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Customs and Border Protection Details New Regulatory Tool to Fight Antidumping and Countervailing Duty Evasion

The interim rule governing the Enforce and Protect Act of 2015 (EAPA) was released by Customs and Border Protection (CBP) on August 22, 2016.   The EAPA is specifically designed to increase the transparency and effectiveness of CBP’s antidumping and countervailing duty (AD/CVD) evasion enforcement by establishing a formal procedure which allows interested parties to file allegations of AD/CVD evasion with CBP.

The EAPA, which is expected to result in significantly more AD/CVD evasion enforcement actions, comes as a welcome addition to the current AD/CVD enforcement mechanisms such as the False Claims Act.   The primary direct beneficiaries of this increased evasion enforcement are expected to be U.S. industry groups who have struggled to gain trade protection by implementing AD/CVD orders only to have the duties continually evaded and law abiding importers who are disadvantaged by competitors who cheat AD/CVD orders.

What are Antidumping and Countervailing Duties?

Antidumping and countervailing duties are vital tools used by the United States to counteract unfair trade practices by foreign corporations and foreign nations.  When a foreign entity is aggressively importing their products into the United States at prices that are below the cost of production simply to grab market share, an AD/CVD order can be issued.  After the AD/CVD order is issued, the unfairly imported products are taxed at a duty level that counter-balances the subsidies the foreign companies receive and account for the cost of production.  The AD/CV duties can be as much as 300% of the value of the imports and this high duty rate creates a strong incentive for fraudulent evasion of the duties.  Schemes to evade AD/CV duties can take many forms but generally have involved misrepresenting the merchandise’s true country of origin, false shipping and entry documentation, or misreporting the merchandise’s physical characteristics.

AD/CVD Order Enforcement and Evasion Prosecution Has Become a Major CBP Initiative

Due to the hyper-aggressive trade practices of foreign corporations and even some foreign governments AD/CVD orders have been on the rise in recent years, which also has led to a rise in AD/CVD evasion.  Because the economic implications of AD/CV duties are so substantial and evasion so pervasive, CBP has made AD/CVD enforcement a major agency priority.  This has led to an increase in AD/CVD evasion False Claims Act cases, such as the recent $3 million settlement by Frohsin & Barger, U.S. ex rel. G.E.S. v. Ameri-source.  Prior to the enactment of the EAPA the administrative mechanism used to detect AD/CVD duty evasion, known as an E-Allegation, did not afford parties an opportunity to participate in the investigation nor did CBP have a duty to notify the party that submitted the allegations of the outcome.

How Does the EAPA Work?

Under the current “interim” EAPA rule, an interested party who believes that another entity is engaging in AD/CVD evasion may submit an allegation to CBP that reasonably suggests that merchandise covered by an AD/CVD order entered the United States without paying the requisite duties.  After receipt of the allegation, CBP must decide whether to initiate an investigation within 15 business days and if initiated must determine within 300 days whether there is “substantial evidence” that merchandise covered by AD/CVD order evaded the AD/CV duties.

CBP may investigate allegations by methods CBP considers appropriate.  One method specifically mentioned by the EAPA is the use of questionnaires to discover information relevant to AD/CVD evasion.  CBP may make an “adverse inference” (essentially viewing the information or lack of information unfavorably) if a party did not act to the best of its ability to provide requested information.  If through this investigative process, “substantial evidence” of evasion is found, CBP has several methods available to recover the evaded duties and may refer the matter for possible civil or criminal investigation.

The EAPA also provides for an even faster temporary remedy, known as the “interim measures mechanism.”  Under this provision, CBP will determine within 90 calendar days of initiation of an EAPA investigation whether “reasonable suspicion” exists that AD/CV duties were evaded.  If CBP determines that such “reasonable suspicion” exists, there are multiple measures CBP may take to collect the appropriate duties, including reassessing duties or requiring a bond or cash deposit to import the goods.

The EAPA, in divergence from the lack of disclosure that hampered the effectiveness of the E-Allegation procedure, requires CBP to communicate its determination to the party who made the allegation within five days.

