False Claims Act defendant pleads the 5th over 100 times

LOS ANGELES -- In a rare suit brought under the False Claims Act, a defendant invoked the Fifth Amendment over 100 times during testimony Thursday in response to questions relating to allegations he defrauded the U.S. government by smuggling goods from China to avoid millions in import duties.

The trial includes several unique elements. Not only is it brought under the False Claims Act -- a case-type that rarely reaches trial -- but since the U.S. government declined to take action, the relator or whistleblower is litigating the case himself. The relator is considered the plaintiff in the matter on the government's behalf. and if that were not unique enough, he admitted to being convicted of a felony in an unrelated matter.

If he wins, the relator will be entitled to 25% to 30% of the award, and the government will get the rest. The relator seeks an award of treble damages, civil penalties, expenses, fees, and costs totaling about $33 million.

After a defendant finished his testimony later in the day Thursday, U.S. District Judge Michael W. Fitzgerald told defense counsel they were not permitted to make specific suggestions to the jury relating to the fact the government declined to pursue the case.

"One thing that I will simply not tolerate at all will be the suggestion that because the United States made a decision in regards to this case that that has any bearing on what the jury verdict should be," Fitzgerald said. He said the jury should not be influenced by the fact the government made certain administrative decisions based on certain evidence and concerns.

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 anti-dumping duties from 2009 to 2014.

Hang denies the claims and says Ji, his former employer, lacks proof of any wrongdoing. Hang says Ji is pursuing the case to hurt his business out of revenge for starting a competing business after he was fired. United States v. Pacific Chemical International Inc., 14-CV7203 (C.D. Cal., filed Sept. 15, 2014).

Ji, represented by the father-daughter-duo of Michael S. Magnuson and Molly J. Magnuson of the Law Offices Michael S Magnuson, said during testimony he brought the action not for personal gain but out of duty to the government and reiterated repeatedly, "It is not personal."

When Hang took the stand to be questioned by Michael Magnuson, he was accompanied by Santa Monica attorney Philip K. Cohen of Philip Kent Cohen APC.

"Isn't it accurate that this glycine that Unichem sold ... was smuggled into the country mislabeled as glucosamine by either Unichem or Pacific Chemical?" Michael Magnuson asked.

"On advice of my counsel, I exercise my right to remain silent under the United States Constitution," Hang replied over and over to numerous questions.

Ji also claims Hang violated the False Claims Act by participating in a conspiracy involving a California company known as Pacific Chemical International Inc. and a Chinese company, Wuxi Maochang, to intentionally mislabel tons of shipments of glycine as a different product not subject to the same duties and provided false documents in order to defraud U.S. custom agents. After the shipments were in the U.S., they were relabeled and sold well below market value, the relator claims.

In his opening statement Wednesday, Hang's attorney, Paul D. Murphy of Murphy Rosen LLP, told the jury the U.S. government conducted an 18 month investigation into Hang's import-export operation after receiving a tip from Ji. After seizing multiple shipments without Hang's knowledge, the government chose not to pursue the case, Murphy said