Upscale furniture seller agrees to pay $15 million to settle reverse FCA allegations

posted on:
May 17, 2016

author:
Andrew Brashier

Last month, the Department of Justice (DOJ) announced that Z Gallerie LLC (Z Gallerie) has agreed to pay $15 million to resolve a lawsuit filed under the False Claims Act (FCA). The lawsuit alleged that Z Gallerie was committing reverse false claims by making false statements concerning furniture imported from the People’s Republic of China, thereby evading customs duties.

The FCA contains a reverse false claims provision that makes it unlawful for one to “knowingly make, use, or cause to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceal or knowingly and improperly avoid or decrease an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(1)(G).

Reverse false claims are different from other false claims because, unlike the typical false claim where one falsely claims federal or state funds, the reverse false claim arises when one makes false statements in order to avoid paying monies owed to the government. In this case, the complaint alleged that Z Gallerie was classifying wooden bedroom furniture, such as dressers and chests, as non-bedroom furniture, such as a hall chest, in order to avoid the antidumping duties on imported wooden bedroom furniture. Because the obligation to pay duties on imported wooden bedroom furniture from the People’s Republic of China existed before and outside of the false statement, the reverse false claims provision of the FCA applied.

The Department of Commerce (DOC) publishes orders detailing the antidumping duties, including the antidumping order concerning wooden bedroom furniture imported from the People’s Republic of China. 70 FR 329-01. These antidumping duties protect domestic manufacturers against foreign manufacturers dumping their products into the American market at prices below cost.

Companies that import and sell foreign goods are required to obey the orders published by the DOC, especially the orders designed to protect our domestic companies from unfair competition. According to a Department of Justice press release regarding the Z Gallerie allegations, Principal Deputy Assistant Attorney General Benjamin C. Mizer stated, “The Department of Justice will zealously pursue those who seek an unfair advantage in U.S. markets by evading the duties owed on goods imported into this country.”

The allegations against Z Gallerie were brought by Kelly Wells, an e-commerce retailer of furniture, under the qui tam, or whistleblower, provision of the FCA. The qui tam provision of the FCA permits private individuals, including companies, to sue on behalf of the government when the government itself is being defrauded. The FCA also provides incentives for whistleblowers (known as relators under the FCA) to do the right thing and report the fraud. These incentives include 15 to 30 percent of the funds recovered by the government. In this case, Kelly Wells will receive $2.4 million for her participation in the investigation.

Are you aware of fraud being committed against the federal government, or a state government? If so, the False Claims Act can protect and reward you for doing the right thing by reporting the fraud. If you have any questions about whether you qualify as a whistleblower, please contact an attorney at Beasley Allen for a free and confidential evaluation of your claim. There is a contact form on this website, or you may email one of the lawyers on our whistleblower litigation team: Archie Grubb, Larry Golston, Lance Gould or Andrew Brashier.

Sources:
U.S. Department of Justice
Notice of Amended Final Determination of Sales at Less Than Fair Value and Antidumping Duty Order: Wooden Bedroom Furniture From the People’s Republic of China, 70 FR 329-01 31
U.S.C.A. § 3729 (West)

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