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Intellectual Property Rights and Commercial Fraud
07/22/2020

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Centric Parts to pay $8 million to resolve allegations of failing to pay the US millions of dollars in import duties on brake pads

LOS ANGELES – CWD, LLC, which operates under the name Centric Parts, a Delaware corporation headquartered in Carson, and its affiliates have agreed to pay $8 million to the United States to resolve allegations that they violated the False Claims Act and the Tariff Act of 1930 by knowingly underpaying customs duties owed to the United States on imported brake pads.

The matter was investigated by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Los Angeles and U.S. Customs and Border Protection (CBP).

Centric Parts and its affiliates sell aftermarket brake and chassis components for passenger vehicles and trucks. Centric Parts imported brake parts into the United States and was responsible for the submission of entry documents to CBP and the payment of any customs duties owed on those products.

The United States alleged that, from 2007 to 2017, Centric Parts falsely claimed on entry documents that mounted brake pads, which carry a 2.5 percent tariff, were unmounted brake pads, which require no tariff. The United States further alleged that when confronted with the misclassifications in 2017, company officials decided to conceal and not disclose the past false entry documents to CBP. As a result of Centric Parts’ alleged omissions and false statements regarding its imported products, the company knowingly evaded millions of dollars of customs duties it owed to the United States.

The settlement resolves two lawsuits filed by former employees pursuant to the qui tam provisions of the False Claims Act. These provisions permit private parties to sue on behalf of the government when a defendant knowingly avoids an obligation to pay money to the government, and to share in any recovery. The two “whistleblowers,” Steven Hughes and Jeffrey Hawk, will receive a total of $1.48 million as their share of the settlement.

Although Centric Parts has filed for bankruptcy protection, the bankruptcy court entered an order confirming the company’s plan of reorganization that explicitly provides the settlement debt is non-dischargeable and will be paid by the reorganized company.

The $8 million settlement resolves federal cases filed in Los Angeles and Detroit: United States ex rel. Steven Hughes v. CWD Holdings, LLC, Case No. 19-CV-7089-DMG (C.D. Cal.), and United States ex rel. Jeffrey Hawk v. CWD Holdings, LLC., et al., Case No. 17-12225-BAF (E.D. Mich.).

The case filed in Detroit was unsealed today, while the Los Angeles case was unsealed on July 16.

The U.S. Attorney for the Central District of California’s Civil Fraud section handled the Los Angeles case.

The claims resolved by the settlement are allegations only. There has been no determination of liability.

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Last Reviewed/Updated: 07/29/2020