Otter Products LLC, maker of OtterBox smartphone and tablet cases, just paid $4.3 million to the United States government to settle whistleblower allegations.
Allegations include that Otter Products violated federal law by underpaying customs duties, according to U.S. Attorney John Walsh’s office, the Northern Colorado Business Report wrote. The U.S. Attorney’s Office for the District of Colorado, the Department of Homeland Security, and the U.S. Customs and Border Protection announced the settlement in a statement yesterday.
Filed in 2011 in U.S. District Court in Denver, Colorado, the whistleblower lawsuit was brought by a former OtterBox supply chain director. The whistleblower will receive $830,000 in the settlement that was negotiated by Assistant U.S. Attorney Amanda Rocque, according to Northern Colorado Business Report.
Between 2006 and 2011, Otter Products, which is a privately held company and the maker of the number one selling smartphone case in North America, manufactured many of its products in China. The products were then imported for distribution and retail sale, reported Northern Colorado Business Report. OtterBox was responsible to submit entry documents to U.S. Customs and to pay customs duties owed on its imported products.
The company saw significant growth during that period and maintains that it did not knowingly underpay customs duties. The case was settled without Otter Products admitting liability; Otter Products previously indicated that it would strongly contest the lawsuit and was confident it would see a “favorable outcome” in court. The company sought a dismissal of the case on September 26, 2014, indicating that it had advised the government of the shortcomings in its import-tax payments, according Northern Colorado Business Report.
According to federal allegations, from January 1, 2006 through December 31, 2011, OtterBox knowingly omitted some of the value of OtterBox cases on imported product documents and also made false statements in other documents that were provided to Customs and Border Protection.‚Ä®Because of OtterBox’s omissions and false statements, according to Northern Colorado Business Report, the company knowingly underpaid owed customs duties and violated the False Claims Act, said Walsh.
‚ÄúAmerica’s economic security and prosperity are at the heart of U.S. trade law,” Walsh said in a statement. “Customs duties are a significant source of revenue for the United States, and this settlement demonstrates that the Department of Justice will zealously enforce their lawful collection,” he added.
The whistleblower alleges that she was fired after she repeatedly advised the company about the duty payment issue involving China-manufactured products imported to the U.S., according to The Denver Post. According to the whistleblower, OtterBox omitted the value of services, so-called ‚Äúassists, from the declared value on entry documents for the imported products. The value of engineering, development, and design work conducted in China needed for production should have, but was not, factored into the duties that OtterBox was responsible to pay under U.S. law.
Under the whistleblower regulations, the whistleblower will receive her $830,000 share, the Department of Justice will receive 3 percent of the total award, and U.S. Customs and Border Protection will receive the remainder of the award, wrote The Denver Post.