U.S. v. Ford Motor Co.

• Citation: 395 F.Supp.2d 1190
• Decision Date: 21 July 2005
• Docket Number: Court No. 02-00116.,Slip Op. 05-87.
• Parties: UNITED STATES, Plaintiff, v. FORD MOTOR COMPANY, Defendant.
• Court: U.S. Court of International Trade

395 F.Supp.2d 1190

UNITED STATES, Plaintiff, v. FORD MOTOR COMPANY, Defendant.

Slip Op. 05-87.

Court No. 02-00116.

United States Court of International Trade.

July 21, 2005.

Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice

(David A. Levitt and David S. Silverbrand); Jeffrey E. Reim and Katherine F. Kramarich, Bureau of Customs and Border Protection, for the United States, plaintiff, of counsel.

Grunfeld, Desiderio, Lebowitz, Silverman, & Klestadt, LLP, New York City (Steven P. Florsheim, Robert B. Silverman, David M. Murphy, and Robert F. Seely); Paulsen K. Vandevert, for Ford Motor Company, defendant, of counsel.

OPINION

TSOUCALAS, Senior Judge.

Plaintiff, the Bureau of Customs and Border Protection of the Department of Homeland Security ("Customs"), seeks collection of a civil penalty pursuant to 19 U.S.C. § 1592 (1988), and customs duties concerning entries of vehicles and vehicle components made between 1987 and 1992 by defendant, Ford Motor Company ("Ford"). Customs alleges that Ford violated 19 U.S.C. § 1592 by acting grossly negligent or negligent in making false statements or omissions in connection with the entry of the merchandise at issue. Accordingly, Customs seeks civil penalties in the amount of $34,576,559 if Ford's conduct was grossly negligent or $17,288,279 if such conduct was negligent. Customs also requests the Court to award it $68,178 for unpaid duties. Ford counterclaims for a refund of all or part of the $8,575,961.80 it has tendered for duties in connection with this matter plus interest, as provided for by law.

DISCUSSION

Customs filed a timely complaint on January 29, 2002, alleging that Ford made material false statements or acts or material omissions in connection with the entries of vehicles and vehicle components entered into the United States between January 1, 1987, continuing through December 1992. See Compl. ¶¶ 4-6. In its complaint, Customs alleges that Ford acted grossly negligent or negligent by: (1) falsely understating to Customs in its entry documents the price it paid or agreed to pay for the subject merchandise; (2) falsely declaring as true and correct the prices and other statements in the entry documents for the subject merchandise; (3) failing to declare on the entry documents that the prices set forth therein were not the final prices and were subject to adjustments based upon agreements Ford had with its suppliers; (4) failing to report upon entry the value of assists provided by Ford for the production of the imported merchandise; and (5) failing to produce to Customs "at once" information received after importation indicating that prices on its entry documents had been adjusted to include lump sum payments made by Ford to its suppliers pursuant to purchase contracts. See id. ¶ 6. Customs claims that Ford's false statements or material omissions deprived the United States of $8,644,139.80 for lawful duty of which $68,178 remains unpaid. See id. at ¶ 9. A bench trial was held on March 15, 2005, through March 23, 2005, to resolve the issues of fact remaining in this action. Pursuant to USCIT R. 52(a), "[i]n all actions tried upon the facts without a jury ... the court shall find the facts specially and state separately its conclusions of law thereon...." USCIT R. 52(a). Accordingly, the Court's findings of fact and conclusions of law are set forth below.

I. Findings of Fact

At trial, Customs produced two witnesses, Mr. Michael Turner, former Special Agent in the Detroit Customs Office of Enforcement, and Mr. Robert Neckel, former group supervisor of the Detroit Customs Office of Enforcement. Both witnesses testified to various factual matters relevant to Customs' investigation of Ford such as, the scope of the investigation, the date such investigation commenced, and the findings Customs made pursuant to its investigation. Ford produced two witnesses, Mr. Harry Gibson, former attorney in Ford's Office of General Counsel, and Mr. Donald Cohen, former manager of Ford's International Transportation and Customs Office. Both witnesses testified, inter alia, to their knowledge of Customs' investigation and the scope of the investigation as it related to Ford. Messieurs Gibson and Cohen also testified about Ford's customs compliance procedures, compliance record, and Ford's responses to inquiries made by Customs regarding its investigation.

