ADCO Industries, also known as Dallco Marketing, Inc., a Dallas-based importer of industrial products, has agreed to pay $2.5 million to settle allegations of violating the False Claims Act, as announced by U.S. Attorney for the Northern District of Texas, Leigha Simonton.
The allegations involve the failure to pay customs duties on imports from China, a violation of customs laws requiring importers to pay duties on the actual price paid for imported goods. The settlement addresses claims that ADCO, along with its owner Raymond E. Davis, customs broker Calvin Chang, and Chinese companies Xiamen Atlantis MFC Co., Ltd. and Xiamen Taft Medical Co., Ltd., conspired to underreport the value of goods imported to the United States.
The government contended that falsified invoices, with lower values for customs valuation purposes, were submitted to U.S. Customs and Border Protection (CBP). Simultaneously, a second set of correct invoices, not disclosed to CBP, was allegedly used to ensure ADCO paid its Chinese suppliers the actual value of the goods. This practice resulted in the undervaluation of goods upon entry into the U.S., leading to revenue loss in the form of customs duties and other fees.
U.S. Attorney Leigha Simonton emphasized the significance of customs laws in national security and protecting the public and American businesses from unfair competition. She stated that the U.S. Attorney's Office will vigorously investigate and hold accountable those attempting to manipulate customs duties.
Director Gregory Alvarez of the CBP Atlanta Field Office highlighted the collaborative effort between CBP's Consumer Products and Mass Merchandising Center of Excellence and Expertise and the U.S. Attorney's Office in identifying and reviewing over 1,000 import entry lines related to the underreporting allegations. CBP expressed pride in its investigative work and commitment to safeguarding the nation's economic security.
The settlement arises from a qui tam or whistleblower lawsuit, allowing private parties to file suit on behalf of the United States for false claims. The lawsuit, titled United States ex rel. Reznicek et al. v. Dallco Marketing, Inc. et al., No. 3:22-CV-332-L (N.D. Tex.), was resolved with ADCO agreeing to pay $2.5 million. The whistleblowers, Donald Reznicek and Collen McFarland, will receive a $500,000 share as part of the settlement.
