The Trump administration has already demonstrated that it intends to actively pursue tariff enforcement, as discussed in prior posts on this site (most recently here). One of the enforcement tools the administration is using is the False Claims Act. In the following post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, takes a look at the ways the administration is using the False Claims Act as an enforcement tool, in the context of two recent enforcement actions. My thanks to Sarah for allowing me to publish her article as a guest post on this site. Here is Sarah’s article.
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The current Administration has been actively leveraging the False Claims Act (FCA) to enforce trade-related priorities, including customs and tariff compliance. As Department of Justice (DOJ) officials continue to signal heightened enforcement of customs and trade violations under the FCA, both a recently announced settlement between the DOJ and Harman International Industries (Harman) and a qui tam complaint filed this summer illustrate how trade-compliance issues can escalate into FCA exposure. D&O Diary readers may recall that FCA actions often give rise to follow-on D&O claims.
In light of the newly publicized Harman settlement and the FCA complaint brought against Global Office Furniture, LLC (GOF), the discussion below provides a brief overview of the FCA and qui tam process, followed by an examination of potential FCA-related D&O underwriting exposure.
Harman Settlement
Harman, best known for its audio brands Harman Kardon, JBL, and Mark Levinson, allegedly imported heat sinks containing extruded aluminum from a Chinese supplier between June 2011 and March 2023 without declaring that the products were subject to steep federal trade duties. According to a November 26, 2025, DOJ press release, Harman evaded the antidumping and countervailing duties on goods made of extruded aluminum from the People’s Republic of China (PRC).
The DOJ’s press release states that “[t]he Department of Commerce assesses, and U.S. Customs and Border Protection (CBP) collects, antidumping and countervailing duties (AD/CVD) to level the playing field for American companies. Antidumping duties protect against foreign companies “dumping” products on U.S. markets at prices below cost, while countervailing duties offset foreign government subsidies.” According to the DOJ, when Harman was confronted with its failure to pay the required AD/CVD for the heat sinks, the company concealed rather than disclosed its duty-avoidance to the United States.
The DOJ further announced that Harman agreed to pay $11,809,628 to resolve allegations brought in a qui tam lawsuit against Harman alleging violation of the FCA and related customs laws. Under the settlement, the whistleblower will receive approximately $2.3 million. The settlement resolves only civil liability (no finding of criminal guilt, and the DOJ explicitly notes that the claims are “allegations only”).
GOF Qui Tam
In July, the DOJ brought one of the first publicly filed FCA enforcement actions focused on tariff evasion. The qui tam complaint brought by a former Vice President of Operations at GOF alleges that the company and its owner orchestrated a multi-year tariff evasion scheme involving office chairs manufactured in China. According to the complaint, GOF and a Chinese manufacturer implemented a double-invoicing system that presented the CBP with bills of lading reflecting only half the true value of the imported merchandise, significantly reducing the duties owed.
The complaint further alleges that GOF began its evasion scheme after the United States imposed an additional 15% tariff on Chinese goods in 2019, and that the company continued submitting reduced invoices to CBP through 2023, purportedly allowing GOF to avoid roughly half of its lawful tariff obligations. The GOF qui tam frames the company’s conduct as a conspiracy to violate both the FCA and the Tariff Act of 1930. The allegations also include efforts to conceal or destroy evidence once GOF learned it was under federal scrutiny.
As with DOJ’s action against Harman, the enforcement action against GOF is being prosecuted by the U.S. Attorney’s Office, with support from CBP and Homeland Security Investigations, underscoring the government’s expanding use of the FCA to police tariff-evasion schemes.
The FCA and Qui Tam
The FCA is a federal statute that enables the US government to recover losses resulting from fraud. Of note, the federal statute was originally enacted in 1863 in response to billing fraud committed by defense contractors during the American Civil War. The FCA provides that any person who knowingly submits, or causes to submit, false claims to the government is liable for three times the government’s damages plus a penalty that is linked to inflation. The statute contains unique provisions, referred to as qui tam provisions, which permit private enforcement of the FCA on behalf of the government. A qui tam action allows whistleblowers (referred to as “relators”) to file suit on behalf of the United States alleging FCA violations.
A relator must file his or her complaint under seal without serving or notifying the defendant of the complaint. While the case is sealed, the U.S. Department of Justice (DOJ) is required to investigate the relator’s allegations. After investigating, the DOJ can intervene to take over the litigation, in which case the relator receives a 15-25% share of any recovery obtained by the United States. If the DOJ declines to intervene, the relator can litigate the case on behalf of the government and is entitled to 25-30% of any recovery. A relator who prevails is also entitled to an award of attorneys’ fees.
Discussion
The Harman settlement and the GOF qui tam complaint may highlight a growing enforcement trend with potential implications for D&O insurers. In both matters, federal authorities framed allegedly improper duty-evasion practices not as isolated compliance lapses but as multiyear schemes attributable to corporate management decisions. For D&O underwriters, framing matters because FCA allegations can give rise to parallel claims asserting failures of oversight, breakdown of internal controls, or fraudulent statements made to government authorities, investors, or counterparties.
The Harman settlement of more than $11.8 million to resolve allegations that the company knowingly failed to disclose and pay AD/CVD duties reflects a scenario familiar to D&O underwriters. Even where the settlement expressly disclaims criminal liability, public announcements of FCA resolutions can prompt shareholder inquiries or books-and-records demands exploring what senior management knew and how the alleged conduct was allowed to persist. Questions about compliance-function performance and the adequacy of disclosure controls may similarly follow.
The GOF complaint, with allegations of double-invoicing, undervaluation of imports, and destruction of evidence, presents a fact pattern that can catalyze follow-on claims from investors or creditors asserting breach of fiduciary duty, corporate waste, or failures of oversight. Although GOF is a private company, the narrative of alleged multiyear misconduct and senior-leader involvement reflects the types of “bad acts” allegations that can lead to D&O coverage issues involving allocation, late notice, and potential triggers of conduct exclusions.
Both cases also underscore how the FCA’s qui tam mechanism creates uncertainty around timing, notice, and claim severity. Because relators file complaints under seal during the DOJ’s investigation, companies and their insurers may be unaware of an imminent enforcement action for extended periods, while executives continue signing certifications, making disclosures, and potentially issuing financial statements. Once the seal is lifted, companies may face government intervention alongside scrutiny of past disclosures and management oversight.
Given these dynamics, D&O underwriters evaluating insureds with meaningful international supply chains, tariff-sensitive inputs, or complex customs-classification practices may wish to consider the increased likelihood, particularly in the current enforcement climate, of FCA-related claims arising from alleged tariff-evasion practices.
The views expressed in this article are exclusively those of the author, and all of the content in this article has been created solely in the author’s individual capacity. This article is not affiliated with the author’s company, colleagues, or clients. The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter.