Last week, the US Court of Appeals for the Federal Circuit issued a decision in the case of the US vs. Trek Leather.
In this case, the president of the company caused the importation of cargo that was undervalued when it was declared to Customs and Border Protection. When a company is in violation of import laws, whether negligence, gross negligence or fraud, the penalty is usually limited to the company. In this case, the Court reversed a lower court ruling and they found that the president of Trek Leather was culpable in the company’s actions and is seeking a penalty against him personally for gross negligence.
Companies employ individuals in many capacities to manage their regulatory or import programs. In many cases those people hold positions such as Import Manager or Compliance Manager. They understand their responsibility to ensure a company’s compliance with regulations to the best of their ability, but if something is happening outside of their view and knowledge, this ruling opens the door to allow Customs to seek prosecution against the person in that position of authority.
For those people, it is a wake-up call to evaluate what kind of additional legal protection, if any, their companies should be providing above and beyond their standard compensation and human resources provided services. It should also make boardrooms sit up and take notice about the fact that liability can reach into their ranks and into the ranks of their top compliance personnel. Companies should evaluate what additional protections they are providing people in these positions to assure quality of staff retention and not to impair their recruitment efforts when there are vacancies.