On January 6, 2020, U.S. District Judge Lewis A. Kaplan approved a settlement stipulating to a whistleblower award in a Customs duties fraud lawsuit. Under the agreement with the government, Xing Wei will receive $170,000 for helping the U.S. Attorney’s Office for the Southern District of New York recover $1 million from Notations, Inc., a garment wholesaler from Warminster, Pennsylvania, with a Manhattan showroom.
On October 3, 2017, Notations admitted it ignored signs of duties evasion by Yingshun Garments, Inc., an importer of apparel from China, and two successor entities and an owner/officer of each entity. The government filed its lawsuit against Notations and the Yingshun defendants charging them with perpetrating a double-invoice scheme whereby the Yingshun companies presented false invoices to CBP, showing prices for imported garments that were falsely discounted up to 75 percent to avoid customs duties. Notations admitted it furthered this scheme by overlooking obvious indications that Yingshun’s business practices were “highly suggestive of fraud.”
The whistleblower, Xing Wei, alerted the government to Yingshun’s conduct, which she had learned about through a family member who once worked for Yingshun, by filing a qui tam law suit under the False Claims Act, 31 U.S.C. § 3729. Doing so potentially entitled Ms. Wei as the “relator” in the lawsuit to between 15% and 25% of any funds recovered after the government joined her case and took over the litigation.
According to one of Ms. Wei’s whistleblower attorneys, Timothy J. McInnis, of NYC-based McInnis Law, this settlement is significant for two reasons. First, the government pursued duties fraud claims against a US-based “downstream” commercial purchaser and re-seller, not just the foreign manufacturer and importers. And, second, the whistleblower received an award for opening the door to the investigation and later helping uncover Notations’ role even though her qui tam complaint did not name Notations specifically.
McInnis commended Ms. Wei for her courage in bringing this misconduct to light. “It goes to show that under some circumstances alerting the government to fraud will be rewarded even where the whistleblower doesn’t know all the participants or all the facts,” McInnis stated. He also acknowledged Washington, DC attorney Joseph Black’s assistance on the case and the efforts of the U.S. Attorney’s Office and CBP investigators.