Under the current interim version of EAPA, the interested party who makes the allegation is not rewarded with any type of monetary benefit, including no reward of attorney’s fees for reporting this information to CBP.  The absence of a reward is puzzling.  An EAPA allegation is essentially a whistleblower complaint as it alerts the government to the fraudulent evasion of AD/CVD duties, a destructive practice which can also carry severe civil and criminal penalties.  Comparatively, other Federal agencies such as the SEC and IRS include whistleblower rewards in the framework of their fraud reporting regulations.  Further, the same type of allegations that would form an EAPA allegation have constituted successful qui tam False Claims Act complaints, which mandate that the whistleblower would receive 15-30% of the amount recovered by the government as well as attorney’s fees.

However, the law states EAPA investigations are not meant to be the exclusive means or only statutory authority by which CBP can investigate allegations of evasion of AD/CVD orders but instead to provide a transparent investigative procedure to address allegations.  Therefore, the existing AD/CVD enforcement mechanisms such as filing a civil case under False Claims Act, prosecuting a criminal case through U.S. criminal smuggling laws and the administrative E-Allegation procedure, are still available.

The interim rule became effective on August 22, 2016 and CBP is accepting comments by interested parties until October 21, 2016.

How Does the EAPA protect American Industry and Law-Abiding Importers?

The passage and implementation of the EAPA demonstrates the strength of the United States’ commitment to not only protecting the American economy from unfair trade practices but also adequately enforcing the trade remedies that have been implemented.  The EAPA also signals that AD/CVD evasion is now a primary focus of CBP and with the increased focus there will be an increase in the detection of AD/CVD evasion schemes.  Overall, the additional resources, streamlined procedure and greater accessibility provided by the EAPA are a step in the right direction to curtail AD/CVD evasion and allow the AD/CVD orders achieve the goal for which they were implemented: to protect the U.S. economy from unfair trade.

If you have questions about the Enforce and Protect Act of 2015, or AD/CVD evasion, please contact Frohsin, Barger & Walthall.



Miami Man Pleads Guilty to $4.2 Million Home Health Care Fraud Scheme

The U.S. Attorney for the Southern District of Florida announced on August 15, 2016 that Ramon Collado Gonzalez has pled guilty to one count of conspiracy to defraud the United States and one count of making a false statement in connection with a federal health care benefit program.

In his guilty plea, Collado Gonzalez admitted that he was recruited by Mildrey Gonzalez and Milka Alfaro, the owners of Golden Home Health Care Inc. (Golden), a home health care agency in Miami, to fraudulently represent himself as the owner of Golden.  In return for concealing his alleged co-conspirators’ ownership interests, Collado Gonzalez received a monthly payment and periodic bonuses, although he did not do any actual work for Golden.  His function was simply to sign off on a Medicare application and other documents for the purpose of facilitating submission of false claims to Medicare and concealing Mildrey Gonzalez’s and Alfaro’s ownership interests.

During the time Collado Gonzalez misrepresented himself as the owner, Golden received approximately $4.2 million from Medicare as a result of false and fraudulent claims.

Since its inception in March 2007, the Medicare Fraud Strike Force has charged nearly 2,900 defendants who have collectively billed the Medicare program for more than $10 billion.

The charges to which Collado Gonzalez pled guilty were criminal charges.  However, under the qui tam provisions of the False Claims Act, whistleblowers with information about similar fraud against government programs may bring a civil case on behalf of the United States.  If such a case is successful, the government can recover up to three times the amount the defendants fraudulently billed the government.  The whistleblower is then entitled to receive 15-30% of the government’s recovery and also entitled to receive reasonable attorney’s fees.

Read the full Department of Justice Press Release 

To report fraud, please contact Frohsin & Barger.

Army Contractor Settles False Claims Act Allegations For $2 Million

Bering Straits Technical Services LLC (BSTS) and its parent company, Bering Straits Native Corporation (BSNC), have paid $2 million in damages to resolve numerous alleged violations of the False Claims Act.  Generally, it was alleged that BSTS and BSNC caused false claims to be submitted to the Department of Defense (DOD) and/or the Defense Logistics Agency (DLA) for maintenance facility services provided at the Red River Army Depot located near Texarkana.

The suit specifically alleged that beginning in September 2010, BSTS and BSNC submitted false preventative maintenance reports for maintenance work that was not performed.  The complaint also claimed that BSTS and BSNC employees were directed to repair equipment that no longer existed or was no longer in service and compelled to claim maintenance hours and supply costs for work that was not performed.  BSTS ceased providing services at the Red River Army Depot Aug. 31, 2014.

