A “zero-tolerance policy toward trade fraud” is what a U.S. Customs official stressed recently in connection with so-called “qui tam” litigation brought by whistleblowers under the federal False Claims Act.
Here’s what that meant for CWD Holdings LLC, a company with multiple subsidiaries in various states, including Michigan: a stern rebuke from government regulators coupled with an $8 million fine.
CWD Holdings provides brakes and other vehicle components to American companies and consumers. Reportedly, it defrauded the U.S. government of tax revenues for a decade-long period ending in 2017. A U.S. attorney from Michigan states that the company “avoided millions of dollars in customs duties by misrepresenting the nature of imported goods.”
This is what that meant in the case that CWD Holdings settled in July with the United States: alleged fraudulent action systematically undertaken by company principals to avoid payments owed on imported mounted disk brake pad sets.
Those sets came with a 2.5% tariff in each instance, which CWD Holdings avoided by falsely claiming that the pads were unmounted. The latter type of pad sets are importable into the U.S. without any tariff at all.
As noted above, federal officials were alerted to the long-time ruse by ex-company employees. The former workers filed separate qui tam lawsuits, which are actions enabling personal recoveries in cases where the government recovers financial damages against reported wrongdoers.
The U.S. Attorney’s Office for the Eastern District of Michigan played a central role in the litigation and settlement. The two whistleblowers will reportedly share an approximate $1.5 million award.