Two whistleblowers who filed separate False Claims Act lawsuits alleging a motor vehicle parts supplier evaded import duties by misclassifying parts have led the U.S. government to an $8 million settlement.

According to the U.S. Department of Justice, Jeffrey Hawk and Steven Hughes, both former employees of CWD Holdings LLC and its subsidiaries, accused the companies of wrongfully misclassifying imported mounted brake pads as unmounted brake pads to avoid paying a 2.5% import tariff. CWD and its subsidiary companies supply brake and chassis components for passenger vehicles and trucks.

Under U.S. customs laws, most unmounted brake pads are not subject to an import tariff. On the other hand, mounted disk brake pad sets are subject to a 2.5% import tariff. The whistleblower lawsuits alleged that the CWD companies falsely reported the mounted brake pad sets as unmounted on United States Customs and Border Protection import forms.

Intentionally misclassifying the imported brake pads enabled the defendants to avoid paying millions of dollars in customs duties, federal prosecutors alleged. The U.S. government investigated the whistleblower allegations and determined that the CWD companies misrepresented the imported brake pads over a 10-year period starting in 2007.

Mr. Hawk and Mr. Hughes will share $1.48 million of the total settlement as an award for their role in exposing the scheme. The False Claims Act authorizes private parties to sue on behalf of the U.S. government in cases of fraud committed against federal agencies and programs. Whistleblowers whose FCA lawsuits end in a settlement or judgment receive between 15% and 30% of the total recovery.

“U.S. Customs and Border Protection maintains a zero-tolerance policy for trade fraud and other unfair trade practices that undermine the competitiveness of U.S. businesses,” said Director of Field Operations Christopher Perry. “We are proud to partner with the U.S. Attorney’s Office to level the playing field for legitimate traders by steadfastly enforcing U.S. trade laws.”

Beasley Allen has a Whistleblower Litigation Team in place to handle False Claims Act (FCA) claims. Due to our firm’s heavy involvement in whistleblower litigation, there was a definite need for the creation of a team specializing in whistleblower cases. Fraud against the federal government has been and continues to be a huge problem, involving many industries in this country, and is usually rampant in the wake of disasters requiring federal assistance, such as major hurricanes, the Deepwater Horizon oil spill, and as we have seen in recent months, the coronavirus pandemic. We expect the amount of fraud against the government to increase greatly during the coming months.

As we have consistently stated, whistleblowers are the key to exposing corporate wrongdoing and government fraud. A person who has first-hand knowledge of fraud or other wrongdoing may have a whistleblower case. Before you report suspected fraud or other wrongdoing – before you “blow the whistle” – it is important to make sure you have a valid claim and that you are prepared for what lies ahead. Beasley Allen’s group of lawyers dedicated to handling whistleblower cases can navigate the oftentimes risky and complex litigation.

Lawyers on our whistleblower litigation team are Lance GouldLarry GolstonLauren MilesLeon HamptonLeslie PesciaPaul Evans and Tyner Helms. If you are aware of fraud being committed against the federal or state governments, you could be rewarded for reporting the fraud. If you have any questions about whether you qualify as a whistleblower, you can contact a lawyer at Beasley Allen for a free and confidential evaluation of your claim.

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