Newman & Shapiro Announces $3.25 Million False Claims Act Customs Fraud Settlement with Importer RGE Motor Direct Inc.

We’re pleased to announce that RGE Motor Direct Inc. (RGE), a California-based importer and reseller of Chinese furniture and other merchandise, has agreed to pay $3.25 million to resolve customs fraud allegations arising from a False Claims Act qui tam lawsuit Newman & Shapiro filed in June 2021 on behalf of its whistleblower client, Chris Chan.

RGE, which does business as OneBigOutlet, is based in City of Industry, California. Mr. Chan, who worked for RGE’s affiliate in Hong Kong, alleged that, after the United States increased tariffs on many Chinese products in 2018, RGE engaged in an increasingly brazen scheme to evade those tariffs when it imported merchandise from China.

According to Mr. Chan’s complaint, the scheme was simple: RGE and its Hong Kong affiliate shifted much of the real price of the imported merchandise to bogus invoices for “testing” or “certification” of the merchandise. At the same time, RGE’s Hong Kong affiliate provided RGE with fake commercial invoices showing reduced merchandise prices that, in most cases, more than offset the additional tariffs. Then, RGE provided the fake commercial invoices to United States Customs authorities and paid duties only on the fraudulently reduced prices. As time went on and RGE and its Hong Kong affiliate realized how much money they could save on tariff payments by creating fake commercial invoices, the companies allegedly shifted ever larger portions of the real prices to the bogus testing or certification prices, so that the reduction in RGE’s duty obligations far exceeded the costs RGE incurred from the new tariffs that the United States had imposed.

In March 2022, the Department of Justice filed a notice declining to intervene in Mr. Chan’s qui tam case, but Mr. Chan continued to pursue the case through to resolution. As a whistleblower reward under the False Claims Act, the government has agreed to pay Mr. Chan 27.5% of the settlement amount.

Newman & Shapiro filed the case under the caption United States ex rel. Chan v. RGE Motor Direct Inc., No. 2:21-cv-04763-RGK (C.D. Cal.). Notwithstanding the Department of Justice declination, the settlement was finalized less than 17 months after the case was filed.

The settlement shows the potential for other whistleblower cases against importers that have attempted to evade the increased tariffs on Chinese goods.

Gregg Shapiro and Jeffrey Newman served as lead counsel for Mr. Chan in the RGE case. They represent whistleblowers in False Claims Act qui tam cases involving customs fraud, health care fraud, and other matters involving fraud against the government. They can be reached at 617-823-3217, gshapiro@newmanshapiro.com, or jnewman@newmanshapiro.com.