One of the world’s largest manufacturers of eco-friendly reusable shopping bags has settled claims it unlawfully evaded customs payments by using a complex invoicing scheme designed to intentionally defraud the government out of money. Following a whistleblower lawsuit filed by a former executive with Green Bag Co., Inc., investigators from the U.S. Attorney’s Office for the Northern District of California and the DHS Office of Inspector General revealed that the company had engaged in potentially unlawful customs avoidance activity and eventually settled the matter. Green Bag, Inc. did not admit any liability or wrongdoing on its part and the relator received $100,000 for his willingness to come forward with the allegations of fraud.
Details of the case against Green Bag Co., Inc.
Green Bag Co., Inc. is in the business of manufacturing the popular cloth reusable grocery store bags designed to help eliminate shoppers’ reliance on plastic and paper products, which eventually pollute the environment and create overflow in landfills. To keep its own costs low, Green Bag relied on manufacturers located in China to assemble the bags, package the product, and ship it to the United States. However, by manufacturing in China and shipping the product to the U.S., Green Bag also realized the added costs of customs tax, and allegedly employed an elaborate invoicing scheme to avoid the assessment of this costly expense.
According to the press release issued by the Department of Justice, for a period spanning from 2007 through 2009, Green Bag maintained two separate invoices for each transaction. The first invoice, between the Chinese manufacturer and the company itself, reflected the true cost of the products and was paid pursuant to each shipment. However, the second invoice it created reflected a much-reduced value of the goods and was submitted to customs officials upon the arrival of the Green Bag products. Over time, this scheme resulted in major underpayments of customs fees and taxes, resulting in the eventual whistleblower lawsuit.
Comments from government officials
Today’s customs fraud case represents a departure from the typical healthcare or defense contract fraud that is so prevalent. However, it shows that fraud can occur in virtually any industry – even the eco-friendly shopping bag industry.
The U.S. Attorney’s Office said in a statement, “Companies that import goods into the United States must disclose the true costs of imports and pay all customs duties owed….This office has a responsibility to make sure the system is fair to those companies that play by the rules and we will not hesitate to take action against those who so brazenly cheat. I commend the work of the Department of Homeland Security Office of Inspector General and the U.S. Customs and Border Protection.”
The Director of Field Operations similarly commented, stating, “U.S. Customs and Border Protection has direct responsibility for enhancing U.S. economic competitiveness by enforcing U.S trade laws on foreign manufactured goods entering our country. The men and women of CBP have an essential role in protecting American economic security while fostering legitimate trade and travel. Attempting to avoid Customs Duty brings serious consequences….”
Contact Berger & Montague, P.C. today
If you are aware of fraud or believe your employer may be engaging in an unlawful scheme against the government to increase profits, we encourage you to contact Berger & Montague, P.C. right away.