Customs and Ford identified documents relating to the investigation and Ford's compliance measures. Such documents were moved by the parties and admitted by the Court into evidence. The Court finds most of these documents highly probative because they provide contemporaneous accounts of events related to Customs' investigation, Ford's response to the investigation, and Ford's customs compliance procedures. The Court finds that the testimony of Messieurs Gibson and Cohen was not highly probative because the demeanor of the witnesses and the testimony they supplied proves that they did not independently recall events or facts relevant to Customs' investigation of Ford. The Court, however, finds the testimony of Messieurs Turner and Neckel highly probative and credible based on their demeanor and ability to independently recollect Customs' investigation of Ford.

The Court also heard testimony from: (1) Ms. Laura Cox (formerly Ms. Laura Erpelding), former Special Agent in the Detroit Customs Office of Enforcement; (2) Ms. Dathrenal Davis, former Import Specialist and Field National Import Specialist for the commodity automotive team in Detroit Customs; (3) Mr. Richard Bridenbaugh, former member of Ford's customs unit; (4) Ms. Karen Monro, former member of Ford's customs unit; and (5) Mr. Walter Manns, former Supervisory Import Specialist and former member of Ford's customs unit. Based on the demeanor and quality of testimony of these witnesses, the Court finds them slightly probative because they did not exhibit an independent recollection or have knowledge of events or facts relating to the subject of this action. Ford and Customs stipulated to the admission of deposition testimony of Mr. Phillip Kruzich, former analyst in Ford's customs unit, and the deposition and prior trial testimony given in Court No. 02-00106 of Ms. Angela Ryan, former Supervisory Import Specialist of the automotive team in Detroit Customs.

The testimony presented at trial along with the documents admitted into evidence established by a preponderance of the evidence the following facts.

A. Findings of Fact Relevant to the Commencement and Scope of Customs' Investigation

1. Ford entered the vehicles, vehicle components, tooling and related materials for the five import programs identified in Exhibit A to the complaint between January 1, 1987, through December 31, 1992. See Pretrial Order, Schedule C ¶ 3.

2. Operation Hat Trick was a trade enforcement initiative meant to "subject certain Big Three import programs to joint Office of Enforcement, Commercial Operations, and Regulatory Audit scrutiny to identify undeclared assists and indirect payments, determine the level of culpability of parties responsible for the failure to declare the assists/payments, and, refer cases for criminal and civil action as appropriate." Pl.'s Ex. 70; see also Trial Transcript ("TT") at 37-39. Operation Hat Trick was initiated by Mr. Turner, based on his personal observations and information obtained from import specialists indicating that Ford and other car manufacturers were not declaring the full value, or price paid or to be paid, for merchandise entered into the United States. See TT at 37-38 & 283.

3. Plaintiff moved into evidence several reports of investigation ("ROI") prepared by Mr. Turner or Ms. Cox in the ordinary course of their business as special agents of Customs' Office of Enforcement. See Pl.'s Ex. 1, 52, 59, 70, 71. The Court places substantial weight on the veracity of the ROIs that were contemporaneously written with events concerning the commencement of Customs' investigation of Ford. See Pl.'s Ex. 70 & 71. The Court gives less weight to the ROIs which summarized the findings of Customs' investigation, particularly ROI # 15 and ROI # 22, because these ROIs were prepared in anticipation of penalty proceedings. See e.g., Pl.'s Ex. 1, 52 & 59. In preparing certain ROIs, the special agents often used notes and previous ROIs to compile their findings. See TT at 170-172; see e.g., Pl.'s Ex. 52 at 5 (referencing ROIs # 3 & 5). While events are recorded in ROIs # 15, 22, and 27, see Pl.'s Ex. 1, 52, 59, these ROIs also contain the legal conclusions of Customs. See TT at 185 & 226. For example, ROI # 22, dated November 23, 1994, is a penalty referral reporting the findings of Customs' Office of Enforcement as well as making legal conclusions relating to Ford's culpability under 19 U.S.C. § 1592. See Pl.'s Ex. 1. Consequently, the Court gives ROIs # 15, 22, and 27 less weight than the earlier reports, ROI # 1 and 2, because the former did not simply record contemporaneous events or facts.

4. Operation Hat Trick "included all the components surrounding value, material omissions, undervaluations, payments that may not have been reflected on the invoice that was submitted with the entry summary...." TT at 283; see also TT 37-38.

5. During Operation Hat Trick, Customs looked at Ford's prior importations and found repeated instances where Ford had "failed to declare and pay duties on assists and indirect payments at the time of entry summary, but only declared those assists/payments in response to import specialist Requests for Information (`CF-28s')."¹ Pl.'s Ex. 71 at 1; See also TT at 283.

6. The Ford vehicle and vehicle component programs investigated by Customs included the Lincoln Mercury Capri ("Capri"),² Ford Festiva ("Festive"), Mercury Tracer and Taurus SHO engine ("Yamaha SHO engine"). See Pl.'s Ex....