Department of Justice Intervenes in and Settles a Customs Fraud Case: The U.S. Department of Justice (DOJ) announced on May 12, 2008, that it had intervened in a Customs False Claims Act case brought by The Cullen Law Firm, PLLC, of Washington, D.C. in the U.S. District Court for the Southern District of New York.

Contact: Paul D. Cullen, Sr., Joseph A. Black, (202) 944-8600
May 13, 2008

The U.S. Department of Justice (DOJ) announced on May 12, 2008, that it had intervened in a Customs False Claims Act case brought by The Cullen Law Firm, PLLC, of Washington, D.C. in the U.S. District Court for the Southern District of New York. At the same time the DOJ settled the case for $2.8 million. The settlement involved three importers: Intertex International Inc., J.J. Basics, Inc. and Red Zone, Inc. - all located in New York City. The defendants allegedly imported the goods for U.S. retailers, including Wal-Mart Stores, Inc., J.C. Penney Co., Kohls Corp. and Marshalls, a division of TJX Companies, Inc.

The False Claims Act allows a private party, a "whistleblower," with knowledge of fraud against the federal government, to sue in federal court on behalf of himself and the United States to recover significant civil penalties and treble damages.The whistleblower is usually given between 15 and 30 percent of the amount recovered by the government as an incentive to expose fraud against the United States.

"Employees of importers and retailers committing Customs fraud should now have confidence that their allegations will be taken seriously by the government. DOJ's intervention in this case represents a major breakthrough in the use of the False Claims Act to prosecute Customs fraud," said Joe Black of The Cullen Law Firm.

A former employee of Intertex became aware that Intertex was importing Chinese made apparel through Korea and labeling the apparel "Made in Korea."At the same time Intertex undervalued the textiles on documentation presented to U.S. Customs and Border Protection.After reviewing documents provided by the employee that demonstrated the fraud, The Cullen Law Firm drafted a complaint and statement of material evidence which was given to the Department of Justice.The complaint was filed under seal on June 6, 2005. The complaint alleged Intertex falsely declared the country of origin of the apparel to avoid existing quotas on Chinese made garments.The complaint also alleged that Intertex became liable for a 10 percent marking duty on mis-labeled goods and liquidated damages under a Customs bond for violating Customs laws.

DOJ, with the assistance of investigators from U.S. Immigration and Customs Enforcement and U.S. Customs and Border Protection, conducted an over two-year investigation of allegations lodged by the former employee of Intertex International, Inc.The former employee will receive a share of the governmentâ€Ts settlement.

It is difficult for the U.S. government to detect Customs fraud.Whistleblowers, however, who have knowledge of the fraud because of their association with companies committing the fraud, can report the fraud and bring a suit to recover the loss suffered by the government.The whistleblower with knowledge of the fraud could be a citizen of any country.The Cullen Law Firm has represented numerous whistleblowers in False Claims Acts cases, including other cases involving Customs fraud. "Goods transhipped from abroad through Mexico or Canada are often declared falsely to be exempt from duties under the North American Free Trade Agreement. Whistleblowers are uniquely positioned to expose this fraud, saving millions in lost revenue for the taxpayers and protecting U.S. jobs at the same time," said Paul Cullen Sr. of The Cullen Law Firm.

For further information, please contact Paul Cullen, Sr. or Joseph Black at 202 944-8600 or customsfraud@cullenlaw.com.