Undeterred, Constantine Cannon took a gamble: It began quietly mining for cases in Britain and Europe that could be eligible for whistle-blower rewards in the United States. Another American law firm, Phillips & Cohen, also looks overseas for such cases, renting shared office space in London for lawyers from the United States to meet with potential whistle-blowers.
Unlike in Britain and the Continent, whistle-blower cases can net big money in the United States — both for the government and the individuals who expose wrongdoing.
In fiscal year 2016, the Justice Department recovered more than $4.7 billion — the third-highest amount recovered in a single year — for civil fraud and false claims cases. Whistle-blowers propel the majority of false claims cases.
The ability of British citizens to avail themselves of American whistle-blower laws “is a great example of how the global economy opens up opportunities for whistle-blowers from around the world to point out fraud against the U.S. government,” said Mary Inman, who arrived in London in July to start Constantine Cannon’s whistle-blower practice in Europe.
For more than a year, Ms. Inman, 49, had been traveling from San Francisco, scouting for tips of illegal practices that her firm could develop into cases in the United States.
The knitwear company case “will be a wake-up call to British people,” sending the message “you can also do this and pick up a tidy sum,” Ms. Inman said.
They may also discover that the Justice Department is not the only United States government entity offering rich bounties for whistle-blowers. In 2015, Congress created the Motor Vehicle Safety Whistleblower Act, whereby a tipster can collect rewards of up to 30 percent of monetary sanctions that the government collects based on information that the whistle-blower provides. And the Securities and Exchange Commission, as part of the 2010 Dodd-Frank regulatory overhaul, has a whistle-blower program.
Since the program’s inception in 2011, the securities regulator has paid out about $158 million in rewards to 46 whistle-blowers. The largest whistle-blower bounty paid out to date by the agency was more than $30 million; it went to an individual living in a foreign country.
And the securities regulator notes on its website that individuals in 95 foreign countries have submitted whistle-blower tips between the 2011 and 2015 fiscal years, with the largest number coming from Britain.
The knitwear case got its start in October 2015, when Richard Pike, a partner in Constantine Cannon’s office overlooking Paternoster Square in London, received a call.
Andrew Patrick, who like Mr. Pike hailed from the north of England, had been trawling the internet and was calling lawyers in London about an employment dispute with his current employer. Mr. Pike couldn’t help him with the labor issue, but his interest was piqued when Mr. Patrick mentioned what his former employer, Pure Collection Ltd., was doing to avoid paying customs duty.
As Mr. Patrick relayed the story, Pure Collection, where he worked until October 2014, avoided duties on the luxury sweaters it shipped to the United States by splitting up orders from customers.
Until March 9, 2016, packages containing merchandise with a total retail value of $200 or less could lawfully enter the United States duty-free, so the company would divvy up single orders for American customers into multiple packages and ship the parcels separately, according to the complaint filed in late July by federal prosecutors in Maine.
The company has not responded to the complaint. Pure Collection did not respond to requests for comment.
The assistant United States attorney in Maine, Andrew K. Lizotte, declined to comment on whether the company and prosecutors were in settlement talks.
Both in his role first as a customer service adviser and later as a warehouse operative at Pure Collection, where he earned between 6,000 and 7,000 pounds, or about $7,800 to $9,000, a year for about 20 hours of work a week, Mr. Patrick said he was told to split orders exceeding $400 into separate smaller orders.
The government’s lawsuit cites an email in which Pure Collection’s chief executive told the company’s co-founder that “we are still splitting parcels and avoiding duty … I am nervous about the potential duty implications this may have for us … (because) U.S. customs could come after us at any point,” the complaint states, quoting from an email.
By finding a way around the customs duties, Pure Collection put itself in the “same favorable domestic pricing position as its American competitors,” the Maine complaint alleges.
Before calling Mr. Pike, Mr. Patrick, 54, had contacted the Internal Revenue Service and sent a package to the United States Embassy in London with some documents on the order-splitting. But he heard nothing back.
He then called a lawyer, who told him his firm wouldn’t take the case because the United States government already knew of it. (At that point, however, no government agency had taken it up.)
“There was nobody interested,” Mr. Patrick recalled. “It was difficult. I felt like a bloody idiot.”
Before Constantine Cannon took on Mr. Patrick’s allegations, it had a customer in Maine, from where Ms. Inman hails, order $937 in cashmere sweaters — to show that Maine was an appropriate venue in which to bring the case. Seven cashmere sweaters arrived in three packages over the course of three days.
At one point, Maine prosecutors wanted Mr. Patrick to fly to the United States, but he was reluctant. “I am not some jet-set,” he said.
Mr. Patrick asked Molly Knobler, an associate in Constantine Cannon’s Washington office, if they could use Skype to talk instead. When she suggested the idea to Maine prosecutors, they agreed.
For now, the size of Mr. Patrick’s reward is unclear. The government’s complaint alleged that between 2010 and 2016 goods worth a little over $121 million were sent to customers in the United States via standard delivery methods like the United States Postal Service. Although not all shipments were split to avoid customs duty, the scale of sales suggests that whistle-blowing could change Mr. Patrick’s life appreciably.
Mr. Patrick said the first thing he would do with his reward would be to give some money to his 77-year-old mother and quit his job as a pallbearer at funerals.
“If it is a reasonable amount, I would go for a £3,000 to £4,000 car,” he said. “I have lived on £250 cars for 20 years.”
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