A recent Customs duties fraud case has earned a whistleblower a six-figure reward.
On Monday, U.S. District Judge Lewis A. Kaplan approved a $170,000 settlement for Xing Wei, the family member of an employee who worked for Yingshun Garments, Inc., which imports apparel from China. Wei is said to have helped the U.S. Attorney’s Office for the Southern District of New York recover $1 million from Warminster, Pa., garment wholesaler Notations, Inc., which admitted to ignoring signs of duty evasion by its aforementioned supplier.
On Oct. 3, 2017, Notations told authorities that it had dismissed evidence of fraud by Yingshun and two successor entities. The government’s lawsuit included both the wholesaler and the importer, charging them with perpetrating a “double-invoice” scheme, according to a statement from Wei’s attorneys at NYC-based McInnis Law.
The Yingshun companies furnished false invoices to Customs and Border Protection (CBP), which showed incorrect pricing for their imported goods. The company’s employees falsely discounted some apparel by up to 75 percent in an attempt to avoid paying customs duties.
Notations conceded its role in furthering the scheme, admitting it overlooked obvious indicators that Yingshun’s activities were “highly suggestive of fraud.”
When Wei learned of the company’s conduct from a relative who worked for Yingshun, she filed a qui tam lawsuit under the False Claims Act. The provision is one of the strongest protection laws afforded to whistleblowers in the U.S., and Wei’s actions potentially entitled her to a sum between 15 percent and 25 percent of any funds recovered by the government once it took over the litigation.
The case was significant because the government pursued duties fraud claims against Notations, a “downstream” wholesaler based in the U.S., rather than limiting legal action to Yingshun, the foreign manufacturer and importer of the goods, Timothy J. McInnis, one of Wei’s attorneys, said.
Wei’s tip created a ripple effect, opening the door for investigators to dig into Notations’ role in the scandal. Though she didn’t name the wholesaler outright in her qui tam lawsuit, she still received an award that included damages from the company.
The case demonstrated the effects of shedding light on misconduct, McInnis said. “It goes to show that under some circumstances, alerting the government to fraud will be rewarded even where the whistleblower doesn’t know all the participants or all the facts,” he said.