Posted June 27th, 2018.
A former inventory manager for the jewelry brand blew the whistle on the company, claiming it was not paying what it should in import duties.
By Brecken Branstrator
New York–Jewelry brand Temple St. Clair has agreed to pay the U.S. government nearly $800,000 after settling a suit involving failure to pay customs duties and inventory that was not properly marked.
A former inventory manager for the jewelry brand was the one who brought the case under the False Claims Act. The act allows whistleblowers, also known as relators, to file a lawsuit on behalf of the government to recover money an individual or business has avoided paying to the United States. If the government successfully recovers the money, then the whistleblower receives a portion of that recovery.
The ex-employee filed her complaint in the U.S. District Court for the Southern District of New York against Temple St. Clair LLC and three individuals–jewelry designer and brand founder Temple St. Clair Carr; her husband and brand President Paul Engler; and Vice President of Sales Jamie McGrath–in June 2015.
The settlement was filed June 21. It and the original suit were unsealed the following day. (Suits brought under the False Claims Act are required to be sealed in order to protect the investigation.)
According to court documents, the whistleblower was responsible for preparing customs documents for the import and export of jewelry and loose gemstones during her time at Temple St. Clair. Her complaint outlined several schemes allegedly undertaken by the jewelry brand to evade or underpay U.S. customs duties.
In addition, the U.S. government filed a complaint-in-intervention, which allows a third party to join the plaintiff in a complaint, containing similar allegations.
The complaint alleges that between 2011 and 2017, Temple St. Clair LLC underreported the value of goods imported from Italy, Sri Lanka and Thailand; obtained duty-free treatment on some imported jewelry that didn’t qualify; and failed to declare to Customs and Border Protection jewelry brought into the U.S. for commercial purposes, thereby unlawfully avoiding payment of customs duties.
The complaint also stated that the company, “failed to affix permanent markings to jewelry manufactured in Sri Lanka or Thailand identifying the jewelry’s country of origin” when it entered the U.S., then sold the jewelry to retailers without any markings indicating country of origin.
(Title 19, U.S. Code, Section 1304 requires jewelry be permanently marked with the country of origin at the time of import.)
According to Sanford Heisler Sharp, the law firm that represented the whistleblower, the case is thought to be the first in New York in which money was recovered for the U.S. government based on the defendant’s failure to properly mark its products with their country of origin.
Temple St. Clair LLC admitted to and accepted responsibility for failing to pay customs duties, both in court papers and in a statement emailed to National Jeweler Tuesday.
Engler said in the brand’s statement to National Jeweler: “For over 30 years, Temple St. Clair has designed, created and shipped tens of thousands of pieces of jewelry throughout the world, including to and from the United States, Europe, and Asia. Our global operations have required us to learn and adhere to multiple countries’ complex regulations regarding import duties and country of origin marking. Despite our careful compliance, United States Customs claimed that we had misinterpreted some regulations, and, in particular, a United States trade preference program.”
He said the allegations “represented a small piece of (their) business” and they cooperated with the investigation and found the government to be correct.
Engler added that the government found no evidence of intentional wrongdoing and that the brand, in addition to paying the money owed, will further identify and apply best practices and policies to make sure all future import duties are accurately calculated and paid.
“As we move forward with those initiatives, we have been and continue to be proud to support and nurture some of the best artisanal goldsmiths in the world and to bring timeless jewels of uncompromising craftsmanship and materials to our clients,” the statement concluded.
U.S. District Judge Katherine Polk Failla awarded a judgment of $796,000 to the U.S. government, as well as post-judgment interest at the rate of 12 percent per year compounded daily.
In addition, Temple St. Clair agreed to affix permanent markings identifying country of origin to all its jewelry going forward.