Whatcom auto broker settles federal fraud lawsuit for nearly half a million dollars

A Blaine auto broker and importer and the U.S. Department of Justice have settled a lawsuit alleging the auto broker lied about the value of vehicles it was importing in order to pay lower import fees, according to a Tuesday DOJ news release.

BidBuy Auctions LLC has agreed to pay $430,000 to settle the allegations it undervalued light trucks purchased in Canada while importing them into the U.S. for sale. Because BidBuy reported a lower value than what it paid at auction for the trucks, the company “avoided paying significantly higher import duties,” the DOJ release from Feb. 7 states.

BidBuy, owned by Whitney McElroy, does not admit any wrongdoing under the terms of the settlement, which also allows the company to make payments over a five-year period. The settlement amount was determined after an analysis of what the company has the ability to pay, the DOJ release states.

The allegations were first brought to light after a former BidBuy employee filed a lawsuit over the discrepancies between what the auto broker paid at auction in Canada and what it reported to U.S. tax authorities, the release states.

Duties on imported foreign-made light trucks jumped substantially in 2020 after the U.S. exited the North American Free Trade Agreement and entered into the United States-Mexico-Canada Agreement. As of July 1, 2020, the duties on vehicles jumped to 25% of their value at the time of import, the release states.

In an example provided in the employee’s lawsuit, BidBuy allegedly purchased a 2011 Dodge Ram truck at auction in Canada for roughly $22,494 in U.S. currency, but reported the value of the truck as $9,638 to U.S. Customs and Border Protection. This saved BidBuy around $3,214 in owed duties, according to the DOJ release.

The former BidBuy employee claimed more than 80 vehicles had been undervalued, the release states. Because the employee brought the fraud to the attention of the government, the employee is entitled to collect 23% of the $430,000 settlement.

“This conduct doesn’t just cheat the government out of revenue, it gives the business an advantage not enjoyed by other auto brokers who report their vehicle values honestly, U.S. Attorney Nick Brown said in a prepared statement in the DOJ release. “This is an expensive lesson for BidBuy — one that could have been avoided if it followed the rules.”