$6.3 million settlement reached in False Claims Act case

DETROIT — A $6.3 million settlement was reached Monday to resolve claims that companies misclassified auto parts manufactured in China and imported to the United States, to evade $2.5 million in duties. The settlement follows an investigation by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI).

"Our country was built on the duties collected under our customs laws and the enforcement of those laws continues to be an HSI priority two centuries later," said Brian M. Moskowitz, special agent in charge of HSI Michigan and Ohio. "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."

CMAI Industries, LLC, a Michigan limited liability company doing business as CMAI North America; China Metal Products Co., Ltd.; China Metal Automotive International Co., Ltd.; China Metal International Holdings, Inc.; CMP (Hong Kong) Industry Co., Ltd.; CMW (Cayman Islands) Co., Ltd.; Shiuh-Lung Chiang, also known as Ronny Chiang; and Ho Ming-Shiann paid the United States $6.3 million to resolve claims that the companies violated the False Claims Act by falsely misclassifying the auto parts.

More than $4 million of the $6.3 million paid in settlement came from assets seized during the investigation.

In a related criminal prosecution, CMAI North America entered a guilty plea to federal charges of entry of goods by means of false statement and was sentenced to two years' probation and ordered to pay a $25,000 fine. The settlement and prosecution was announced by U.S. Attorney Barbara L. McQuade, Eastern District of Michigan, and Moskowitz.

The corporations are a group of related entities, operating in China, Taiwan and the United States, that manufacture and sell automotive parts. Part of this business involved the importation and sale of parts in the United States. Shiuh-Lung Chiang is the president of CMAI North America. CMAI North America provides logistics and warehouse services for other members of the group of companies that manufacture and import automotive parts into North America. Ho Ming-Shiann is the founder and chairman China Metal Products Co., Ltd., the holding company for the other defendant companies in the group.

The companies and the named individuals allegedly violated the False Claims Act by knowingly misclassifying auto manifolds to obtain a duty rate of zero, while charging its customers the correct duty of 2.5%, and retaining as "profit" the duty that should have been paid to U.S. Customs and Border Protection (CBP). Between June 2004 and June 2011, the United States alleged that the company evaded $2,549,000 worth of duties on 706 entries involving manifolds valued at $102,000,000.

In the related criminal case, on December 8, 2011, CMAI North America pleaded guilty to one count of entry of goods by means of false statements. CMAI North America assisted in entering commercial vehicle exhaust manifolds manufactured in China into the commerce of the United States by means of fraudulently declaring that the parts were "unfinished." CMAI North America knew that if the correct Harmonized Tariff Schedule Code associated with the merchandise had been used, the United States would have been owed duty of 2.5% for each entry, or a total of $1,290,399.95.

Special agents with HSI investigated the scheme, which came to the government's attention through a lawsuit that was brought under the qui tam or whistleblower provisions of the False Claims Act. The Act permits private citizens with knowledge of fraud against the government to bring an action on behalf of the United States and to share in any recovery. The whistleblower in this suit, Theodore Ludlow, received $1.2 million from the United States' recovery.