CWD Holdings To Pay $8 Million To Resolve False Claims Act Allegations Relating To Unpaid Import Duties
CWD Holdings LLC has agreed to pay the United States $8 million to resolve allegations that it violated the False Claims Act by knowingly avoiding paying tariffs on certain imported brake parts. The settlement arises out of allegations that CWD falsely claimed that the mounted brake pads it in fact imported, which carried a 2.5% tariff, were unmounted brake pads, which required no tariff. CWD is a Delaware-incorporated company based in California, with additional operating facilities and subsidiaries in California, Kentucky, and Michigan. CWD and its subsidiaries provide aftermarket brake and chassis components for passenger vehicles and trucks.
This settlement resolves allegations that from 2007 to 2017, CWD knowingly imported into the United States mounted brake pad sets subject to a 2.5% tariff under the Harmonized Tariff Schedule and misrepresented the nature of the imported goods to United States Customs and Border Protection (“U.S. Customs”). The allegations claim that CWD falsely represented to U.S. Customs that the mounted disk brake pad sets were unmounted brake pads, requiring the payment of no duty, in order to avoid payment of the 2.5% tariff.
“CWD Holdings avoided millions of dollars in customs duties by misrepresenting the nature of the imported goods to U.S. Customs,” said U.S. Attorney Matthew Schneider for the Eastern District of Michigan. “With this lawsuit and the accompanying resolution, CWD Holdings is being held to account for its unlawful evasion of customs duties.”
“U.S. Customs and Border Protection maintains a zero-tolerance policy for trade fraud and other unfair trade practices that undermine the competitiveness of U.S. businesses,” said Director Field Operations Christopher Perry. “We are proud to partner with the U.S. Attorney’s Office to level the playing field for legitimate traders by steadfastly enforcing U.S. trade laws.”
The settlement resolves allegations contained in two lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act. Two separate whistleblowers filed the lawsuits: Jeffrey Hawk and Steven Hughes, both former employees of CWD Holdings and/or its subsidiaries. The False Claims Act permits private parties to file suit on behalf of the United States and to share in any recovery. The whistleblowers in this case will receive $1.48 million of the settlement amount.
The matter was handled by Assistant United States Attorneys John Spaccarotella and Caroline Burgunder from the U.S. Attorney’s Office for the Eastern District of Michigan; and Karen Paik and Abraham Meltzer from the U.S. Attorney’s Office for the Central District of California.
The two qui tam cases are docketed as United States ex rel. Jeffrey Hawk v. CWD Holdings, LLC, et al., Case No. 17-12225 (E.D. MI), and United States ex rel. Steven Hughes v. CWD Holdings, LLC, Case No. 19-CV-7089 (C.D. CA). The claims resolved by the settlement are allegations only; there has been no determination of liability.