Recently, the federal government has implemented a raft of tariffs on imports from dozens of countries, including China. Since then, those governments have responded with their own tariffs, raising the possibility of a potential trade war. Fortunately, when tariffs ratchet up, most businesses follow the rules. However, some companies find ways to skirt those charges to protect their bottom lines. Not only does this give these dishonest companies an unfair advantage over other businesses that play by the rules, but they also cheat U.S. taxpayers.

Behind One Case of Customs Fraud

In 2023, the Baron & Budd Whistleblower Practice announced a $2.5 million settlement on behalf of the United States government involving several defendants, including ADCO Industries, Xiamen Atlantis MFC Co., Raymond E. Davis, and Calvin Chang, involving a scheme to avoid payment of tariffs enacted during the first Trump Administration.  At the time, it was the largest customs fraud case under the False Claims Act (FCA) in which the government intervened.

The defendants were accused of committing FCA violations when they knowingly and fraudulently evaded customs duties owed on goods imported from China. As part of their scheme, they employed fraudulent invoicing methods to deliberately understate the value of their imports to U.S. Customs and Border Protection (CBP). By doing this, they allegedly defrauded the United States out of more than one million dollars in customs duties. Central to this enforcement was the participation of two whistleblowers who were employees of ADCO. Their direct knowledge and independent investigation were crucial in securing the settlement.

The role of whistleblowers

Given that millions of containers and billions of dollars’ worth of goods enter the country each day, it is impossible for CBP to detect every instance of fraud on its own, especially as companies continually create new schemes to avoid payment of tariffs. Thus, just like in the ADCO case, whistleblowers continue to be an essential element for providing information and exposing companies who engage in these practices. With tariffs playing a larger role in global trade, whistleblowers are even more crucial in safeguarding trust in the marketplace.

Employees of a company committing customs fraud, competitors of dishonest companies flouting customs laws, or other individuals working closely with the importation of goods may have information about customs fraud schemes. These individuals can report customs fraud by filing a case under the FCA. The FCA allows a private citizen or company to file a case on behalf of the government. Whistleblowers who file a lawsuit under the FCA may receive 15% to 30% of the money recovered in the case. The FCA also contains a specific provision to protect whistleblowers from unlawful retaliation by their employers.

Contact Baron & Budd

Baron & Budd’s whistleblower representation team has more than 50 years of experience representing dozens of clients in government fraud cases. They have returned more than $6.0 billion to federal and state agencies with whistleblower recovery shares as high as 50%.

For more information, see What You Need to Know About Becoming a Whistleblower.