Manhattan U.S. Attorney Announces Settlement Of Civil Fraud Lawsuit Against Garment Wholesaler For Evading Customs Duties
Wholesaler Repeatedly Ignored Warning Signs That Its Importer Was Falsely Underreporting the Value of Garments Imported Into the United States
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Angel M. Melendez, the Special Agent-in-Charge of the New York Field Office of Homeland Security Investigations (“HSI”), and Troy Miller, Director, Field Operations, New York, U.S. Customs and Border Protection (“CBP”), announced today that the United States filed and settled a civil fraud lawsuit under the False Claims Act against BYER CALIFORNIA, INC. (“BYER”), a wholesaler of women’s and girls’ apparel. The Government’s complaint alleges that for years one of BYER’s importers, Queen Apparel NY, Inc. (“Queen”), repeatedly falsified customs forms by undervaluing the garments it manufactured in Vietnam and imported into the United States for BYER. This fraudulent practice substantially reduced the amount of import duties owed to the United States. BYER was well aware that Queen was grossly undervaluing BYER’s garments in customs forms submitted to CBP. Yet, BYER chose to continue sending work orders to Queen for garments that it understood would be imported into the country with false customs forms resulting in fraudulent underpayment of customs duties. As part of the settlement, approved yesterday in Manhattan federal court by U.S. District Judge George B. Daniels, BYER admitted to and accepted responsibility for certain conduct alleged in the Government’s complaint and agreed to pay $325,000 to the United States.
Manhattan U.S. Attorney Geoffrey S. Berman said: “This Office is committed to combatting customs fraud. Importers and the merchants who retain them will be held accountable when they evade customs duties by lying about the value of the goods they bring into the United States.”
HSI Special Agent in Charge Angel M. Melendez said: “Byer California, Inc. defrauded the U.S. government for years, turning a blind eye to the fact that its supplier was undervaluing goods to avoid paying proper duties. Because Byer did not take responsibility, U.S. Customs was denied more than a quarter of a million dollars of underpaid duties. We will continue to work with CBP to ensure that businesses import goods in accordance with U.S. law.”
CBP Director of New York Field Operations Troy Miller said: “The approved settlement today is a testament to the dedication of our partners in the United States Attorney's Office, Homeland Security Investigations, and the men and women of CBP in enforcing our nation’s trade laws and punishing those perpetrating this type of fraud.”
BYER, a California corporation headquartered in San Francisco, is a designer, manufacturer, and importer of women’s and girls’ apparel. This business includes purchasing garments that are made overseas and imported into the United States, and selling those garments via department stores and national retail chains in the United States.
From 2009 to 2013, BYER purchased garments from Queen, which manufactured the garments in Vietnam in accordance with BYER’s guidelines and imported them into the United States for BYER. The Government’s complaint alleges that during this time period, BYER knew that Queen repeatedly and falsely undervalued these garments on customs forms in order to evade lawful duties, yet continued to do business with Queen.
As part of the settlement, BYER admitted that:
- Based on its reviews of documents provided by Queen, BYER understood that Queen falsely represented the value of garments in copies of documents that it was presenting to CBP, and that as a result of that undervaluation, Queen paid less than the required amount of import duties.
- Although BYER was substantially certain that during the relevant time period Queen presented entry forms to CBP that contained false valuations of the garments BYER was purchasing, BYER made no attempt to alert CBP or stop supplying Queen with additional work orders.
- In September 2012, Queen’s owner tried to bribe BYER’s compliance manager with an envelope full of cash. BYER rejected this attempted bribe, but continued to provide Queen with more work orders until April 2013, despite multiple warning signs that Queen was filing documents containing false valuations to CBP.
The United States filed a civil fraud lawsuit against Queen and its owner, Hank Choi, on February 20, 2019. That case is pending. The conduct in this matter was first brought to the attention of federal law enforcement by a whistleblower who filed a lawsuit under the False Claims Act.
Mr. Berman praised the investigative work of HSI on this case. He also thanked CBP for its assistance.
This case is being handled by the Office’s Civil Frauds Unit. Assistant United States Attorney Kirti Vaidya Reddy is in charge of the case.