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The victory after a jury trial is believed to be one of the largest recoveries in a qui tam False Claims Act lawsuit involving import duty evasion and customs fraud.

A federal court in California has awarded $24 million damages—and an additional $2.7 million in attorney’s fees—to a corporate qui tam whistleblower that successfully sued a rival company rival under the False Claims Act claiming that it unlawfully evaded anti-dumping duties on “welded outlet” imports from China.  The whistleblower—Tennessee-based Island Industries, Inc.—accused importer Sigma Corp. of being able to undersell law-abiding competitors like Island only by cheating U.S. Customs and Border Protection (CBP) on the tariffs.

Jury rules in favor of whistleblower

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With the IRS and state tax authorities cracking down on crypto investors and traders, cryptocurrency tax fraud whistleblowers stand to receive significant awardsCryptocurrency tax fraud

Mark A. Strauss Law, PLLC, a whistleblower law firm, is encouraging individuals with information regarding tax evasion in connection with cryptocurrency transactions to contact whistleblower attorney Mark A. Strauss for a free consultation.

In Notice 2014-21, the IRS made clear that convertible digital currencies comprise intangible “property”—just like shares of stock or other financial assets—for tax purposes.   What that means is that when crypto currencies like Bitcoin (BTC), Etherium (ETH), Ripple (XRP) are sold or exchanged—or simply used as a means of payment—the transaction in question is a taxable event.  Capital gains taxes are owed on any price increases realized.  Parties accepting crypto as payment for goods or services must include the value thereof in their gross income.  Moreover, a wide range of transactions involving cryptocurrencies are potentially taxable, including staking, mining, and crypto-to-crypto trading.

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Extruded aluminum imports fraudulently misclassified as warehouse pallets to evade anti-dumping and countervailing (AC/CVD) duties

A group of California companies affiliated with CiStock-1131702041-1-300x169hinese Billionaire Liu Zhongtian—known as “Uncle Liu” or “Big Boss”—have been ordered to pay the U.S. government $1.83 billion in restitution after having been convicted of a scheme to evade customs duties on imports of Chinese aluminum.  The judgment is believed to be one of the largest in U.S. history involving customs fraud.

On April 11, 2022, United States District Judge R. Gary Klausner sentenced the affiliated warehousing and aluminum companies to five years probation and ordered them to pay the $1.83 billion.  The sentence followed a trial in August 2022 where the defendants were convicted of conducting a scheme with Zhongtian and others to evade U.S. anti-dumping and countervailing duties (AC/CVD) on extruded aluminum products from China.  The jury found the defendants guilty of conspiracy, wire fraud, and passing false and fraudulent papers through a customshouse.

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Company allegedly gave government inflated cost and pricing data when negotiating no-bid contracts for drone-related military projects.

Insitu drone.

Insitu drone. The company settled False Claims Act allegations that it inflated the prices of parts sold to the U.S. Navy and the Special Operations Command (SOCOM).

A subsidiary of aerospace and defense contractor Boeing has agreed to pay $25 million to settle a False Claims Act lawsuit alleging it defrauded the government by passing off recycled and reconditioned drone parts and components as new under defense contracts with the U.S. Navy and the Special Operations Command (SOCOM). The former employee who filed the qui tam lawsuit exposing the fraud received a whistleblower reward of $4.6 million.

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Service member wearing Army uniform (ACU) filling real estate related paperwork.Court takes “holistic approach” to materiality, rejecting strict focus on the ultimate “payment decision” in significant win for qui tam whistleblowers and the government.

A few weeks ago, I blogged about United States v. Strock. There, the Second Circuit Court of Appeals determined that the Supreme Court’s decision in Universal Health Services v. Escobar—which held that misrepresentations regarding compliance with a statutory, regulatory, or contractual requirements “must be material to the Government’s payment decision” to be actionable under the False Claims Act—did not invalidate the “fraudulent inducement” theory of False Claims Act liability. Under that theory, which predates Escobar, a violation of the False Claims Act can be established by showing that the defendant submitted claims for payment under a contract obtained by fraud—even if the subsequent claims for payment under the contract were themselves entirely truthful. The focus in a such a case, the Second Circuit confirmed, still includes the fraudulent statements’ impact on the government’s initial decision to award the contract. Any subsequent payments are “tainted” by that original fraud.

Now—in another key victory for whistleblowers and the government—the Eleventh Circuit has taken a similarly broad view of Escobar’s materiality requirement. In United States ex rel. Bibby v. Mortg. Inv’rs Corp., the court adopted a “holistic approach” to the assessment of materiality under the False Claims Act, rejecting a “strict focus” on the ultimate “payment decision.”

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Second Circuit rules that relevant government “payment decision” under Escobar included Veterans Administration’s initial decision to award contracts based on claim that contractor qualified as a “service-disabled, veteran-owned small business”—not just the VA’s subsequent decisions to make payments under those contracts.

In a key victory for the federal government and qui tam whistleblowers, the Second Circwhistlebloweruit Court of Appeals has affirmed that false statements regarding eligibility to take part in government programs—and not just subsequent false claims for payment after being allowed to participate—are actionable under the False Claims Act notwithstanding the U.S. Supreme Court’s 2016 landmark decision in Universal Health Services v. Escobar. The court in United States v. Strock rejected the idea that the only relevant “payment decision” under Escobar was the decision to pay a contractors’ invoices without regard to the initial decision to award the contract.

Impact on False Claims Act cases involving eligibility

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Fraud in connection with receipt of federal bailout funds held to be actionable under the False Claims Act.

The Second Circuit Court of Appeals has ruled in favor of two financial sector shutterstock_401325058-2-300x134qui tam whistleblowers, reviving their claims under the False Claims Act that Wells Fargo lied about its financial condition in order to get billions of dollars in low-interest emergency bailout funds from regional Federal Reserve Banks during the Financial Crisis.

The whistleblowers–who were former employees of Wells Fargo–alleged that the financial institution falsely certified that it was adequately capitalized and in compliance with applicable banking and mortgage lending laws when it requested billions of dollars in emergency loans from the Fed’s Discount Window and Term Auction Facility. As a result, it could get interest rates on the borrowed funds that were much lower than those for which it would otherwise have qualified.

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Despite whistleblower claims, federal agency insists it wasn’t defrauded

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Guardrail spears driver’s side door of car in Gurnee, IL, in 2013. Harman alleged that the crash involved Trinity’s ET-Plus guardrail.

The anti-fraud bar is focused on the upcoming oral argument in the appeal of the trial verdict in United States ex rel. Harman v. Trinity Industries Inc., calendared for Dec. 7, 2016, before the Fifth Circuit. The $663 million verdict — the largest in the history of the federal False Claims Act — raises questions going to heart of the False Claims Act’s qui tam (whistleblower) provisions.  Those provisions enable private parties who have evidence of fraud against the government to bring civil lawsuits for the recovery of damages on the government’s behalf. Successful qui tam whistleblowers receive bounties of 15-30% of what the government receives.

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