Unusual False Claims Act trial wraps up with insults

LOS ANGELES -- A defense attorney in a False Claims Act case called the plaintiff and relator who accused his client of defrauding the U.S. government a liar during closing arguments Thursday in a federal court.

"I say this with apologies to my mom: He is a liar, ladies and gentlemen," defense attorney Paul Murphy of Murphy Rosen LLP told a seven-person jury.

Murphy, who said he was breaking his mother's rule by calling someone a liar, said the relator David Ji, a business owner who claims his former employee, Tony Hang, through his company Unichem, smuggled supplements into the U.S. from China, brought the case out of revenge for starting a competing business. 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 and Molly Magnuson from the Law Offices of Michael S. Magnuson, claims Hang violated the False Claims Act by participating in a conspiracy to smuggle tons of the food supplement glycine through U.S. customs to avoid paying over $10 million in duties.

Magnuson said when the U.S. raised the anti-dumping duties on glycine imported from China from 155% to 453%, Hang gave him an incentive to engage in the smuggling scheme.

"The anti-dumping duties have created an opportunity for people to smuggle glycine into the U.S., sell a product in competition with other companies who obtained the product legally, and reap what turns out to be a tremendous illegal profit," Magnuson said. "Mr. Hang thought the part of the American dream about playing by the rules did not apply to him."

The case is unique for several reasons. Not only is it brought under the False Claims Act -- a case type rarely taken to trial -- but because the government declined to take action, the relator and whistleblower is privately pursuing the case himself on the government's behalf.

Complicating things, Ji, the relator, admitted to being convicted of a felony in another matter.

Complicating things further, Hang, the defendant, invoked the Fifth Amendment protection against self-incrimination over 100 times when questioned about the alleged smuggling scheme. More complicated still, Hang claims all the import records from the period of the alleged scheme were lost in a computer server failure.

The trial seems to have served as a field study on jury inference. Before arguments began Thursday, U.S. District Judge Michael W. Fitzgerald read jury instructions directly addressing inference and credibility relating to the parties' unique circumstances.

"You have heard that David Ji has been convicted of a felony," Fitzgerald read. "This conviction may be considered along with all the other evidence in deciding on whether or not to believe David Ji and how much weight to give his testimony, and for no other purpose."

"You have heard Tony Hang ... decline to answer certain testimonies on the grounds of ... Fifth Amendment privilege against self-incrimination," Fitzgerald said. "You are permitted, but not required, to draw the inference that the withheld information would have been unfavorable to Tony Hang."

As in all actions pursued under the False Claims Act, after a relator or whistlerblower presents evidence to the U.S. 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 themselves 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.