British Brand Faces Lawsuit Over Duties in U.S. Gov-Backed Whistleblower Case

To appear in compliance with its shipments and avoid customs fees, Pure Collection systematically divided U.S. orders into multiple packages for shipping.
Pure Collection is accused of devising a scheme to avoid paying U.S. duties.

The U.S. government has intervened in Constantine Cannon LLP's client's whistleblower case against Pure Collection Ltd., a Harrogate, England-based e-retailer of luxury cashmere and apparel.

The government also brought claims against Pure Collection's current acting CEO, Samantha Harrison.  The lawsuit, among the first whistleblower cases brought in the U.S. by a U.K. citizen that the government has joined, alleges that Pure Collection fraudulently evaded the payment of duties to U.S. Customs and Border Protection (CBP), giving itself an unfair advantage among U.S. and foreign retailers, while allegedly saving millions of dollars and boosting its own profits.

The complaint, brought by British whistleblower Andrew Patrick of Harrogate, England, alleges that beginning in at least 2010, Pure Collection purposefully avoided paying U.S. customs duties on retail orders worth more than $200 that it shipped to U.S. customers. To attract more U.S.-based customers, Pure Collection advertised on its website "we do our utmost to prevent customs fees," and even reimbursed customers for any customs fees they incurred in the instances where Pure's evasion efforts failed.

Pure Collection did this by engaging in a practice referred to internally as "splitting."  During this time, CBP rules exempted commercial goods imported into the U.S. from customs duties if the total order value did not exceed $200, later raising the limit to $800.  To appear in compliance with its shipments and avoid customs fees, Pure Collection systematically divided U.S. orders into multiple packages for shipping.

Patrick worked for Pure Collection from 2010 to 2014, first as a sales representative in its U.K. call center and then in its U.K. packaging department.  He was trained to systematically split customers' large orders to successfully avoid paying U.S. customs fees, saving the company millions of dollars, according to the whistleblower suit.

Patrick originally brought his allegations to the CBP's attention in 2014 and provided documents to the U.S. Embassy.  He later filed a whistleblower submission with the U.S. Internal Revenue Service in 2015. After these three attempts to alert U.S. authorities were unsuccessful, Patrick approached Richard Pike, a solicitor-advocate and partner in Constantine Cannon's London office, which specializes in advising whistleblowers under the American whistleblower programs.  After retaining Constantine Cannon,  Patrick filed his whistleblower suit in 2016 in federal court in Maine.

Patrick is represented by Constantine Cannon attorneys Molly KnoblerTimothy McCormack and Mary Inman, as well as Maine lawyer Dan Murphy of Bernstein Shur.

"Pure [Collection] arrogantly decided it didn't need to play by the same rules as other retailers, and placed its own interests in profits and access to the U.S. market above the laws of the U.S. government," said Knobler, an associate in Constantine Cannon's Washington, D.C., office. "The government's intervention in Mr. Patrick's case sends a clear message that this behavior will not be tolerated."

"If this case is successful, Mr. Patrick will be among one of the first British whistleblowers to expose a U.K. company for evading U.S. import duties and receive a financial reward under the whistleblower provisions of the False Claims Act," said Inman, a partner in Constantine Cannon's London office whose practice focuses on representing U.K. and E.U. whistleblowers under the American whistleblower programs.  "As global business expands, European whistleblowers like Mr. Patrick play an increasingly vital role in alerting the U.S. Government to fraud schemes that cross international borders."

The case was brought under the federal False Claims Act, which promotes collaboration among corporate insiders and the government to fight fraud on U.S. taxpayers. The FCA, known as Lincoln's Law, was originally enacted during Abraham Lincoln's presidency to put a stop to purposefully inflated prices and delivery of knowingly inferior products by contractors during the Civil War. This important tool is used to combat government fraud, and incentivize individuals with knowledge of fraud to step forward, and includes legal protections against retaliation toward whistleblowers.

The law encourages whistleblowers of any nationality to expose companies that are defrauding the U.S. government by allowing a private party from any country to file a civil lawsuit on the government's behalf and providing for a reward of 15 to 25 percent of the government's civil recovery if the government joins, or intervenes in, the case, as the government has done here.  If this case is successful, Patrick will receive between 15 and 25 percent of the government's recovery.

The case is captioned:  United States of America ex rel. Andrew Patrick v. Pure Collection Ltd. et al., Case No. 2:16-cv-00230-GZS, United States District Court for the District of Maine.

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