Ford agrees to pay $365 million to settle tax-evasion scheme involving ‘sham seats’ in vans, prosecutors say

Ford Motor Company has agreed to pay $365 million to resolve allegations that it conducted a multiyear scheme to import thousands of misclassified vehicles to avoid paying higher duties, the Justice Department announced Monday.

The Justice Department said Ford imported more than 160,000 Transit Connect vehicles into the United States from Turkey between April 2009 and August 2013.

Prosecutors accused Ford of misclassifying specific Transit Connect models as motor cars principally designed for the transport of people in order to pay a 2.5% duty rate instead of the 25% imposed on motor vehicles designed for the transport of goods.

The settlement agreement states that as part of the scheme, Ford allegedly installed “temporary, rear seats that were never intended to, and never would, be used to carry passengers” in certain Transit Connect vehicles.

In addition to “sham seats,” prosecutors alleged there were many other features that made clear the vehicles were never intended to principally transport passengers. Those features included rear doors that were designed for cargo, rear seats with missing headrests and lumbar support as well as being covered in cheaper fabric than what covered the front seats.

There were also no cargo mats, side airbags, speakers, handholds or vents behind the front seats, according to prosecutors, who added that the back area consisted of an exposed metal floor.

After passing through customs, the vehicles were transported to a port processing facility where they were stripped of the rear seats and second-row seatbelts, among other modifications, the court document states.

“At all times Ford knew that the Transit Connect 6/7 vehicles were intended to be sold, and in fact were designed, offered, marketed and sold, as cargo vehicles rather than passenger vehicles,” the Justice Department alleged in the agreement.

UPI asked Ford for comments.

The Justice Department described Monday’s settlement as one of the largest in history.

“Today’s settlement is a victory for American taxpayers . ... Companies that attempt to evade customs duties with sham representations and workarounds will not be rewarded,” Acting Associate Attorney General Benjamin Mizer said in a statement.