On August 19, the U.S. Department of Justice (DOJ) announced that Allied Stone Inc. (Allied Stone) and its president, Jia “Jerry” Lim, agreed to pay $12.4 million in settlement to resolve allegations that the company violated the False Claims Act (FCA) by evading, or conspiring to evade, antidumping and countervailing duties owed on quartz surface products imported from China. Allied Stone is a Dallas-based countertop and cabinetry supplier. According to the DOJ, Allied Stone misrepresented Chinese quartz surface products as other merchandise subject to lesser duties to avoid the applicable antidumping and countervailing duties. The company also allegedly failed to declare and pay, and failed to ensure that others were declaring and paying, applicable duties owed to the U.S. on entries of its Chinese quartz surface products.
Importers that bring goods into the U.S. must declare, among other things, the country of origin, value, applicable duties, and the amount of duties related to the goods. U.S. Customs and Border Protection is responsible for collecting applicable duties, like antidumping and countervailing duties assessed by the Department of Commerce. Antidumping duties allow the U.S. to stop foreign companies from “dumping” products into U.S. markets at prices below their cost, while countervailing duties offset foreign government subsidies. Both antidumping and countervailing duties applied to Alliance Stone’s quartz products at the center of DOJ’s investigation into Allied Stone and its president.
The settlement agreement resolves the 2021 civil lawsuit filed by relator Melinda Hemphill. That lawsuit asserted that Allied Stone and its president knowingly evaded or conspired to evade duties on Chinese quartz surface products between September 29, 2018, and February 7, 2023. As the relator, Hemphill will receive approximately $2,170,875 of the settlement proceeds.
This case exemplifies a reverse false claim, which occurs when an individual improperly retains money or property owed to the government or creates a false record to avoid payment. Although this is not a new application of the FCA, the lawsuit underscores a growing regulatory trend of using the FCA to meet regulatory goals. With significant incentives available to whistleblowers, known as relators, companies must comply with federal and state requirements not only when seeking payments from the government but also when remitting amounts owed. Failing to diligently monitor these obligations — or ignoring warnings from employees about potential noncompliance — can lead to substantial legal risks.
Read the DOJ’s full press release regarding the settlement here.
