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U.S. v. NATURE'S FARM PRODUCTS

May 12, 2004.

UNITED STATES OF AMERICA, Plaintiff -v.- NATURE'S FARM PRODUCTS, INC., DENNIS CHOI, PETER PIZZO, RAVINE FOODS, INC., ALIMENTS HERITAGE, INC., and THE BANK OF CHINA, NEW YORK BRANCH, Defendants


The opinion of the court was delivered by: SIDNEY STEIN, District Judge

OPINION & ORDER

Defendants Nature's Farm Products, Inc., Dennis Choi, and Peter Pizzo (collectively, the "NFP defendants") have moved to transfer this action for the convenience of the parties and witnesses and in the interest of justice pursuant to 28 U.S.C. § 1404(a) to the Northern District of California. The NFP defendants have also moved, pursuant to Fed.R. Civ. P. 12(b)(6), to dismiss the government's second claim alleging that the defendants conspired to defraud the government in violation of the False Claims Act, 31 U.S.C. § 3729 et seq. Because, as set forth below, a transfer of this action to the Northern District of California would serve the convenience of the parties and witnesses and the interest of justice within the meaning of 28 U.S.C. § 1404(a), the NFP defendants' motion to transfer this action is granted.

I. Background

 A. The Parties

  Nature's Farm is a California corporation with its principal place of business in California. Choi and Pizzo are residents in the Northern District of California. Choi was the President of Nature's Farm and Pizzo was its Vice-President. Defendants Ravine Foods, Inc. ("Ravine"), a canning corporation, and Aliments Heritage, Inc. ("Heritage")*fn1, a distributor, are Canadian corporations. The Bank of China is a corporation organized and existing under the laws of the People's Republic of China with a branch located in the Southern District of New York. The New York branch of that bank ("BOCNY") was a defendant in this litigation prior to the Court's approval of a settlement agreement resolving the claims in this action and the subsequent entry of a judgment against BOCNY on February 19, 2004.

 B. Procedural Background

  This action was commenced in 2000, when relator Huangyan Import & Export Corporation filed a complaint seeking to recover on behalf of the United States government for violations of the False Claims Act, 31 U.S.C. § 3732(a). For the next three years the government periodically requested that the Court extend the seal that covered the action in order for the government to continue its investigation into the allegations in the complaint. In October 2003, the government moved to intervene as a party, to lift the seal, and to dismiss Huangyan Import & Export Corporation as the relator. It also proposed a settlement with BOCNY for this Court's approval. In January 2004, this Court granted the government's motion to dismiss the relator. The following month, a hearing was held on the fairness, reasonableness and adequacy of the government's proposed settlement with BOCNY and that settlement was subsequently approved. The NFP defendants then filed a motion to transfer this action to the Northern District of California, pursuant to 28 U.S.C. § 1404(a), and to dismiss the second claim in the complaint. Ravine filed a motion to dismiss the complaint, which the NFP defendants also joined in part.

 C. The Alleged Conspiracy

  The following facts are as alleged in the complaint filed by the government in October 2003. In 1998 the International Trade Administration of the Department of Commerce issued a Final Determination that certain brine mushrooms that were being exported from Chile to the United States by the Chilean branch of Nature's Farm were being sold at less than fair value, and it ordered United States customs to raise the duty imposed on those mushrooms to 148.51% of declared value as an "antidumping duty." (Compl. ¶ 15). In response to the imposition of these antidumping duties, the NFP defendants allegedly developed a scheme to avoid paying U.S. duties by shipping the mushrooms to Mexico and Canada, re-packing them into cans, and then shipping the canned mushrooms, improperly labeled as products of Canada or Mexico, into the U.S. market. (Compl. ¶ 18).

  In August 1998, Pizzo allegedly contacted Heritage, a Canadian importer, and Ravine, a Canadian canning corporation, concerning the scheme. (Compl. ¶ 26). In October of 1998, the government contends that an "Agency Agreement" relating to the mushrooms was signed by Pizzo, Philip Hirst, President of Heritage, and Ravine's Plant Manager Peter Quattrociocchi. (Compl. ¶ 29). This agreement allegedly specified that Nature's Farm would provide Chilean mushrooms for processing, Ravine would pack the mushrooms into cans, and Heritage would provide a Certificate of Origin and other shipping documents. (Id.). The government contends that defendants submitted false information about the origin of the mushrooms at the Canadian border by representing that the mushrooms originated in Canada, when they had in fact been grown elsewhere. (Compl. ¶ 35-37).

  The government also contends that Choi made repeated requests to BOCNY for approval of a credit extension and explained the details of this importation plan to support his requests. (Compl. ¶ 16-25). At a February 12, 1999 meeting at the BOCNY office in midtown Manhattan, Choi and BOCNY personnel allegedly discussed the "modus operandi" of the scheme. (Compl. ¶ 49-52; Exh. H at 1). BOCNY approved an extension of Nature's Farm credit, and in exchange Choi agreed to provide more information to BOCNY on the mushroom importation scheme so that Cheedi Chen, general counsel to BOCNY, could assess the legality of the arrangement. (Compl. ¶ 49-52, Exh. H).

  The government asserts that the NFP defendants knew that this scheme was illegal and attempted to conceal it. It supports that allegation by pointing out that in March 1999, Choi indicated he knew of the illegality of the mushroom importation when he wrote to a BOCNY General Manager as follows: "I am certain that the Bank is not acting as the policeman for U.S. petitioners in the anti-dumping action and therefore, it is not necessary to get into legal issues with Ravine Foods, a Canadian company." (Compl. ¶ 59; Exh. I.). The government further alleges that the NFP defendants knew of the illegality of their conduct because on April 13, 1999, Bart Fisher of the law firm Porter, Wright, Morris & Arthur ("PWM&A") wrote to Nature's Farm, Choi, and Pizzo "strongly advis[ing] [Nature's Farm] to import only moderate amounts of mushrooms to the U.S. to avoid any unwanted attention to this transaction." (Compl. ¶ 69; Exh. L). Nature's Farm and Choi have sued PWM&A in a separate action in the Northern District of California regarding this advice.

  Further, the government alleges that the NFP defendants took various steps to conceal their illegal importation scheme, including the creation of a new company to import the mushrooms, Horley Trading Company, Limited, with an ...


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