The United States Attorney in Savannah, Georgia recently entered in to a settlement of a False Claims Act lawsuit against Z Gallerie LLC. Headquartered in Gardena, California Z Gallerie LLC is a privately owned retailer of home accessories and furniture with stores across the nation. Pursuant to the settlement, Z Gallerie LLC will pay $15 million. The deceptive practices of Z Gallerie LLC led to the avoidance of paying funds owed to the government, as qui tam whistleblower Kelly Wells alleged under the False Claims Act in the Southern District of Georgia. According to the allegations of the case, from 2007 to 2014 Z Gallerie LLC engaged in the evasion of antidumping duties in the importation of wooden bedroom furniture from China by misclassifying, or conspiring to misclassify, the furniture for non-bedroom use on U.S. Customs documents.

The U.S. Department of Homeland Security’s Customs and Border Protection collects duties on imported goods in accordance with numerous trade rules and regulations, including the protection of U.S. industries from unfair competition from low-priced imported goods. Antidumping duties address the potential for suspiciously low-priced, foreign manufactured items to undercut a particular industry’s ability to compete with such cheaply produced goods. Generally, businesses must pay a duty equal to the difference between the price of goods at the time of importation and their market value in the exporting country.

As reported by the U.S. Department of Justice, “Companies that intentionally mislabel shipments or misrepresent the value of goods being imported into the United States to avoid paying the appropriate duties do so in an attempt to create an unfair advantage over businesses that play by the rules,” said Special Agent in Charge Nick S. Annan of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE HSI) in Atlanta.  “This type of activity hurts legitimate U.S. businesses and, by extension, our overall national economy.  Uncovering these types of schemes will continue to be a major investigative priority for ICE HSI.”

As a U.S. business that imports foreign manufactured goods, Z Gallerie LLC’s failure to correctly declare to U.S. Customs the value of furniture from China, and thus evade payment of duties to the government was in direct violation of the False Claims Act (“FCA”). Under the FCA, an individual can act as a qui tam relator, or whistleblower, and is able to bring a lawsuit on behalf of the United States if he or she believes that fraudulent claims are being submitted to the government or that, as in this case, a company is fraudulently avoiding paying money it owes to the government. If the case settles, the whistleblower is entitled to a portion of the recovery, known as the relator’s share.  That share typically ranges from between 15% to 30% of the amount recovered by the government. In this case, the relator who blew the whistle on Z Gallerie LLC received $2.4 million.