Toyo Ink Reaches $45 Million Settlement of Whistleblower’s Customs Fraud Allegations

The Justice Department announced this week that Japanese ink manufacturer Toyo Ink has reached an agreement with the government to settle allegations that the company evaded import duties on pigments it imported into the U.S.

According to the government, between April 2002 and March 2010 Toyo Ink submitted falsified documents to the U.S. Customs and Border Protection to avoid paying duties on pigments produced in China and India. The U.S. imposes duties—taxes on items imported into the country—on certain products manufactured in specific countries when the Commerce Department determines that foreign manufacturers have priced their goods unfairly, typically due to foreign government subsidies. Duties on such products ensure that foreign companies compete fairly with U.S. businesses that do not receive such subsidies.

Toyo Ink’s alleged fraud involved its carbazole violet pigment 23, which the company represented to U.S. Customs as having been manufactured in Mexico and Japan, rather than in China and India, thereby avoiding the required duties. The government claims that although facilities in Mexico and Japan did do some finishing work on the pigment, that was not adequate to escape payment of the duty.

In this case, Toyo’s fraud was initially brought to the government’s attention by John Dickson, the president of a U.S. carbazole violet pigment 23 manufacturer. For his contributions to the case, Mr. Dickson will receive a relator award of over $7.8 million.

Although most people associate the False Claims Act with health care fraud and defense contractor fraud, the reach of the Act is far, far broader. Under the Act, a company or individual is liable for knowingly making any false claim to the government for payment, or to avoid a payment required by law. The falsity of a claim often relates to price or quality, but may also stem from certifications that a product or service meets federal regulations when it does not.

Customs duties are one of many areas in which false claims may be submitted to the government. Because payments to the government are required when importing certain goods, mischaracterizing imported goods to evade payment of duties constitutes a false claim under the False Claims Act. Any time U.S. Customs demands information about imported goods to determine whether or not duty payments are required, falsification of that information may constitute a false claim under the False Claims Act. Such information may relate to the identity of the good, the country of origin, or other classifications.

If you have knowledge of fraud or false claims for payment submitted to the government, you may stand to earn a reward of up to 30% of any amount the government recovers with your assistance. Our experienced whistleblower attorneys can confidentially evaluate your information and, if there is convincing evidence that false claims have been made, devise a litigation strategy, and bring your lawsuit on behalf of the government against the violators.

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