Blowing the whistle on big time corporate tax cheaters can not only help the US economy but it can make a nice reward for the whistleblower too. Today's blog is a guest post from our friends at Berger & Montague, PC, a nationally known law firm that handles Whistleblower Claims, and it's a man who helped the government go after tax cheaters on a big scale.
Multiple Companies Named in False Claims Act Lawsuit Involving Misclassified Automotive Manifold Parts
A $6.3 million settlement was recently reached in a case that involved several companies incorrectly classifying auto parts that were manufactured in China and imported to the United States. The misclassification was apparently done in an effort to avoid paying the US government $2.5 million in taxes. The settlement follows an investigation conducted by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI).
China Metal Products Company operates a North American plant in Milford, Michigan under the name of CMAI Industries LLC. CMAI Industries, along with several of China Metal’s international subsidiaries, all took part in the automotive scheme, falsely classifying commercial truck exhaust manifolds imported from China to avoid paying a duty charge. The way the company got around paying the duty fees was to simply classify the automotive manifolds as "unfinished." The reason for claiming the manifolds were unfinished? Under United States law, when unfinished automotive manifolds are imported to the United States, they are not charged a duty fee. If the truck manifolds had been correctly classified as finished, CMAI Industries would have been forced to pay a duty on each shipment.
"Our country was built on the duties collected under our customs laws and the enforcement of those laws continues to be an HSI priority two centuries later," said Brian M. Moskowitz, special agent in charge of HSI Michigan and Ohio. "HSI special agents will continue to protect the revenue of the United States and aggressively investigate individuals and companies who attempt to operate outside our laws and regulations."
Companies and Individuals Involved in the Auto Parts Scam
These corporations are a group of related entities, operating in China, Taiwan and the United States, that manufacture and sell automotive parts. As part of each company’s operation, auto parts were routinely imported into the United States and sold around the nation. The companies involved in this scandal agreed to the settlement as a way to resolve claims that they violated the False Claims Act by falsely misclassifying the auto parts. The long list of companies and citizens involved in this False Claims Act lawsuit are:
CMAI Industries, LLC, a Michigan limited liability company doing business as CMAI North America
China Metal Products Co., Ltd.
China Metal Automotive International Co., Ltd.
China Metal International Holdings, Inc.
CMP (Hong Kong) Industry Co., Ltd.
CMW (Cayman Islands) Co., Ltd.
Shiuh-Lung Chiang, also known as Ronny Chiang
Ho Ming-Shiann
Special agents with HSI recovered more than $4 million of the total $6.3 million paid in settlement fines from assets that were seized during the investigation. This case first came to the government's attention due to a lawsuit filed under the "qui tam" or whistleblower provisions of the False Claims Act.
What is the False Claims Act?
The False Claims Act allows private citizens who have first-hand knowledge of fraud against the government to file a lawsuit on behalf of the United States government. When whistleblowers consider bringing a Qui Tam lawsuit against their employers, it is vital to first seek out the professional advice of highly skilled lawyers in this particular legal niche, such as the legal team at Berger & Montague, P.C. Whistleblowers that bring a successful False Claims Act lawsuit are entitled to a share of the money that the government receives in any recovery. The whistleblower in this suit, Theodore Ludlow, received $1.2 million as his cut of the money recovered by the United States government.
The companies and individuals named in this False Claims Act lawsuit allegedly violated the Act by knowingly and willfully misclassifying automotive manifolds in order to obtain a duty (or tax) rate of zero, all the while charging their customers the correct duty amount of 2.5 percent. Each company then kept the "profit" for themselves, pocketing the duty money that should have been paid to U.S. Customs and Border Protection (CBP). Between June 2004 and June 2011, it is estimated that the companies avoided paying $2,549,000 worth of duty money on 706 separate entries into the United States involving manifolds valued at $102,000,000.
Multiple Companies Named in False Claims Act Lawsuit Involving Misclassified Automotive Manifold Parts
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| Photo Source - GardenTrucking.com |
China Metal Products Company operates a North American plant in Milford, Michigan under the name of CMAI Industries LLC. CMAI Industries, along with several of China Metal’s international subsidiaries, all took part in the automotive scheme, falsely classifying commercial truck exhaust manifolds imported from China to avoid paying a duty charge. The way the company got around paying the duty fees was to simply classify the automotive manifolds as "unfinished." The reason for claiming the manifolds were unfinished? Under United States law, when unfinished automotive manifolds are imported to the United States, they are not charged a duty fee. If the truck manifolds had been correctly classified as finished, CMAI Industries would have been forced to pay a duty on each shipment.
"Our country was built on the duties collected under our customs laws and the enforcement of those laws continues to be an HSI priority two centuries later," said Brian M. Moskowitz, special agent in charge of HSI Michigan and Ohio. "HSI special agents will continue to protect the revenue of the United States and aggressively investigate individuals and companies who attempt to operate outside our laws and regulations."
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| Photo Source - Gardentrucking.com |
These corporations are a group of related entities, operating in China, Taiwan and the United States, that manufacture and sell automotive parts. As part of each company’s operation, auto parts were routinely imported into the United States and sold around the nation. The companies involved in this scandal agreed to the settlement as a way to resolve claims that they violated the False Claims Act by falsely misclassifying the auto parts. The long list of companies and citizens involved in this False Claims Act lawsuit are:
China Metal Products Co., Ltd.
China Metal Automotive International Co., Ltd.
China Metal International Holdings, Inc.
CMP (Hong Kong) Industry Co., Ltd.
CMW (Cayman Islands) Co., Ltd.
Shiuh-Lung Chiang, also known as Ronny Chiang
Ho Ming-Shiann
What is the False Claims Act?
The False Claims Act allows private citizens who have first-hand knowledge of fraud against the government to file a lawsuit on behalf of the United States government. When whistleblowers consider bringing a Qui Tam lawsuit against their employers, it is vital to first seek out the professional advice of highly skilled lawyers in this particular legal niche, such as the legal team at Berger & Montague, P.C. Whistleblowers that bring a successful False Claims Act lawsuit are entitled to a share of the money that the government receives in any recovery. The whistleblower in this suit, Theodore Ludlow, received $1.2 million as his cut of the money recovered by the United States government.
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