Defense says False Claims Act case is a vendetta

LOS ANGELES -- In the second day of a rare civil suit brought under the False Claims act, an attorney for the defense said the relator was pursuing the case out of revenge against a former employee turned competitor after the U.S. government declined to pursue the litigation itself.

As in all actions pursued under the False Claims Act, after a relator or whistleblower presents evidence to the government that an individual or entity defrauded or conspired to defraud it, the government may or may not litigate the matter itself. If the government declines to pursue litigation, as it did in this case, the relator has the option to take on the case and becomes the plaintiff.

If the relator wins, he will be entitled to 25% to 30% of the recovery, and the government keeps the rest. United States v. Pacific Chemical International Inc., 14-CV7203 (C.D. Cal., filed Sept. 15, 2014).

The relator, David Ji, claims business owner Tony Hang and his company Unichem defrauded the government by intentionally mislabeling tons of the supplement and food additive glycine before it passed through U.S. customs from China in order to avoid paying millions in import duties from 2009 to 2014.

Hang denies the claims and says Ji, his former employer, lacks any evidence to prove them. Hang, represented by Paul D. Murphy of Murphy Rosen LLP, also says Ji is pursuing the case out of revenge for starting a competing business.

"This case, ladies and gentleman, is about Mr. Ji's vendetta and attempt to exact revenge for a perceived, and I mean a perceived, wrongdoing," Murphy said in his opening statement. "Keep in mind the United States government had the opportunity to step in the shoes and be sitting in that chair. The government is on the sidelines."

At that point, U.S. District Judge Michael W. Fitzgerald interjected, telling the eight-person jury not to infer anything from the fact the government did not choose to take on the case.

"The government has its own reasons for being involved or not being involved in these False Claims Act cases," Fitzgerald said. "The fact that it is not involved here has nothing to do with your decision on whether the allegations are proven or not."

Murphy told the jury the government launched an 18-month investigation into Hang and Unichem's import operation after Ji sent a letter to the Department of Homeland Security claiming they committed fraud. The government seized 26 shipments without notifying Unichem but found no wrongdoing, according to Murphy.

If the case weren't unique enough, halfway through jury selection the day before, Fitzgerald revealed Ji had been convicted of a felony in an unrelated matter, and Hang was likely to invoke his Fifth Amendment right to remain silent during questioning.

Ji, who took the stand after opening statements concluded, is represented by Michael S. Magnuson of The Law Offices of Michael S. Magnuson in Whittier.

Before the day was through, Magnuson asked the judge how he would handle the issue of inference relating to Hang's choice to invoke his Fifth Amendment right. Fitzgerald indicated earlier in the trial he would give the jury specific instructions regarding inference. He said he would discuss the issue further with counsel the next day.