Manhattan U.S. Attorney Settles Civil Fraud Lawsuit Against Clothing Importer And Manufacturers For Evading Customs Duties
Defendants Admit To Presenting To The Government False Commercial Invoices That Led to the Underpayment of Customs Duties and Agree To Pay $13.375 Million
Preet Bharara, 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 the U.S. Immigration and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), and Robert E. Perez, Director of the New York Field Operations for U.S. Customs and Border Protection (“CBP”), announced a $13.375 million settlement of a civil fraud lawsuit against MOTIVES, INCORPORATED, an importer of clothing, and MOTIVES FAR EAST and MOTIVES CHINA LIMITED, foreign manufacturers of clothing (collectively “MOTIVES”), for engaging in a double invoicing scheme to defraud the United States out of millions of dollars in customs duties. In the settlement, approved yesterday in Manhattan federal court by U.S. District Judge George B. Daniels, MOTIVES admitted to and accepted responsibility for under-reporting the value of its imported merchandise and agreed to pay $13.375 million to the United States under the False Claims Act.
Manhattan U.S. Attorney Preet Bharara said: “Motives evaded millions in customs duties by presenting false invoices to U.S. Customs and Border Protection. With this lawsuit and the accompanying resolution, which involves admissions and the payment of over $13 million, Motives is being held to account for its unlawful evasion of customs duties.”
ICE HSI Special Agent-in-Charge Angel M. Melendez said: “Motives disguised the true value of goods imported into the United States to cheat the government out of millions of dollars in customs duties. This scheme backfired, now Motives will pay millions for trying to skirt America’s customs laws. Trade fraud threatens the U.S. economy and restricts competitiveness of U.S. industry in the world markets. HSI and CBP maintain a zero-tolerance policy when it comes to these types of predatory and unfair trade practices.”
CBP Director of New York Field Operations Robert E. Perez said: “CBP takes trade fraud, such as undervaluation, very seriously. We are proud to partner with HSI and the Southern District to level the playing field for legitimate traders by steadfastly enforcing US trade laws.”
The Government’s complaint, filed in Manhattan federal court, alleges that from approximately 2009 through 2013, MOTIVES, which regularly manufactured and/or imported apparel into the United States, conspired with clothing wholesalers fraudulently to underpay customs duties owed to the Government by making false representations in entry documents filed with CBP about the value of the imported merchandise. Pursuant to the scheme, MOTIVES created and/or used two sets of invoices: one that undervalued the garments and was presented to the Government for calculation of the appropriate duty, and the second that reflected the actual value of the garments. MOTIVES presented to the Government invoices with the lower value on the entry forms, thereby defrauding the Government of millions of dollars in customs duties.
As part of the settlement, MOTIVES admitted, acknowledged, and accepted responsibility for engaging in the following conduct from 2009-2013:
repeatedly preparing and presenting to the Government commercial invoices for apparel being imported into the United States that reported less than the total value of the goods imported;
repeatedly representing to the Government that its documentation contained, to the best of MOTIVES’ knowledge, correct and true information such as prices, values, and quantities;
repeatedly receiving from apparel wholesalers an amount in excess of that recorded on the commercial invoices; and
repeatedly failing to disclose to the Government the separate invoices reflecting the true value of the apparel, and instead reporting only the lesser amounts listed in the commercial invoices, which the Government then used to assess customs duties.
The allegations of fraud stated in the Complaint were first brought to the attention of federal law enforcement by a whistle-blower who filed a lawsuit under the False Claims Act.
Mr. Bharara praised the investigative work of the ICE HSI on this case. He also thanked U.S. Customs and Border Protection for their assistance.
This case is being handled by the Office’s Civil Frauds Unit. Assistant United States Attorneys Jamie L. Nawaday and Kirti Vaidya Reddy are in charge of the case.