The settlement is the result of a False Claims Act qui tam suit that was filed in United States District Court for the Southern District of Texas in 2012.  The qui tam provision allows individuals, with knowledge of fraud against the government, to file suit on behalf of the United States.  The individual, known as a relator, is then typically entitled to receive a portion of the government’s recovery.

Read the full Department of Justice Press Release here.

To report fraud, contact Frohsin & Barger.

Furniture Importer Settles False Claims Act Antidumping Duties Case for $15 Million

California-based Z Gallerie LLC has agreed to pay $15 million to settle allegations that the company violated the False Claims Act by engaging in a scheme to evade antidumping duties on imports of wooden bedroom furniture from the People’s Republic of China (PRC).  Specifically, the suit alleged that from 2007 to 2014, Z Gallerie evaded antidumping duties by misclassifying, or conspiring with others to misclassify, the imported bedroom furniture as non-bedroom pieces.   For instance, Z Gallerie allegedly sold certain Basset Mirror Company products, including a six-drawer and three-drawer chest as part of a bedroom collection.  However, this furniture was mislabeled as “grand chests” and “hall chests” on the import documents submitted to Customs and Border Protection (CBP), in order to evade the antidumping duties.  Under the antidumping order on wooden bedroom furniture from the PRC, which has been in effect since 2005, antidumping duties can be as much as 216.01% of the value of the subject merchandise.

The case was handled by the U.S. Attorney’s Office for the Southern District of Georgia. “Savannah is home to one of the fastest growing ports in the country, handling almost 10 percent of all the containerized cargo volume in the United States,” said U.S. Attorney Edward J. Tarver for the Southern District of Georgia.  “This U.S. Attorney’s Office will work hard to make sure those using the Port of Savannah play by the rules, and to hold those who try to cheat their way out of paying customs duties accountable.”

The allegations resolved by the settlement were originally brought by whistleblower Kelly Wells, an e-commerce furniture retailer from Huntsville, Alabama, under the qui tam provision of the False Claims Act.  The qui tam provision allows private parties, who have knowledge of fraud against the government, to sue on behalf of the United States those who falsely claim federal funds or, in the case of antidumping fraud those who avoid paying funds owed to the government.  Under the False Claims Act, a whistleblower is entitled to receive a share of any funds recovered. Ms. Wells will receive $2.4 Million as her share of the $15 million settlement.

“Under the new Trade Facilitation and Trade Enforcement Act, CBP will likely see an increase in these types of settlements as the streamlined processes take effect concerning allegations of duty evasion,” said CBP Commissioner R. Gil Kerlikowske. “The Act reinforces CBP’s existing authorities and tools to collect and investigate public allegations of duty evasion improving the overall effectiveness and enforcement of CBP law enforcement actions concerning illicit trade activity, specifically in the area of antidumping and countervailing duty evasion schemes.”

The use of the False Claims Act to enforce customs fraud, particularly schemes to avoid antidumping and countervailing duties, is a viable unfair trade remedy available to both individuals and businesses injured by unfair trade.  Another example of False Claims Act enforcement of antidumping duties fraud is the recent case settled by Frohsin & Barger client Graphite Electrode Sales, Inc.

Read the full Department of Justice Press Release here.

To report fraud, please contact Frohsin & Barger.


Home Health Patient Recruiter Convicted of $2 Million Home Health Care Fraud Scheme

Carlos Rodriguez Nerey, a patient recruiter for several Miami-based home health companies, has been convicted for his role in a fraud and kickback scheme that resulted in fraudulently submitting millions of dollars in false claims to Medicare.

Mr. Nerey was found guilty of one count of conspiracy to defraud the United States and pay and receive health care kickbacks and one count of receiving health care kickbacks. He claimed to work for a staffing company but in reality served as a patient recruiter for D&D&D Home Health Inc. (D&D&D) and Mercy Home Care, Inc. (Mercy), two fraudulent home health care companies. Mr. Nerey created a shell company through which he received kickbacks from Mercy and D&D&D, as well as $250,000 for his role in the conspiracy. Medicare paid over $2 million to D&D&D and Mercy for false claims.

The case was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Southern District of Florida. Since its inception in 2007, the Medicare Fraud Strike Force has charged nearly 2,000 defendants who have collectively billed the Medicare program over $6 billion.

Read the full Department of Justice press release.

To report fraud, contact Frohsin & Barger.

Two Defense Contractors to Pay $8 Million to Settle False Claims Act Allegations

Tennessee-based Kilgore Flares Company and New York-based ESM Group have agreed to pay a total of $8 million to resolve allegations that they violated the False Claims Act by selling or conspiring to sell defective infrared flares to the U.S. Army and that ESM knowingly evaded antidumping duties.

