Linde agrees to $22.8M settlement of whistleblower case alleging customs fraud

PHILADELPHIA, PA, Sept. 25, 2020 – Linde GmbH and its North American subsidiary have agreed to a $22.8 million settlement of a whistleblower lawsuit, filed by Phillips & Cohen LLP, which alleged the multinational company evaded US customs duties on materials it bought and imported to build chemical and natural gas plants.

The settlement is one of the largest for a whistleblower case alleging avoidance of customs duties.

“When companies don’t pay the duties that are owed on imported goods, they are breaking the law and also giving foreign manufacturers an unfair price advantage over American-made goods,” said Steve Hasegawa, a whistleblower attorney and partner at Phillips & Cohen. “Customs duties help level the playing field for US businesses.”

The whistleblower complaint alleged Linde avoided paying tariffs and the full amount for duties and anti-dumping and countervailing duties (AD/CVD). The government intervened after investigating the matter and settled the complaint, resolving allegations that Linde failed to pay required customs duties, including by:

  • Submitting invoices and entry forms to the Customs Border Patrol (CBP) that falsely identified imported goods by using incorrect HTS (Harmonized Tariff Schedule) codes, which are used to assess duties.
  • Failing to report the raw materials and components, known as “assists,” that it provided to manufacturers to make the imported goods. Those assists add value to the goods and are required to be disclosed on the customs forms.

For instance, the whistleblower complaint says that Linde described stainless steel pipes from China as carbon steel pipes, which have a lower tariff and no AD/CVD duties. This saved the company millions of dollars.

“The system depends on importers providing truthful information on customs forms,” said Dave Jochnowitz, an associate with Phillips & Cohen. “The amounts that companies save by falsifying information on one form can be small, but over time, the sums are enormous.”

The whistleblower, Crystal Johnson, worked for Linde in Oklahoma for 10 years, most recently as a purchasing and logistics manager. Phillips & Cohen filed her “qui tam” (whistleblower) lawsuit under seal in federal district court in Philadelphia, PA, in 2017. Kathryn M. Schilling of Schilling Law LLC was local counsel.

The court approved the settlement and unsealed the lawsuit today, making it public for the first time.

“Companies that cheat on customs duties hurt sales for American manufacturers, which causes American workers to suffer,” Johnson said. “I could not keep quiet about what I saw.”

The $22.28 million settlement includes $15 million that Linde paid previously in two separate payments after it self-disclosed that it had underpaid customs duties.

Linde notified the government in 2016 that it had underpaid customs duties, but delayed telling the government how much it owed until it paid $13 million in August 2017. After the government informed Linde that it was investigating the underpayments – prompted by Johnson’s qui tam lawsuit, which at the time was under seal so Linde was unaware of it – Linde submitted another $2 million in 2019.

“Our client let the government know what Linde truly owed,” Hasegawa said. “It’s usually only company insiders who know about specific instances of customs fraud, which is why whistleblowers are crucial for enforcement.”

Johnson will receive a reward of $3.78 million for her information and the assistance she and her lawyers provided to the government. The False Claims Act offers whistleblowers rewards if funds are recovered as a result of their qui tam lawsuits and protection from job retaliation.

Johnson and her attorneys thanked the government attorneys for their outstanding work on the case, particularly Assistant US Attorney Paul W. Kaufman and Assistant US Attorney Landon Y. Jones III at the Eastern District of Pennsylvania and DOJ Trial Attorney Jennifer Chorpening with the Commercial Litigation Branch.

DOJ press release: Multinational Industrial Engineering Company to Pay $22 Million to Settle False Claims Act Allegations of Evading Customs Duties

 

About Phillips & Cohen LLP

Phillips & Cohen is the nation’s most successful law firm representing whistleblowers. The firm’s cases have helped recover more than $12.3 billion in civil settlements and criminal fines. Phillips & Cohen represents whistleblowers in qui tam lawsuits as well as whistleblower claims with the reward programs of the Securities Exchange Commission, the Commodity Futures Trading Commission and the Internal Revenue Service. www.phillipsandcohen.com

Let us help you.
Get a free, confidential case review