Pure Collection, a UK fashion retailer, committed customs fraud resulting in the evasion of routine tax duties. A case that was first brought to the attention of authorities in 2014, has finally reached a 900K settlement thanks to the False Claims Act and one brave whistleblower.
Former Employee Blows the Whistle
Andrew Patrick, a former employee of the luxury retailer, blew the whistle on a practice giving the company an unfair advantage over other retailers. The simple practice of “splitting” large packages being shipped to the US into multiple, smaller packages, avoids triggering customs duties. Patrick says he was specifically trained to do this and alleges this was a commonplace company policy between 2010 and 2017.
CEO Samantha Harrison is now on the hook for over $900K. The False Claims Act (FCA) ensures that Patrick will be awarded 18% of the total settlement. The settlement is a long time coming, as Patrick approached UK law firms, US Embassy, and Customs and Border Protection (CBP) in 2014. He then later filed a submission with the IRS in 2015.
Dishonest Company Practices Give Unfair Advantages
US customers were promised they could avoid payment on all customs duties for all merchandise purchased online. Pure Collection implemented strategic marketing tactics purposefully in hopes of attracting more US based customers. The tactic had large appeal and sales skyrocketed. This boost in sales over a 7-year period put them in competitive running with other retailers such as L.L. Bean and Land’s End.
Pure Collection was also hoping to launch their own lucrative US-based catalogue. But because of this tactic, Pure Collection ultimately prevented the US from receiving legitimate payments. The scheme gave Pure Collection an unfair advantage.
Companies such as Pure collection have made many attempts to put its own interests above the tax law. Pennsylvania garment wholesaler, Notations, recently settled an FCA case in an issue with the company’s supply chain. Yingshun Garments and Import Global Designs Inc. were ultimately responsible for the fraudulent practices such as issuing double invoices, changing prices for imported garments, and avoiding duties requirements.
Undervaluing goods during the customs process, and manipulating shipments at one point might have fallen within CBP rules. However, Pure Collection attempted to mislead customers on their website into believing they would not have to pay any fees, creating obvious problems. Mounting suspicion forced the retailer to go as far as reimbursing its customers for the confusion.
Whistleblower Lawsuits Are Necessary
These actions by Pure Collection are considered fraudulent and systematic; that they refused to play by the rules. But the retailer has yet to admit liability for evading US import duties. It is believed that whistleblowing is now necessary in uncovering schemes crossing international borders. Since 2008, $34.5 million has been recovered overall from retailers in whistleblower cases, due in part to the FCA. Whistleblowers are responsible for 80% of all FCA cases won and therefore are awarded a share of the amount recovered.
To learn more about customs fraud or report suspicious activity, contact Jeffrey Newman Law today at 1-800-682-7157.