party, termed a "qui tam relator," in the amount of 15 to 30 percent of the funds recovered by the government. 

In the Customs context, a FCA qui tam violation usually falls under a special provision in the statute known as a "reverse-false claim." This is a consequence of Customs violations typically involving material false statements, or omissions, which serve to avoid the payment of monies that would otherwise have been owed to the government. 

Customs False Claim Act cases have been lucrative for the government and typically arise in duty related disputes such as:

• related party valuation,

• undeclared assists or allegations of double invoicing,

• Avoidance of antidumping and countervailing duties,

• mis-classifications under the US tariff

AD/CVD and other violations of the customs laws are usually nuanced and complex, it is therefore critical to engage with legal counsel that holds a deep expertise in both (i) FCA defense, and (ii) international trade & customs law.  These compliance issues particularly benefit from experienced Customs counsel, since the legal issues can be complex and nuanced.   

FCA Penalties

The minimum and maximum FCA penalty amounts are subject to regular re-indexing for inflation.

• In 2016, the minimum per-claim penalty increased from $5,500 to $10,781. (*applicable to violations between November 3, 2015 to February 2, 2017) In 2017, those amounts increased from $10,781 to $10,957. In 2018, the penalties increased to $11,181. Similarly, the maximum per claim penalty increased in 2016 from $11,000 to $21,563, and then again to $21,916 in 2017. In 2018, the maximum increased again to $22,363.

• In 2019, the statutory per occurrence minimum/maximum penalty amounts are $11,463 / $22,927.

FCA/Customs News:

December 2, 2022: DOJ: FCA: Settlement by US importer and its Danish parent, announced for $728,910 related to alleged misclassifications of thermal validation equipment.

September 7, 2022: DOJ: Colorado Company settles False Claims allegations related to Buy American Act Violations for $625,000.

August 11, 2022: DOJ: U.S. Attorney Announces $3.64 million settlement against menswear company and manager for underpaying customs duties owed on imported apparel.

March 17: 2022: DOJ: Importer settles False Claims Act allegations of misclassification on chain saw chain and blade imports.

October 10, 2021 : DOJ: Press release: Garment importer, Queen, settles FCA allegations of undervaluation.

March 26, 2019: DON: Byer: Press release: Garmen importer settles FCA allegations surrounding undervaluation.

February 17, 2021: Senator Chuck Grassley (R-IA): noted the central role that the FCA has held and will continue to play in the government’s civil fraud. When speaking on potential amendments, he stated: You have to come down with a sledgehammer, not a toothpick!"

January 14, 2021: DOJ: Press Release: 2020 FCA recoveries at $2.2 Billion.

July 22, 2020: DOJ: Importer Settles False Claims Act Allegations Relating To Unpaid Import Duties for $8 Million.

December 22, 2020: DOJ: Press Release: CEO Of Clothing Company Sentenced To Prison For Million-Dollar Customs Fraud. A False Claims Act case continues against the two undervaluation schemes using false invoices.

December 22, 2020: DOJ: Press release: Importers of Chinese earrings settle for over $860,000 False Claims Act allegations of undervaluing imports to evade tariffs.

September 25, 2020: DOJ: Press Release: Industrial Engineering company settles FCA allegations for $22 million for issues including COO and ADCVD.

June 10, 2019: DOJ: FCA modification to Guidelines for cooperation.

June 6, 2019: DOJ: Criminal/Civil charges announced against CEO of Apparel company for Customs Fraud under FCA.

May 13, 2019: False Claims Act Settlement of $610,000 for evasion of customs duties that would have been paid by U.S. customers by breaking up single shipments into multiple shipments of lesser value in order to avoid duties. United States ex rel. Vale v. Selective Marketplace Ltd. et al., Civil No. 2:17-cv-380-LEW (D. Me.).

February 7, 2019: Civil Monetary Penalty Adjustments for Inflation: New statutory per occurrence minimum/maximums penalty amounts are $11,463 / $22,927.

February 6, 2019: After civil prosecution under the FCA in the Western District of Texas, the owners of Blue Furniture are now also facing criminal charges in the US District for South Carolina.

August 17, 2018: Government files its intervention in Blue Furniture case for evasion of antidumping duties and fraudulent undervaluation.

December 21, 2018: Justice Department Recovers Over $2.8 Billion from False Claims Act Cases in Fiscal Year 2018

February 13, 2018: DOJ: FCA Settlement in United States ex rel. Patrick v. Pure Collection Ltd., 2:16-cv-00230-GZS (D. Me.) for breaking-up shipments to skim customer transactions under the $800 limit.

February 6, 2018: Home Furnishings company settles allegations of customs duty evasion for $500,000.

January 29, 2018: NYT article: Customs False Claims cases

January 17, 2018: DOJ: $10.5 Million FCA Settlement: Basset Mirror (ADCVD Wooden Bedroom Furniture)

January 11, 2018:  DOJ: $2.3 million FCA Settlement: American Dawn (misclassfication)

December, 2017:  False or fraudulent claims under the Program Fraud Civil Remedies Act (31 USC 3802(a)(1) and (2)) – maximum increasing from $10,957 to $11,181.

November 7, 2017:  ABA reporting on statements of Judge Buchannan in the HCR ManorCare case: “I don’t think this case should have ever been brought,. . .I’m appalled, I’m embarrassed, I’m ashamed that the Department of Justice would rely on this kind of nonsense . . .”  

October 3, 2017: DOJ:  Notations $1 million dollar settlement where domestic purchases of a reseller allegedly "aided the fraudulent scheme by ignoring warning signs that . . . irregular business practices [of the importer] were highly suggestive of fraud."  Consent order here.

May 1, 2017:  Import Merchandising Concepts L.P. settlement of alleged ADCVD evasion on wooden bedroom furniture from China.

December 14, 2016: Merry Christmas -- DOJ announces its recovered Over $4.7 Billion From FCA cases in Fiscal Year 2016

April 27 2016.  Z Gallerie's $15 million settlement announced relating to alleged false invoicing designed to evade duties on wooden bedroom furniture.

April 19, 2016:  SCOTUS upholds implied certification theory of FCA liability in Universal Health Services v. US. ex rel Escobar

March 28, 2016: DOJ announces $8 million settlement in Kilgore Flares case.

February, 2016: DOJ announces $3 million settlement in small-diameter graphite electrodes case.

July 14, 2015:  9th Circuit False Claims Act decision in U.S. ex rel. Hartpence v. Kinetic Concepts overturns "original source" precedent relating to pre-2010 relator claims.  (In 2010, the FCA amended to remove the “direct” knowledge requirement.)

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