Rare False Claims Act civil suit trial opens in LA

LOS ANGELES -- Five years after being filed, jury selection and opening statements began Tuesday for a rare civil suit brought under the False Claims Act in the Central District of California.

The relator, David Ji, claims business owner Tony Hang and his company Unichem defrauded the U.S. 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 employee, lacks any evidence to prove them. Ji says Hang began running a competing business and is pursuing the case simply to put his company out of business.

If the case weren't unique enough, halfway through jury selection, U.S. District Judge Michael W. Fitzgerald revealed that 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. Fitzgerald said he would give the jury specific instructions regarding the information for evaluating each party's testimony.

"I'm not going to tell you to ignore it [Ji's conviction]," Fitzgerald said, "... and you will be able to use it in evaluating whether you believe the truthfulness and accuracy of his testimony. However, that's not the only thing you're going to hear from Mr. Ji. ..."

In addressing Hang's likely use of the Fifth Amendment, Fitzgerald said jurors might have heard about it from movies or TV shows.

"That's not what we have here," the judge said. "Mr. Hang and any other witness has the right, in consultation with his lawyer, to invoke it. It doesn't mean he or anyone else is guilty of anything, but you are not getting all the information you might otherwise get."

Ji was present in the court and is represented by Michael S. Magnuson and Molly J. Magnuson of Michael S. Magnuson Law Offices in Whittier. Hang, also in the court, is represented by Paul D. Murphy and Daniel Scillag of Murphy Rosen LLP. Mark Grieco, vice president of Unichem was also present. Unichem is represented by Jason L. Liang and John K. Ly of Liang Ly LLP.

Ji presented the case to the government but as in all actions pursued under the False Claims Act, the government had the option to decline it. Since the government did decline to take the case, Ji remains the plaintiff. If he wins, he will be entitled to 25% to 30% of the recovery and the government keeps the rest. United States et al. v. Pacific Chemical International Inc. et al., 14-CV7203 (C.D. Cal., filed Sept. 15, 2014).

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 and provided false documents in order to defraud U.S. customs agents. After the shipments were in the U.S., they were relabeled and sold well below market value, the relator claims.

Hang also denies these allegations.

Ji said he believes Hang and Unichem avoided approximately $11 million in duties owed to the U.S., according to the complaint.

When Murphy was given a chance to question the potential jurors, he asked if a defendant invoking the Fifth Amendment would alter their ability to be impartial. A few jurors seemed to respond in the affirmative.

One juror said she had a relative in law enforcement and felt those who invoke the Fifth Amendment had something to hide. "If you weren't doing anything wrong, why wouldn't you just say that?" she asked. Others gave similar answers.

Another question which seemed to prompt a response from the potential jury pool had to do with the importance of documentation. When asked how they felt about missing documentation, one juror said, "When you don't have documentation, I feel like there's something fishy going on." A few others voiced similar concerns.

In opening statements, Michael Magnuson called the suit "a modern day smuggling case," and told the jury opposing counsel failed to produce any documents of any kind from the relevant time period. He said opposing counsel told him the defendant's computers had malfunctioned and had erased all documents for that time period.

Fitzgerald said the trial would likely conclude by the end of next week. The jury pool was whittled down to eight before opening statements began.

The relator seeks an award of treble damages, civil penalties, expenses, fees, and costs.