Federal Court Declines to Rule for Whistleblower in Undervaluation Case, Says Jury Must Decide
A California federal court on June 10 declined to hand victory to a whistleblower suing his former employer for allegedly undervaluing imports of herbal supplements to evade payment of customs duties. Travis Kiro, a former account manager for Jiaherb, did not prove that Jiaherb knowingly mislabeled its shipments to pay lower duties to CBP, the Central California U.S. District Court said in the decision.
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Kiro alleges that Jiaherb worked with its supplier in China to falsely label and invoice its herbal supplements as cheaper raw materials, then file CBP Form 7501 entry summaries that understated the transaction value of the imported goods. According to Kiro, once the goods were cleared through customs, Jiaherb would email “relabeling requests” for its employees at its California warehouses to print out and attach the correct labels on the packaging for the high-priced extracts. Kiro said he has personal knowledge of the scheme because he personally saw the relabeling. The U.S. government has declined to intervene in the case.
Jiaherb doesn’t dispute that it changed labels for various reasons, including damaged or ripped labels, incorrect labels and customer requests. But it denies that it ever intentionally placed a false label onto imported goods or undervalued its imports to avoid customs duties.
For a false statement to violate the False Claims Act, the false statement must be intentional or result from “reckless disregard or deliberate indifference.” The District Court ruled that Kiro, whose case largely rested on his own declaration, did not demonstrate that Jiaherb knowingly made statements, nor that the importer underpaid customs duties as a result of any mislabeling. “This case appears to boil down to is a question of credibility between [Kiro’s] testimony, and [Jiaherb’s] various witnesses,” the court said. Those are “determinations to be made by the jury and not the Court on summary judgment,” it said.
(U.S. ex rel. Kiro vs. Jiaherb, Inc., C.D. Cal. 14-2484, dated 06/10/19, Judge Lew)