Buyer Beware

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by Janet Labuda

After the 2009 special enforcement initiative, called Operation Mirage, CBP compiled statistical data proved that the undervaluation of imported goods from China had risen to the level of significant risk in some product categories. Supported by the Administration’s direction to level the trade playing field, addressing undervaluation will continue to be part of CBP’s comprehensive trade enforcement strategy.

While working for CBP, an in-house counsel remarked that you would know you are on the right enforcement track when case law supports your theory of risk.

An example of this observation recently surfaced. In a press release dated October 3, Immigration and Customs Enforcement reported that, as alleged in a False Claims Act complaint, a company called Notations, acting as a wholesaler, repeatedly ignored warning signs that its business partner, which imported garments from China, was engaged in a scheme to underpay customs duties on the imported garments it sold to Notations.  Pursuant to the settlement, Notations admitted and accepted responsibility for failing to act in response to indications of fraudulent conduct. The company agreed to pay $1 million in damages, and implement measures designed to prevent future fraud in its business and supply chain operations.

The importer of women’s apparel manufactured in China presented false and fraudulent invoices to CBP, showing prices that were discounted by 75 percent, or more, to avoid customs duties. The wholesaler, Notations, which was the importer’s biggest customer, admitted that it aided this scheme by repeatedly ignoring warning signs that the importer’s irregular business practices were highly suggestive of fraud.

Notations has also agreed to implement a written compliance policy that will include measures to educate its employees on identifying red flags for fraud in import transactions, to monitor the conduct of its business partners who act as importers, and to report all potentially fraudulent conduct to CBP.

To be noted in this example, the court was successful in pursuing a case against a company that was not the importer of record, and that is in a foreign location.
This should be a warning to all companies. It is recommended that your written compliance plan include steps to monitor the players in your supply chain.   If your suppliers are buying overseas, your procurement team needs to remember that caveat emptor can save them a world of trouble.

North Texas man pleads guilty in conspiracy to illegally export radiation-hardened integrated circuits to Russia and China

08/03/2017

PLANO, Texas — A 62-year-old North Texas man pleaded guilty Thursday to federal violations of conspiring to smuggle and illegally export to China and Russia circuits used in space and military programs.
This guilty plea was announced by Acting U.S. Attorney Brit Featherston, Eastern District of Texas, and Acting Assistant Attorney General for National Security Dana J. Boente. This case is being investigated by the Dallas and Denver offices of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the FBI, the Department of Commerce’s Bureau of Industry and Security’s Office of Export Enforcement, and the Department of Defense’s Defense Criminal Investigative Service.

Peter Zuccarelli, from Plano, Texas, pleaded guilty to conspiring to smuggle and illegally export from the U.S., radiation-hardened integrated circuits (RHICs) for use in the space programs of China and Russia, in violation of the International Emergency Economic Powers Act (IEEPA). He entered his guilty plea Aug. 3 before U.S. Magistrate Judge Kimberly Priest-Johnson.

Zuccarelli pleaded guilty to engaging in a conspiracy to smuggle and illegally export from the U.S. items subject to IEEPA, without obtaining licenses from the Department of Commerce.  According to the allegations contained in the information filed against Zuccarelli and statements made in court filings and proceedings, including the Aug. 3 guilty plea:

  • Between about June 2015 and March 2016, Zuccarelli and his co-conspirators agreed to illegally export RHICs to China and Russia. RHICs have military and space applications, and their export is strictly controlled;
  • In furtherance of the conspiracy, Zuccarelli’s co-conspirator received purchase orders from customers seeking to purchase RHICs for use in China’s and Russia’s space programs. Zuccarelli received these orders from his co-conspirator, as well as payment of about $1.5 million to purchase the RHICs for the Chinese and Russian customers. Zuccarelli placed orders with U.S. suppliers, and used the money received from his co-conspirator to pay the U.S. suppliers. In communications with the U.S. suppliers, Zuccarelli certified that his company, American Coating Technologies was the end user of the RHICs, knowing that this was false. Zuccarelli received the RHICs he ordered from U.S. suppliers, removed them from their original packaging, repackaged them, falsely declared them as “touch screen parts,” and shipped them out of the U.S. without the required licenses. He also attempted to export what he believed to be RHICs.  In an attempt to hide the conspiracy from the U.S. government, he created false paperwork and made false statements.

At sentencing, Zuccarelli faces a maximum statutory term of five years imprisonment and a maximum fine of $250,000. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes. If convicted of any offense, the defendant’s sentence will be determined by the court after considering the advisory Sentencing Guidelines and other statutory factors. A sentencing hearing will be scheduled after the U.S. Probation Office completes a presentence investigation.

This case is being prosecuted by the U.S. Attorney’s Office for the Eastern District of Texas together with the Counterintelligence and Export Control Section of the Justice Department’s National Security Division.

KC Man Sentenced for Marriage Fraud

Thursday, July 13, 2017

KANSAS CITY, Mo. – Tom Larson, Acting United States Attorney for the Western District of Missouri, announced that a Kansas City, Mo., man was sentenced in federal court today for his role in leading a marriage fraud conspiracy.

Delmar Dixon, 49, of Kansas City, was sentenced by U.S. District Judge Gary A. Fenner to three years in federal prison without parole.

Dixon pleaded guilty on March 8, 2017, to leading a conspiracy to assist African nationals in circumventing immigration laws by arranging fraudulent marriages. Dixon also pleaded guilty to falsely swearing in an immigration matter.

Dixon admitted that he arranged 30 to 40 fraudulent marriages, including his own. Dixon charged the African nationals $1,000 upfront for his services, which included providing them U.S. citizen spouses. The African nationals were additionally required to pay $500 to the spouse at the time of the wedding, and an additional $500 immediately after completion of the wedding. They were required to pay their spouses $250 each month after the weddings until the immigration process was complete. The African nationals were coached by Dixon on how to make their marriages appear legitimate.

In addition to arranging fraudulent marriages, Dixon engaged in a fraudulent marriage himself. Dixon obtained a marriage license on March 19, 2008, and married a Kenyan national who had entered the United States as a B2 nonimmigrant visitor but overstayed her visa.

Co-defendant Traci R. Porter, 45, of Kansas City, Mo., was sentenced to two years in federal prison without parole. Co-defendant Tierra Ofield, 24, of Kansas City, Mo., was sentenced to one year and one day in federal prison without parole. Co-defendants Kakeland Barnes, 37, Shakeisha Harrison, 37, and Stephanie Harris, 22, all of Kansas City, Mo., have pleaded guilty to their roles in the marriage fraud conspiracy and await sentencing.

This case is being prosecuted by Special Assistant U.S. Attorney Kim Moore. It was investigated by Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and U.S. Citizenship and Immigration Services, Fraud Detection and National Security.