Customs Fraud, Part 3: The e-Allegations Program
A potential whistleblower with information about customs evasion can file a qui tam case under the False Claims Act (“FCA”). But that potential whistleblower has another option: the “e-Allegations” program with Customs & Border Protection (“CBP”), also called a “Moiety claim.”
The e-Allegations program was established pursuant to section 619 of the Tariff Act, 19 U.S.C. § 1619, also known as the Moiety Statute. The Moiety Statute provides that a person who reports “any fraud upon the customs revenue” or “any violation of the customs laws or the navigation laws” may be entitled to a reward if the reported information “leads to a recovery” of “any duties withheld” or “any fine, penalty, or forfeiture of property incurred.” The Moiety Statute is further governed by CBP regulations, 19 C.F.R. §§ 161.12 et seq.
As compared to filing a qui tam case under the FCA, pursuing a Moiety claim has both advantages and disadvantages. Moiety claims have three primary advantages:
1. Simplicity. A qui tam claim is lawsuit, subject to both the unique rules of the FCA and all the normal rules of litigation. Successfully pursuing a qui tam claim requires a major commitment of time and resources by both the relator and relator’s counsel. In comparison, Moiety claims are relatively simply to pursue. The informant submits the information through CBP’s e-Allegations website, then perfects the Moiety claim by submitting a DHS Form 4623. And that’s it!
2. Confidentiality. While some strategies exist for qui tam relators to attempt to keep their identities confidential, anonymous qui tam cases generally are not allowed, and the Department of Justice (“DOJ”) generally opposes keeping the identities of relators confidential. Accordingly, when filing a qui tam case, the relator must assume that his or her identify will eventually be revealed. In contrast, the identity a Moiety claim informant must be kept confidential.
3. Broader applicability. The FCA covers the “knowing” evasion of customs duties. Moiety claims are broader, covering not only fraud, but also “any violation of the customs laws.” Accordingly, where a potential whistleblower has evidence of a customs law violation that is not made “knowingly” or that does not involve customs duties—such as a violation of trade sanctions or forced labor laws—the Moiety statute, not the FCA, provides an avenue for reporting the violation.
Balanced against these advantages, a Moiety claim has at least three significant disadvantages compared to a False Claim Act qui tam claim:
1. Caps on reward amount. The most that a Moiety claim informant can receive as a reward is the lesser of 25% of the amount recovered by CBP or $250,000. In contrast, no such caps exist for qui tam cases. Accordingly, if a potential whistleblower could potentially earn an award of more than $250,000 via a qui tam case, then this would be a major reason to choose a qui tam case rather than a Moiety claim.
2. Lack of transparency. A qui tam case is filed in court and is overseen by a federal judge. The DOJ assigns at least one attorney to the case with whom the relator and their counsel can communicate. Accordingly, a qui tam relator generally will have access to at least some information about the status of the government’s investigation and can provide input on that investigation. In contrast, the Moiety claim process is a “black box”: CBP has no obligation to provide any information to the informant about whether or how CBP is investigating the claim. And the informant relies on CBP to be honest about whether and in what amount CBP has recovered money as a result of the informant’s report.
3. No ability to pursue without the government. In qui tam cases, if the government declines to take on the case, the relator generally may pursue the case on his or her own in what is called “declined” litigation. No such option exists with Moiety claims; if CBP chooses not to pursue the matter, there is nothing the informant can do to about it—other than to file a qui tam case!
Which raises the question: can a potential customs evasion whistleblower file both a qui tam case under the False Claims Act, and a Moiety claim via the e-allegation process? The answer is: yes, you can do both, and in some cases doing both may make sense.
Jonathan Tycko is a Partner at Tycko & Zavareei.