The United States alleged that from July 2003 through May 2005 ESM knowingly misrepresented the content of ultrafine magnesium powder imported from China in order to avoid paying antidumping duties owed on the imported powder.  At the time, ultrafine magnesium powder from China was subject to a 305 percent antidumping duty.  The government also alleged that from March 2005 through August 2006 Kilgore used the illegally imported Chinese magnesium powder purchased from ESM in the countermeasure flares it sold to the U.S Army.  Using the illegally imported powder violated multiple provisions of Kilgore’s contracts with the Army, namely that the contract prohibited use of magnesium powder from foreign countries (except Canada) and that the Chinese magnesium powder did not meet the engineering specifications required by the contracts.  To resolve these allegations, Kilgore and ESM agreed to pay $6 million and $2 million, respectively.

Prior to these civil settlements, five former ESM employees and agents, including ESM’s former president Charles Wright and father and son pair Gregory and Justin Magness, pleaded guilty to criminal charges related to the antidumping duty evasion scheme.  In total, the criminal defendants were ordered to pay over $14 million in restitution.

The settlement with ESM resolved a lawsuit filed under the qui tam provisions of the False Claims Act by Reade Manufacturing Company, a domestic manufacturer of magnesium powder.  The qui tam provisions permit private parties to sue, on behalf of the United States, those who falsely claim government funds or avoid paying funds owed to the government .  The False Claims Act also allows the whistleblower to receive a portion of any funds recovered through the lawsuit.  In this case, Reade Manufacturing received $400,000 from the settlement with ESM.

“The Department of Justice is committed to ensuring that contractors do not cut corners in manufacturing critical items sold to the U.S. military,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “These settlements also show that the department will aggressively pursue those who avoid paying duties to gain an unfair business advantage over competitors who abide by the rules.”

“The components of U.S. military equipment are held to rigorous standards to ensure our military superiority and the safety of our warfighters,” said Special Agent in Charge James Spero of Homeland Security Investigations (HSI) Buffalo. “When short cuts are taken, lives are put at risk. This settlement ensures that the companies involved are held responsible for their actions and further emphasizes HSI’s commitment to ensuring that the sale and distribution of products used by our military is done with integrity.”

To report fraud contact Frohsin & Barger.

Read the full DOJ press release here.


Respironics to Pay $34.8 Million for Allegedly Causing False Claims to Medicare, Medicaid and Tricare

Medical equipment manufacturer Respironics Inc. will pay the government $34.8 million for allegedly providing kickbacks – in the form of free call center services – to durable medical equipment (DME) suppliers in exchange for their buying Respironics sleep apnea masks.

The Anti-Kickback Statute prohibits the making of knowing and willful payments to induce the referral of services or other items that are paid for by a federal healthcare program. Claims submitted to these federal programs – which include Medicare, Medicaid, and TRICARE – in violation of the Anti-Kickback Statute are also false claims under the False Claims Act (FCA).

Respironics allegedly provided DME companies with free call center services to meet their patients’ resupply needs as long those patients were using Respironics-manufactured masks. According to the Department of Justice (DOJ) lawsuit, DME companies providing their patients with a competitor’s masks had to pay a monthly fee. The government alleged that the Pennsylvania-based company provided the call center kickbacks from April 2012 until November 2015.

The lawsuit was originally brought by whistleblower Dr. Gibran Ameer under the qui tam provisions of the FCA. The FCA permits private citizens with knowledge of fraud against the government to bring a lawsuit on behalf of the United States and share in any recovery. Under the DOJ settlement, Dr. Ameer, who has worked for different DME companies, will receive $5.38 million out of the federal share of the recovery.

“Medical equipment manufacturers that boost profits by providing kickbacks to suppliers will be held accountable for their improper conduct,” said Special Agent in Charge Derrick L. Jackson of the Department of Health and Human Services, Office of Inspector General (HHS-OIG).  “We will continue to investigate such business arrangements, which threaten the integrity of federal healthcare programs.”

Read the full DOJ press release.

To report healthcare fraud, contact Frohsin & Barger.

