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Tycko & Zavareei LLP’s Client Successfully Blows The Whistle On Customs Fraud By Major Supplier Of Chinese Made Ready-To-Assemble Furniture

Date Published
Dec 13, 2023

December 13, 2023. The law firm of Tycko & Zavareei LLP is pleased to announce the settlement of a False Claim Act qui tam lawsuit brought on behalf of one of the firm’s clients against Homestar North America, LLC (Homestar NA) which agreed to pay approximately $800,000 to resolve allegations that it knowingly evaded customs duties on ready-to-assemble (RTA) furniture made in China and imported into the United States. Homestar NA is the U.S.-based subsidiary of a Chinese company, Homestar Corporation, which is among the world’s largest manufacturers of RTA furniture, and which has supplied numerous retailers in the United States, including Walmart and Home Depot.

Starting in 2018, the furniture imported by Homestar NA was subject to a 25% tariff imposed under Section 301 of the Trade Act of 1974. These so-called Section 301 tariffs were imposed on a wide variety of Chinese-made goods by the Trump administration, and have been kept in place by the Biden administration. According to the allegations of the complaint, Homestar NA sought to evade the payment of Section 301 tariffs by providing U.S. Customs And Border Protection (CBP) false information regarding the value of the imported products. As alleged in the complaint, Homestar NA and its parent company engaged in a “dual invoicing” scheme, whereby Homestar NA paid certain prices for the furniture pursuant to a “true” invoice, but then provided a second “false” invoice, showing lower prices, to CBP with the “entry summaries,” which are the documents used to calculate the customs duties owed.

Tycko & Zavareei LLP’s client, Larry Edwards, Jr., was a Distribution Manager working at Homestar NA’s warehouse operation in Lewisville, Texas. While working there, Mr. Edwards discovered the dual invoicing scheme, and reported it to the federal government under the qui tam provision of the False Claims Act (FCA).

Under the qui tam provision, a private individual or company may bring a lawsuit in the name of the government, seeking to force the payment of unlawfully avoided customs duties. If successful, the party bringing the lawsuit—often referred to as a whistleblower or, more technically, a relator—may receive an award of between 15% and 30% of the amount recovered for the government.

Qui tam cases are initially filed under seal, and provided to the U.S. Department of Justice, and to the U.S. Attorney’s Office in the district in which the case is filed. Government attorneys and investigators then investigate the allegations of the case, and the government can “intervene” in the case, meaning that the government formally joins as the plaintiff. If the government declines to intervene, the whistleblowing individual or company may still pursue the case on its own.

In the Homestar NA matter, the case was investigated by the U.S. Attorney’s Office for the Eastern District of Texas. This is just the second time that the Department of Justice has intervened in a False Claims Act case alleging evasion of Section 301 tariffs.

Jonathan Tycko, a partner of the firm who led the matter, said, “We are grateful to the government’s attorneys and investigators who diligently pursued our client’s allegations. Cases brought by whistleblowers are crucial to enforcement of the country’s trade laws. The fraud that our client revealed was otherwise invisible to CBP, and Homestar would have continued to successfully evade payment of duties if our client had not come forward. The joint efforts of whistleblowers and the Department of Justice is central to protecting taxpayer dollars, which is the goal of the False Claims Act.”

Mr. Edwards said, “I am glad that the information I provided to the government, and the filing of my whistleblower case, was able to stop Homestar from continuing its illegal conduct. I would encourage others with information about trade fraud to come forward to help our government enforce the laws and protect American jobs from unfair trade practices.”

Tycko & Zavareei LLP is a leading law firm in the representation of whistleblowers. The firm has been an innovator in customs fraud cases, representing both individuals and domestic manufacturers in cases involving evasions of duties, Anti-Dumping/Countervailing Duty orders, Section 301 tariffs, failure to properly mark country-of-origin on imported goods, and other trade law violations.

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