The Department of Justice (DOJ) announced last month that Z Gallerie LLC has agreed to pay $15 million to resolve a lawsuit filed under the False Claims Act (FCA). It was alleged in the lawsuit that Z Gallerie was committing “reverse false claims” by making false statements concerning furniture imported from the People’s Republic of China, thereby evading customs duties. The FCA contains a reverse false claims provision that makes it unlawful for one to “knowingly make, use, or cause 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 conceal or knowingly and improperly avoid or decrease an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(1)(G).
Reverse false claims are different from other false claims. That’s because, unlike the typical false claim where one falsely claims federal or state funds, the reverse false claim arises when one makes false statements in order to avoid paying monies owed to the government. The complaint alleged in this case that Z Gallerie was classifying wooden bedroom furniture, such as dressers and chests, as non-bedroom furniture, such as a hall chest, in order to avoid the antidumping duties on imported wooden bedroom furniture. Because the obligation to pay duties on imported wooden bedroom furniture from the People’s Republic of China existed before and outside of the false statement, the reverse false claims provision of the FCA applied.
The Department of Commerce (DOC) publishes orders detailing the antidumping duties, including the antidumping order concerning wooden bedroom furniture imported from the People’s Republic of China. 70 FR 329-01. These antidumping duties protect domestic manufacturers against foreign manufacturers dumping their products into the American market at prices below cost. Companies that import and sell foreign goods are required to obey the orders published by the DOC, especially the orders designed to protect our domestic companies from unfair competition. The allegations against Z Gallerie were brought by Kelly Wells, an e-commerce retailer of furniture, under the whistleblower provision of the FCA.
Sources: U.S. Department of Justice
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