Where is the Report of Investigation?
As we get to the end of 2018, I am trying to wrap up a lot of work and a few blog posts. Here is the first.
Greenlight Organics is not a particularly interesting decision on its own, at least not at this point. It involves a motion for summary judgment in a customs fraud case. The government is seeking approximately $3.5 million in unpaid duties and penalties from Greenlight. Because this is a fraud case brought under 19 USC 1592, the applicable statute of limitations in five years. See 28 USC 1621. The trick with a fraud case is that, unlike the standard negligence case, the five-year clock does not start to run until Customs and Border Protection first learns of the fraud.
Here, the government filed its complaint on February 8, 2017. Defendant contends that the government knew of the fraud in 2011, making the case time barred. The United States counters that it did not know of the fraud until sometime after February 8, 2012, making the case timely.
The Court of International Trade declined to grant summary judgment. According to the Court, determining the date of discovery of fraud is a fact-specific exercise that is rarely amenable to summary judgment. Looking at the elements of the fraud involved in this case, the Court did not see sufficient evidence of when the government might have first determined that the products were allegedly misclassified, that the importer was allegedly using double invoicing to fraudulently declare value, and that the importer acted with the intent to defraud the government. Consequently, these facts will have to be established through the introduction of evidence at trial.
I have zero reason to quibble with the legal analysis. The date of discovery rule is entirely well established and has been applied in customs cases. I also agree entirely that this phase of the case presents a question of fact that requires a review of the facts to answer the question presented.
My question (and it really is a question) is: What remains to be presented to the Court? In penalty cases, the United States has usually conducted a thorough investigation. The progress of that investigation is usually recorded by the investigating Agent in a document known as a Report of Investigation, or ROI. The ROI is often several inches thick and includes summaries of documents, lab reports, conversations with CBP personnel, and with witnesses. The ROI, assuming one exists, should contain a summary of what the government knows and when it knows it. That, by itself, might be sufficient to determine when the five-year period began to run and, possibly avoid a trial on this question and on the merits.
Reports of Investigation have been referenced in other cases as evidence of the facts surrounding a penalty case. For example, in United States v. Ford Motor Company, Ford pointed to the ROI as contradicting testimony concerning the scope of an investigation. In Clymore v. United States, the ROI was cited as evidence that Customs and Border Protection knew the identity of the owner of a seized truck.
There are several reasons why the ROI might not resolve this matter. Perhaps there is no ROI. I am not sure why that would be the case. Perhaps there is conflicting information in the ROI requiring a live person to clarify. It is possible that conflicting information has created a credibility issue that will be best resolved through live testimony. Judges have often said that the best way to judge credibility is by watching the person testify. If any of these possibilities is true, it makes sense to move this question to trial. Otherwise, one would think that the documents would be sufficient to tell the story of when CBP determined that there was evidence of fraud.
Greenlight Organics is not a particularly interesting decision on its own, at least not at this point. It involves a motion for summary judgment in a customs fraud case. The government is seeking approximately $3.5 million in unpaid duties and penalties from Greenlight. Because this is a fraud case brought under 19 USC 1592, the applicable statute of limitations in five years. See 28 USC 1621. The trick with a fraud case is that, unlike the standard negligence case, the five-year clock does not start to run until Customs and Border Protection first learns of the fraud.
Here, the government filed its complaint on February 8, 2017. Defendant contends that the government knew of the fraud in 2011, making the case time barred. The United States counters that it did not know of the fraud until sometime after February 8, 2012, making the case timely.
The Court of International Trade declined to grant summary judgment. According to the Court, determining the date of discovery of fraud is a fact-specific exercise that is rarely amenable to summary judgment. Looking at the elements of the fraud involved in this case, the Court did not see sufficient evidence of when the government might have first determined that the products were allegedly misclassified, that the importer was allegedly using double invoicing to fraudulently declare value, and that the importer acted with the intent to defraud the government. Consequently, these facts will have to be established through the introduction of evidence at trial.
I have zero reason to quibble with the legal analysis. The date of discovery rule is entirely well established and has been applied in customs cases. I also agree entirely that this phase of the case presents a question of fact that requires a review of the facts to answer the question presented.
My question (and it really is a question) is: What remains to be presented to the Court? In penalty cases, the United States has usually conducted a thorough investigation. The progress of that investigation is usually recorded by the investigating Agent in a document known as a Report of Investigation, or ROI. The ROI is often several inches thick and includes summaries of documents, lab reports, conversations with CBP personnel, and with witnesses. The ROI, assuming one exists, should contain a summary of what the government knows and when it knows it. That, by itself, might be sufficient to determine when the five-year period began to run and, possibly avoid a trial on this question and on the merits.
Reports of Investigation have been referenced in other cases as evidence of the facts surrounding a penalty case. For example, in United States v. Ford Motor Company, Ford pointed to the ROI as contradicting testimony concerning the scope of an investigation. In Clymore v. United States, the ROI was cited as evidence that Customs and Border Protection knew the identity of the owner of a seized truck.
There are several reasons why the ROI might not resolve this matter. Perhaps there is no ROI. I am not sure why that would be the case. Perhaps there is conflicting information in the ROI requiring a live person to clarify. It is possible that conflicting information has created a credibility issue that will be best resolved through live testimony. Judges have often said that the best way to judge credibility is by watching the person testify. If any of these possibilities is true, it makes sense to move this question to trial. Otherwise, one would think that the documents would be sufficient to tell the story of when CBP determined that there was evidence of fraud.
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