Louisiana Jury Convicts 2 in Medicare Home Health Fraud Scheme

A federal jury in New Orleans convicted the owner of a Louisiana home health care company and a doctor for their roles in a $34 million Medicare home health care fraud scheme.  Elaine Davis, the owner of Christian Home Health Care Inc. and Dr. Pramela Ganji, both of New Orleans were each convicted of one count of conspiracy to commit health care fraud and one count of health care fraud on Thursday, March 17.  Dr. Godwin Ogbuokiri, another doctor indicted in scheme,  was acquitted on all charges.

According to a Department of Justice press release, evidence introduced at trial showed that Davis and Ganji caused Christian Home Health Care to bill Medicare for home health care services that were not needed and/or were not provided.  To accomplish this fraudulent scheme, Davis paid employees to recruit new home health patients from communities in Southeast Louisiana, primarily around New Orleans and Hammond, Louisiana.  The company then sent the new patients’ Medicare information to doctors, including Dr. Ganji, to falsely certify that the patients qualified to receive home health care services.  The evidence introduced at trial showed that Dr. Ganji often never examined these patients to assess their eligibility for home health services.  The false certifications allowed Christian Home Health Care to fraudulently bill Medicare for home health services and to conceal that the services were unnecessary.  This scheme was in effect from 2007 to June 2015, when the defendants were indicted.  Throughout this time period, Christian Home Health Care submitted more than $34.4 million in claims to Medicare. A large number of these claims were fraudulent because the patients did not actually qualify to receive home health care.  Due to the concealment of this fraud, Medicare paid Christian Home Health Care approximately $29.6 million for these claims.

This case is an example of criminal prosecution of health care fraud.  However, health care fraud, including home health fraud can also be prosecuted in civil court through the qui tam provisions of the False Claims Act.   To read more about the conditions necessary for a patient to be qualified for Medicare home health services, visit the Home Health page.

To report healthcare fraud contact Frohsin & Barger.

United States Settles $34.7 Million False Claims Act Allegations Against 21st Century Oncology

The nation’s largest physician-led integrated cancer care provider, 21st Century Oncology Inc., and its subsidiary, South Florida Radiation Oncology LLC, have agreed to settle allegations that they performed and billed for procedures that were not medically necessary.

The lawsuit involved medical procedures that measure the exit dose of radiation from a patients after they undergo radiation treatment, a procedure known as the Gamma function. The United States alleged that 21st Century Oncology knowingly and improperly billed for these procedures when they were not medically appropriate, including having physicians or physicists perform them in spite of their not being properly trained to interpret and utilize the results. The government also alleged that defendants billed for the procedure when no Gamma result was available due to imaging equipment technical failures.

Whistleblower Joseph Ting, a former physicist at South Florida Radiation Oncology, originally filed the lawsuit under the qui tam or whistleblower provisions of the False Claims Act (FCA). Under FCA provisions, a private party, known as a relator, can file an action on behalf of the United States and receive a portion of the recovery – more than $7 million in Ting’s case.

Since 2009, the United States Justice Department (DOJ) has recovered over $27.4 billion through FCA cases, more than $17.4 billion of which has involved health care fraud allegations.

Read the full DOJ press release.

To report Health Care Fraud, please contact Frohsin & Barger.

DOJ settles with Recovery Home Care for $1.1 million over False Claims Act violation claims

Recovery Home Care (RHC) agrees to $1.1 million settlement for allegedly paying illegal kickbacks to doctors to refer Medicare patients for RHC services. Whistleblower receives $198,000 of recovered funds.

From 2009 to 2012, Mark T. Conklin, former owner of the West Palm Beach, FL company, allegedly paid dozens of physicians to review patient charts and refer them to RHC, regardless of need of and eligibility for RHC services. According to the lawsuit, these physicians spent minimal to no time reviewing the charts and received thousands of dollars in kickbacks every month.

The settlement partially resolves lawsuit allegations made by whistleblower Gregory Simony, a former RHC employee.  The False Claims Act (FCA) permits private individuals to sue on behalf of the government for false claims and share a portion of any recovery. Mr. Simony will receive $198,000 of the recovered funds.

The settlement resulted from a coordinated effort by the Department of Justice’s Civil Division’s Commercial Litigation Branch, the US Attorney’s Office for the Middle District of Florida, and HHS-OIG.

“We will continue to identify, investigate and, where appropriate, sue individuals and corporations that misuse funds meant to provide critical medical services for beneficiaries of federal health care programs,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.

Read the full DOJ press release.

To report Health Care Fraud, please contact Frohsin & Barger.



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