Brake Pad Importer to Pay $8 Million in Settlement Over Classification Issues
The Department of Justice reached an $8 million settlement agreement with CWD, which does business as Centric Parts, over questionable classifications of imported brake pads, DOJ said in news releases. The settlement resolves separate whistleblower complaints filed in Michigan and California. Centric is alleged to have misclassified mounted brake pads as unmounted brake pads upon import, DOJ said. Mounted brake pads have a 2.5% duty rate, while unmounted pads are duty-free.
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Although Centric is under 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 U.S. Attorney’s Office for the Central District of California said. The USAO said company officials “decided to conceal and not disclose the past false entry documents to Customs” after being confronted with the classification issues. “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.”
The two whistleblowers involved will receive a total of $1.48 million. The Michigan whistleblower was Jeffrey Hawk, who worked as controller at a Centric subsidiary company. After realizing the company had been misclassifying the brake pads for years, he told his superiors and that information eventually reached the California whistleblower, Steven Hughes, who was vice president of supplier development, logistics, and government affairs at CWD.
Hughes passed the information up the food chain, eventually reaching the CEO and CFO, according to the complaint. Another company employee emailed the CFO that the company needed to consider making a prior disclosure due to the misclassification and face the required duties on the past entries or possibly “face penalties if CBP discovered the prior misclassification and the company's failure to report it,” DOJ said. The CEO and CFO would later meet with Hughes to discuss the issue, it said.
That meeting ended with the CEO and CFO instructing Hughes to “delete any emails regarding the misclassification,” DOJ said in the complaint. Hughes instead forwarded them to his personal email account and concluded that executives didn't intend to report the misclassification to CBP, DOJ said. Hughes resigned soon after and reported the problems to CBP. “With this lawsuit and the accompanying resolution, CWD Holdings is being held to account for its unlawful evasion of customs duties,” U.S. Attorney for the Eastern District of Michigan Matthew Schneider said.
Email ITTNews@warren-news.com for copies of the complaints.