Customs Duty Fraud

Customs Fraud example of a so-called “reverse” false claim under Section 3729(a)(1)(G) of the False Claims Act. That provision prohibits someone from knowingly making, using, or causing 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 concealing or knowingly and improperly avoiding or decreasing an obligation to pay or transmit money or property to the Government. This law has been used successfully against foreign manufacturers, importers, distributors and shippers of foreign goods and merchandise into the United States, usually when they have tried to reduce or eliminate duties owed to the United States by committing Customs Fraud.

1. Can you provide a few examples of what might amount to Customs Fraud?

Under reporting the true value imported goods and merchandise; falsifying the country of origin; and prematurely withdrawing goods and merchandise from a bonded-warehouse

2. What types of “false records or statements” support a Customs Fraud case?

Customs records (CBP Form 7501, entry form); customer records (commercial invoices); shipping records (bills of lading); financing records (letters of credit); bonded-warehouse records (inventory withdrawal reports).

3. Is there anything peculiar to reverse false claims that you need to look out for?

The “obligation” to the Government must pre-exist the making or use of the false record or statement. The obligation to pay duties based on the true commercial value of imported merchandise is an example of a pre-existing obligation. Some Customs penalties only come up after the making or use of the false record or statement and don’t qualify as an “obligation” under the False Claims Act.

4. Which Government agency is responsible for handling these cases?

Customs Fraud cases are ordinarily investigated by Special Agents from U.S. Immigration and Customs Enforcement (ICE), either on their own or in coordination with U.S. Attorney Offices and/or the Department of Justice.

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"Tim McInnis is a superb lawyer for whistleblowers. As both a relator and a lawyer I worked with for more than three and a

On October 14, 2020, medical device maker Merit Medical Systems Inc. (MMSI), of South Jordan, Utah, agreed to pay $18 million to settle allegations the company helped submit false claims to the federal Medicare and TRICARE programs and numerous state Medicaid programs by giving kickbacks to physicians and hospitals to induce the purchase and use of MMSI’s durable medical equipment devices and products. NYC attorney Timothy J. McInnis was a member of the legal team that successfully represented the whistleblower in the case, Charles J. (“CJ”) Wolf, M.D., who was the former Chief Compliance Officer of MMSI.

According to Dr. Wolf’s complaint and the government’s settlement agreement, for over six years MMSI paid kickbacks to physicians, medical practices, and hospitals. The payments were made indirectly under the guise of free advertising assistance, practice development, practice support, and so-called “educational” grants. All of this was intended to induce the healthcare providers to purchase and use MMSI’s products, including EmboSphere devices, which are used for uterine fibroid embolization procedures, and QuadraSphere devices, which are used for other types of embolization procedures. Among other things, MMSI used local advertising campaigns to steer patients to healthcare providers as a reward for past sales and to increase future purchases of MMSI products. Dr. Wolf and the government further alleged that MMSI disregarded numerous internal warnings, including from Dr. Wolf, that MMSI’s sales practices potentially violated the healthcare Anti-Kickback Statute (AKS).

The lawsuit was filed in the federal court in District of New Jersey, where attorney McInnis formerly served as an Assistant U.S. Attorney. The case is captioned United States ex rel. Wolf v. Merit Medical Systems, Inc., No. 2:16-cv-01855-CCC-MF (D.N.J.). Of the $18 million MMSI is paying to settle the case, $15.21 million will be go to the U.S. Treasury, and the remaining $2.79 million will go to the approximately 30 individual states that also joined the lawsuit.

half years and his counsel and perseverance were always spot on. His work was critical to a successful settlement of the case."
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Customs Duty Fraud

1. Can you provide a few examples of what might amount to Customs Fraud?

2. What types of “false records or statements” support a Customs Fraud case?

3. Is there anything peculiar to reverse false claims that you need to look out for?

4. Which Government agency is responsible for handling these cases?

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