Defunct Jewelry Importer to Pay $400,000 to Settle Whistleblower Suit on Misclassification
A former jewelry importer will pay more than $400,000 to settle a False Claims Act whistleblower lawsuit that alleges it intentionally misclassified imported earrings to avoid paying higher customs duties, the Justice Department said in a Dec. 8 news release. A TSI Accessories Group subsidiary allegedly classified the earrings based on the value of pairs or larger groups, when they should have been classified based on the value of each single earring, said the whistleblower complaint, subsequently joined by the Justice Department.
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TSI Accessories, which ceased to do business in 2016, owned Rostone Acquisition until the previous year, when it was sold to W.R. Cobb and renamed Roman & Sunstone. According to the complaint, from 2011 to the present day, Roman & Sunstone and its predecessor disregarded prior CBP rulings that say the term “piece” in provisions on earrings in the tariff schedule refers to a single earring, rather than a pair or multiple pairs packaged together on a card.
The distinction matters because tariffs on earrings vary based on value. Roman & Sunstone classified the earrings in subheading 7113.11.50, which is to be used if earrings are worth more than $18 per dozen, or $1.50 per piece. That subheading is dutiable at 5%. On the other hand, earrings worth less than $1.50 per piece are dutiable at 13.5% under subheading 7113.11.20.
Roman & Sunstone determined the value for classification purposes based on the price it paid for each pair, the complaint said. It directed its suppliers to write vague descriptions on the invoices it would later send to CBP that identified pairs or cards of earrings as a single piece. With nothing to go on but the information provided by Roman & Sunstone, the importer’s broker, UPS, filed the shipments under subheading 7113.11.50 at the lower 5% duty rate, even when each single earring included in the shipment was worth less than $1.50, the complaint said.
Alan Robins filed the whistleblower suit against his former employer. He was hired as controller and director of finance for Roman & Sunstone in 2016, and began voicing his concerns to management the following year. As a result, he “faced retaliation and was constructively discharged in January 2018,” the complaint said. Robins will receive $70,000 out of the $402,736 settlement from TSI Accessories for his role in the case.
“This settlement underscores our efforts to ensure that importers uphold their responsibilities in American markets,” Massachusetts U.S. Attorney Andrew Lelling said in the news release. “We credit TSI’s cooperation in this investigation and agreement to make the government whole.”
The settlement only resolves the allegations related to TSI’s involvement in the scheme from 2012 to 2015. The news release is silent on the allegations that the fraud continued until the present, as well as on the fate of the constellation of companies, including W.R. Cobb, that bought Roman & Sunstone's predecessor in 2016. The Justice Department did not immediately comment.
Email ITTNews@warren-news.com for a copy of the complaint.