Frohsin Barger & Walthall Client Settles $3 Million FCA Import Duties Case

The Department of Justice issued a press release yesterday announcing that it has settled a False Claims Act suit originally brought by a whistleblower represented by Frohsin & Barger.   The settlement resolved allegations that the defendants, which included four importer companies and their owners, engaged in a scheme to evade antidumping duties on imports of small-diameter graphite electrodes from China.   The defendant companies, Ameri-Source International Inc., Ameri-Source Specialty Products Inc., Ameri-Source Holdings Inc. and SMC Machining LLC are all based in Pennsylvania.  The whistleblower and Frohsin & Barger client, Graphite Electrode Sales Inc., originally brought the allegations under the qui tam provisions of the False Claims Act. Under the qui tam provisions the whistleblower is entitled to receive a share of any funds recovered.  Graphite Electrode Sales Inc. will receive approximately $480,000 of the $3,000,000 settlement.

The United States collects import duties that protect U.S. manufacturers from unfair international competition by leveling the playing field for domestic products.  Antidumping duties, the specific import duties at issue in this case, protect domestic manufacturers from foreign companies “dumping” products on U.S. markets at prices below cost.  Imports of small diameter graphite electrodes from China have been subject to an antidumping duty of approximately 160% since 2008.  Small diameter graphite electrodes are defined as having a diameter of less than 16 inches and are used as fuel in electric arc and ladle furnaces, often used in steel manufacturing.  There are no antidumping duties on larger diameter graphite electrodes.

The settlement resolved claims that revolved around the defendants’ alleged evasion of antidumping duties on 15 shipments of Chinese small-diameter graphite electrodes from December 2009 to March 2012.  The Department of Justice and Frohsin & Barger contended that Ameri-Source International misclassified the size of the electrodes in order to avoid paying the 160% antidumping duties. The United States also alleged that the owners of the defendant companies, Ajay Goel and Thomas Diener, caused and conspired in the misrepresentation which resulted in the evasion of duties.

In addition to the civil False Claims Act case, Ameri-Source International also pleaded guilty to two counts of smuggling goods into the United States.  In this guilty plea, Ameri-Source International admitted that on April 27, 2011 and June 9, 2011, the company falsely declared imported cargo from China as being graphite rods greater than 16 inches in diameter, when in fact the graphite rods were less than 16 inches in diameter and thus subject to the antidumping duties.  In U.S. District Court in the Western District of Pennsylvania, Chief Judge Joy Flowers Conti sentenced Ameri-Source International to pay a $250,000 criminal fine within 10 days and applied the $3 million False Claims Act payment to the United States’ loss of antidumping duties of $2,137,420.

Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, commented on the settlement stating: “The nation’s customs laws are designed to protect domestic manufacturers from foreign products that enter the country at below-market prices due to unfair practices abroad.  This settlement shows that the Department of Justice is committed to pursuing claims against anyone involved in a scheme to seek an unfair advantage in U.S. markets by evading duties on imported goods, including the individuals who run the companies and knowingly participate in such schemes.”  David J. Hickton, U.S. Attorney for the Western District of Pennsylvania also commented, stating: “We are committed to protecting U.S. jobs and industries from those who seek an unfair advantage in the U.S. marketplace.”

United States manufacturers and importers should be afforded the protection guaranteed under fair trade and antidumping laws.  In order to provide this protection, the United States and Frohsin & Barger are working diligently to investigate and prosecute those who evade antidumping duties.  Frohsin & Barger is honored to have been able to assist the United States in this case and thank the individuals and agencies involved, including U.S. Customs and Border Protection, U.S. Immigration and Customs Enforcement, U.S. Department of Commerce and the U.S. Department of Justice.

The lawsuit is captioned United States ex rel. Graphite Electrode Sales, Inc. v. Ameri-Source Holdings, Inc., et al., Case No. 13-cv-0474 (W.D. Pa.).

To report International Trade and Customs Fraud, please contact Frohsin & Barger.