In prior posts (most recently here), I have noted the risk to companies in the current global trade environment of governmental enforcement actions relating to the collection and payment of tariffs. Indeed, in a May 12, 2025, memo, Assistant Attorney General Matthew Galeotti identified “trade and customs fraud, including tariff evasion” as the Department of Justice’s number two corporate criminal enforcement priority.
In the latest sign that the Trump administration is ready to aggressively deploy its enforcement tools to ensure compliance with tariffs and other trade goals, the U.S. government has filed a complaint in intervention in a pending qui tam action against a South Carolina furniture company, alleging that the company used false documentation to underreport the price of furniture the company imported from China, resulting in tariff underpayment. The new case underscores the fact that as the current Trump rolls out and enforces its sweeping tariff program, companies will face significant scrutiny and potential claims risk.
A copy of the government’s July 15, 2025, complaint in intervention in the action against the South Carolina furniture company can be found here. A copy of the U.S. Attorney’s Office for the District of South Carolina’s July 15, 2025 press release about the complaint can be found here. A July 21, 2025, memo from the Sullivan & Cromwell law firm about the case can be found here.
Background
In September 2018, during the first Trump administration, the United States Trade Representative implemented a 10% tariff on goods imported from the People’s Republic of China. In May 2019, the USTR increased the tariff to 25%.
Global Office Furniture LLC, founded by Malcolm Smith in 2013, is based in South Carolina. It sells office chairs manufactured in China. The U.S. government alleges that the tariffs increased GOF’s furniture import costs. The government alleges that in order to evade the tariffs, GOF allegedly pursued a fraudulent scheme to evade tariffs. The company deployed what the government called a “double-invoice scheme,” allegedly involving the preparation of two separate invoices, one reflecting the true value of the goods and one reflecting an undervalued amount of imported goods that allowed GOF to pay half of the tariffs it would otherwise owe.
In March 2020, the company’s former office manager filed a qui tam whistleblower complaint under seal, which led to both a civil and criminal investigation later that year. The government further alleges that after learning of the government investigation, Smith ordered employees to delete relevant emails, scanned employee desks for incriminating hand-written notes, and directed the company’s IT service company to institute a 60-day auto-delete function.
As is the case in qui tam actions filed by whistleblowers (known as “relators”) under the False Claims Act, the government has the option on whether or not it wants to intervene in the whistleblower action. In this case, the government did decide to intervene. On July 15, 2025, the United States Attorney for the District of South Carolina filed a complaint in intervention in the whistleblower’s action. In the complaint, Smith and GOF are charged with claims of concealing or improperly avoiding or decreasing obligations to pay money to the government, making false records or statements material to an obligation to pay money to the government, and unjust enrichment.
Discussion
The tariffs at the heart of his new government action were not part of the current round of tariff impositions. The tariffs involved were those imposed during the first Trump administration. However, the government’s decision to intervene in this case was made during the current administration and reflects the administration’s commitment to using its powers to enforce tariff compliance.
It is also important to note that the government is using the False Claims Act as one of its tariff enforcement tools. As I noted in a post earlier this week, the administration has signaled its intent to use the False Claims Act (FCA) as a tool to enforce a number of its policy priorities. The “reverse false claims” provisions of the FCA imposes liability on a defendant who “knowingly and improperly avoids or decreases an obligation to pay or transmit money to the government.”
The Sullivan & Cromwell memo to which I linked above notes that while the DOJ has in the past brought criminal prosecutions against companies that commit tariff evasion, it has done so occasionally, not traditionally as a top priority. The government’s actions and its statements about pursuing tariff evasion “help illustrate that priorities have indeed changed.” The Trump administration, the memo noted “is poised to aggressively use both civil and criminal enforcement tools to ensure companies’ compliance with tariffs and other trade measures.”
The administration’s tariff enforcement priorities have practical implications. The law firm memo suggests that “companies with international supply chains should consider reviewing and updating their compliance programs, if necessary, to ensure that customs and tariff-related issues are appropriately addressed,” including in particular with respect to “their customs payment processes.”
There is a particular aspect of the government’s complaint in intervention here, and that is that the government’s action followed the earlier filing of a qui tam complaint by a former employee whistleblower. This sequence is not unusual; indeed, the vast majority of FCA actions originate with whistleblower complaints. The whistleblowers involved (motivated by the significant whistleblower bounties available under the FCA) often are former employees, and sometimes include competitors. The fact that tariffs are much more pervasive than in the past increases the risk of these kinds of actions, given the incentives that whistleblowers have to initiate these kinds of claims.
The possibility of one of these kinds of claims based on companies’ alleged tariff underreporting is separate and apart from the risks public companies may face with respect to the public disclosures to investors and regulators about the impact of the tariffs on their operations and financial results. As companies report their second quarter results over the coming weeks, it will be interesting to watch what they say about the impact of the tariffs.
By way of illustration, earlier this week, Stellantis, the corporate parent of Jeep and other car brands, reported that the U.S. governments tariffs cost the company Euro 300 million during the first half of the year and contributed to a 25% reduction in the number of cars delivered to U.S. buyers. Other companies, particularly those with significant overseas operations or with significant dependence on non-U.S. inputs, may also report significant tariff impacts. What companies say (or fail to say) could be subject to significant scrutiny, particularly when viewed in hindsight down the road as the tariffs further impact financial results.
All of which reinforces my view that the Trump administration’s tariffs, along with a number of other administration policies, contribute to an environment of significantly increased potential corporate liability risks.