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Customs Fraud a Growing Area of Whistleblower Law

Whistleblower lawsuits are on the rise across the board as would-be whistleblowers have been emboldened by more federal protections and increasingly valuable awards. A new field has suddenly jumped to the forefront in the world of whistleblower law: customs fraud.

A 2016 decision by a federal appeals court in the case of United States ex. Rel. Customs Fraud Investigations LLC v. Victaulic Co. paved the way for more whistleblower lawsuits in customs cases. In the case, the court ruled the False Claims Act actually applies to a much broader range of cases than had been presumed.

Now, for example, an importer that does not mark goods with their country of origin could be subject to prosecution under the False Claims Act. That was one strategy that has commonly been used to avoid customs duties.

In this particular case, Victaulic was accused of avoiding duties by not labeling pipe fittings with the country from which they came and by not revealing that the fittings were not marked as instructed. This allowed Victaulic to allegedly evade 10 percent duties that accrue when unmarked goods arrive in the United States. For its part, Victaulic denies any wrongdoing.

Expect more customs cases

There are only a few customers-related whistleblower cases that have been made public in recent months. However, this shift in precedent will likely encourage whistleblowers to come forward with their information — and will also likely lead attorneys who practice in FCA cases to broaden the types of cases they take on.

FCA cases are already a lucrative source of revenue for the Justice Department. The government collected $3.4 billion in such cases last year, the vast majority of which was made possible by whistleblowers coming forward with information about wrongdoing within their companies, organizations or agencies.

For more information on filing a FCA case, speak with a trusted Dallas attorney at Kardell Law Group.

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