Four Pennsylvania-Based Companies and Two Individuals Agree to Pay $3 Million to Settle False Claims Act Suit Alleging Evaded Customs Duties

Corporation Pleads Guilty to Criminal Charges and Sentenced

The Department of Justice announced today that three importers and their owners – Ameri-Source International Inc., Ameri-Source Specialty Products Inc., Ameri-Source Holdings Inc., Ajay Goel and Thomas Diener – and a related importer, SMC Machining LLC, incorporated at Goel’s direction and formerly owned by his wife, have agreed to pay $3 million to resolve a lawsuit brought by the United States under the False Claims Act.  The lawsuit alleged that the defendants had engaged in a scheme to evade customs duties on imports of small-diameter graphite electrodes from the People’s Republic of China (PRC).  Small-diameter graphite electrodes are columns of synthetic graphite with diameters of around 16 inches or less that are used as fuel in electric arc and ladle furnaces, such as those used in steel manufacturing.  The companies are all based in Pennsylvania.    

“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,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “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.”  

The Department of Commerce assesses and the U.S. Department of Homeland Security’s Customs and Border Protection (CBP) collects duties to protect U.S. manufacturers from unfair competition abroad by leveling the playing field for domestic products.  The particular duties at issue in this case are antidumping duties, which protect domestic manufacturers against foreign companies’ “dumping” products on U.S. markets at prices below cost.  Imports of PRC-manufactured small-diameter graphite electrodes have been subject to antidumping duties since Aug. 21, 2008. 

The settlement announced today resolves claims that Ameri-Source International Inc. evaded antidumping duties on 15 shipments of small-diameter graphite electrodes from the PRC from December 2009 to March 2012.  The United States contended that Ameri-Source International misclassified the size of the electrodes to avoid paying the duties.  There are no antidumping duties on larger diameter graphite electrodes.  The United States also alleged that Goel, Diener and the other companies caused and conspired in the misrepresentation to evade duties.  Ameri-Source International also waived indictment and pleaded guilty today to two counts of smuggling goods into the United States.   In U.S. District Court in the Western District of Pennsylvania, Ameri-Source International admitted that on April 27, 2011 and June 9, 2011, the company falsely declared imported cargo from the PRC as being graphite rods greater than 16 inches in diameter.  Chief Judge Joy Flowers Conti immediately sentenced the corporation to pay a $250,000 criminal fine within 10 days and applied the payment of the $3 million to the loss of antidumping duties of $2,137,420.00.

“We are committed to protecting U.S. jobs and industries from those who seek an unfair advantage in the U.S. marketplace,” said U.S. Attorney David J. Hickton for the Western District of Pennsylvania.  “This office’s aggressive criminal and civil enforcement efforts to combat and prosecute the evasive practices of both the corporations and individuals who perpetrated this scheme demonstrate our resolve to ensure a level playing field for all.”

“Antidumping duties level the playing field for U.S. manufacturers,” said CBP Commissioner R. Gil Kerlikowske.  “This is a prime example of how U.S. Customs and Border Protection partners with the Department of Justice, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE HSI) and the U.S. Department of Commerce to enforce antidumping duty laws.”

“This settlement underscores one of HSI’s primary efforts, which is to ensure a level playing field for companies engaged in legitimate trade and commerce with the United States,” said Special Agent in Charge John Kelleghan of Homeland Security Investigations (HSI) Philadelphia. “HSI special agents will continue to protect the revenue of the United States and aggressively investigate individuals and companies who attempt to operate outside our laws and regulations.”

“The Department of Commerce Office of Inspector General is dedicated to supporting bureaus such as the International Trade Administration in protecting the U.S. economy from the type of criminal activity disclosed in this case,” said Special Agent in Charge Duane E. Townsend of the U.S. Department of Commerce Office of Inspector General.  “We greatly appreciate the cooperation and efforts of HSI and the U.S. Attorney’s Office that resulted in this agreement.”

The allegations resolved by the settlement were originally brought by whistleblower Graphite Electrode Sales Inc. under the qui tam provisions of the False Claims Act.  The act permits private parties to sue on behalf of the government those who falsely claim federal funds or, as in this case, those who avoid paying funds owed to the government or cause or conspire in such conduct.  The United States may intervene in and take over the lawsuit, as it has done here.  The act also allows the whistleblower to receive a share of any funds recovered through the lawsuit.  Graphite Electrode Sales Inc. will receive approximately $480,000 as its share of today’s settlement.

The case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of Pennsylvania, CBP, ICE HSI and the Department of Commerce’s International Trade Administration and Office of Inspector General. 

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.).  The claims resolved by this settlement are allegations only; there has been no determination of liability except as admitted in the criminal proceedings.