OtterBox , based in Fort Collins, Colorado, has agreed to settle allegations first made in a whistleblower’s qui tam lawsuit that the company violated the False Claims Act and the Tariff Act of 1930 in connection with its imported products.
OtterBox is a well-known seller of protective cases for smartphones and tablets. According to the Justice Department, between 2006 and 2011, the majority of OtterBox’s products were manufactured overseas and then imported into the United States to be sold. In accordance with the Tariff Act of 1930, OtterBox was required to report the value of the imported goods to Customs and pay the applicable customs duties owed to the United States.
In 2011, a former employee of OtterBox, Bonnie Jimenez, filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act alleging that OtterBox knowingly underpaid customs duties owed to the federal government in violation of the False Claims Act and the Tariff Act of 1930. Specifically, the whistleblower, and later the federal government, alleged that between 2006 and 2011, OtterBox knowingly omitted the value of the “assists” it provided to the manufacturer of its products from the taxable value of its imported goods that it reported to U.S. Customs on the entry documents. An “assist” occurs when an importer of foreign merchandise provides something of tangible value to the producer of that merchandise.
The reported value of the imported goods determines the amount of duties owed to the United States. The government alleged that OtterBox knowingly underreported the value of the goods in order to lessen the amount it would owe, in violation of the False Claims Act and the Tariff Act of 1930. In this instance, the government alleged that OtterBox underpaid the customs duties owed on cellphone cases manufactured in China.
The United States Attorney’s Office for the District of Colorado reported that OtterBox has agreed to pay $4,300,000 to settle the allegations. As her reward under the qui tam provisions of the False Claims Act, the whistleblower will receive approximately $830,000 of the settlement proceeds.
The False Claims Act allows private individuals to pursue whistleblower claims on behalf of the United States in certain instances. To read more about whistleblower cases, click here.