Four Pennsylvania-based Companies and Owners Settle Customs and Shipping Fraud Lawsuit for $3 Million; Plead Guilty to Related Criminal Charges - TZ Legal - Fraud Fighters
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HomeNewsFour Pennsylvania-based Companies and Owners Settle Customs and Shipping Fraud Lawsuit for $3 Million; Plead Guilty to Related Criminal Charges

Four Pennsylvania-based Companies and Owners Settle Customs and Shipping Fraud Lawsuit for $3 Million; Plead Guilty to Related Criminal Charges

Date Published

Feb 24, 2016

Earlier this week, Ameri-Source International Inc., a Pennsylvania-based company, and three other related companies, agreed to settle a qui tam lawsuit for $3 million. The False Claims Act lawsuit alleged that Ameri-Source International Inc. evaded so-called “antidumping” duties on several shipments of small-diameter graphite electrodes that originated from the People’s Republic of China.

An antidumping duty is an additional duty assessed by U.S. Customs and Border Protection, or CBP, to protect American manufacturers from the “dumping” of massive quantities of cheaper foreign imports. Often, importers attempting to avoid these duties on foreign products will mislabel their imports as another item that does not require payment of the antidumping duty. In this case, Ameri-Source International Inc. was accused of misclassifying the diameter of their graphite electrodes in order to avoid the antidumping duties.

The type of electrode at issue in this lawsuit are columns of synthetic graphite, the majority of which are manufactured in Russia and China, that fuel industrial-strength furnaces used in the steel manufacturing process. Chinese-made small-diameter electrodes have been assessed antidumping duties since late 2008.

Ameri-Sources International Inc., Ameri-Source Specialty Products Inc., Ameri-Source Holdings Inc., and SMC Machining LLC, all based in Pennsylvania, allegedly perpetrated the antidumping evasion from December 2009 until March 2012.

Whistleblower Graphite Electrode Sales Inc., an international importer of graphite and carbon products headquartered in Alabama, first brought suit on behalf of the US government in April 2013. However, it was not until February 12, 2016 that the US government announced its intention to intervene in the case. As a result of its work to bring this issue to the attention of the government, Graphite Electrode Sales Inc. will receive nearly $500,000 as their relator’s share of the settlement. While it is somewhat unusual for qui tam case to be brought by a competing company, nothing in the False Claims Act prohibits that.  As this case demonstrates, often it is other players in the particular industry—including competitors—who will be best positioned to learn about or uncover customs fraud.

In addition to the qui tam case, Ameri-Source International Inc., and its owners, Ajay Goel and Thomas Diener, faced criminal charges as a result of conspiring to misrepresent the imports in the alleged duty-evasion scheme. On Monday, the corporation plead guilty to two criminal counts of smuggling goods into the United States. The Western District of Pennsylvania ruled that the company must pay an additional $250,000 for their criminal liability.

This customs and shipping fraud case differs from other qui tam lawsuits in that the named companies evaded paying funds owed to the government, as opposed to falsely claiming federal funds. Both tactics of unjust enrichment are covered by the False Claims Act. If an importer knowingly evades any type of duties, it can be held liable under the False Claims Act. By law, the responsibility to properly label and declare an import falls upon the “importer of record”, not the CBP, due in part to the practicality of such a task. Since the burden of classification falls upon the importer, this type of duty-evasion is another prolific example of a violation of the False Claims Act.

If you have information about a potential case involving a company or individual committing government programs fraud, do not hesitate to take action. You might be able to bring your own qui tam lawsuit under the False Claims Act, acting as a whistleblower on behalf of the US government.

Before filing your lawsuit, be sure to consult with a qui tam attorney familiar with the intricacies of the False Claims Act and government fraud cases, as these attorneys are best equipped to protect your rights and help you secure your share of any potential monetary reward.

If you would like to consult with one of our False Claims Act attorneys, please fill out our Confidential Case Evaluation form, or call (202) 973-0900 to speak with a lawyer at the law office of Tycko & Zavareei LLP.

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