Case Studies

Tire Company Indicted for Fraudulently Avoiding Nearly $10 Million in Antidumping/Countervailing Duties (AD/CVD)

James and Doreen PEARL and Shuang “Lucia” LIU were named in a 51-count indictment in the Northern District of Ohio in July 2017 for allegedly filing fraudulent paperwork to avoid paying nearly $10 million in antidumping/countervailing duties (AD/CVD) on imported tires. They are charged with conspiracy to defraud the United States, entry of goods by means of false statement, and smuggling goods into the United States.

James PEARL was president of PRO-TRAC TIRES LLC (“PRO-TRAC”), located in Streetsboro, OH. Doreen PEARL was an employee of the company. The company was in the business of importing tires from China, India, and other international suppliers, serving as a middleman between the foreign supplier and domestic retailer. Liu worked for Qingdao AU SHINE TIRE Co. (AU SHINE), a tire exporting company located in China. From 2009 through 2013, the PEARLS and LIU presented fraudulent and physically altered invoices to make it appear the tires were being shipped from companies that had exemptions from the AD/CVD order on tires from China, so PRO-TRAC’s duty rate was lowered from 210 percent to 12.9 percent. By submitting approximately 176 false entry summaries, the United States was deprived of more than $9.7 million in revenue.

https://www.justice.gov/usao-ndoh/pr/former-president-streetsboro-tire-company-indicted-fraudulently-avoiding-nearly-10

Bassett Mirror Company Agrees To Pay $10.5 Million to Settle False Claims Act Allegations Relating To Evaded Customs Duties

In January 2018, Virginia-based home furnishings company, BASSETT MIRROR COMPANY, agreed to pay the United States $10.5 million to resolve allegations that it violated the False Claims Act by knowingly making false statements on customs declarations to avoid paying antidumping/countervailing duties (AD/CVD) on wooden bedroom furniture imported from China. The United States alleged that between January 2009 and February 2014, Bassett Mirror evaded AD/CVD owed on wooden bedroom furniture that the company imported from China by knowingly misclassifying the furniture as non-bedroom furniture on its official import documents. At the time of the alleged conduct in this case, wooden bedroom furniture from China was subject to a 216-percent AD/CVD.

The settlement with BASSETT MIRROR resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. Homeland Security Investigations (HSI) was the lead investigative agency in this case.

https://www.justice.gov/opa/pr/bassett-mirror-company-agrees-pay-105-million-settle-false-claims-act-allegations-relating

Virginia Hardwood Flooring Company Paid $13.15 Million, Largest Lacey Act Penalty Ever

Beginning in June 2013, Homeland Security Investigations (HSI), with support from the U.S. Fish and Wildlife Service, conducted an environmental crime investigation of Lumber Liquidators Incorporated (LLI), the largest retailer of wood flooring in North America. HSI’s investigation ultimately ascertained that LLI knowingly imported and sold multi-ton shipments of wood products illegally harvested in Far East Russia and Myanmar, processed in China, and falsely declared at import with the countries of origin or harvest being listed as Germany and China in violation of the Lacey Act and 18USC542. The illegal harvest of Mongolian oak from Far East Russia was of grave concern because it furthered the destruction of the habitat vital for the survival of the last few endangered wild Siberian tigers and Amur leopards. This HSI-led investigation, resulted in the first felony conviction related to the import and use of illegally harvested timber and the largest criminal fine to date under the Lacey Act. This case clearly demonstrated HSI’s capabilities to tackle complex international criminal investigations. Under the plea agreement, LLI paid $13.15 million, including $7.8 million in criminal fines, $969,175 in criminal forfeiture and more than $1.23 million in community service payments. LLI also agreed to a five-year term of organizational probation and mandatory implementation of a government-approved environmental compliance plan and independent audits. Subsequently, the company was also ordered to pay more than $3.15 million in cash due to a prior disclosure culminating in a related civil forfeiture. In the end, LLI’s criminal and civil forfeitures and fines totaled $15.30 million.

https://www.justice.gov/opa/pr/lumber-liquidators-inc-sentenced-illegal-importation-hardwood-and-related-environmental

Ringleader Convicted in Major New York Cigarette Smuggling Case.

In December 2012, Homeland Security Investigations (HSI) New York, with the New York State Attorney General's Organized Crime Task Force (OCTF), initiated an investigation into a New York/Maryland-based Palestinian organization involved in a trade based money laundering scheme to traffic in stolen goods and move illegal/untaxed cigarettes across state lines. Basel RAMADAN was identified as the leader of the smuggling ring that transported thousands of dollars in cigarettes each month to co-conspirators for unauthorized resale and distribution in New York City. The cigarettes were purchased from a wholesaler in Virginia, stored in Delaware and ultimately distributed to markets throughout New York. In September 2015, RAMADAN was found guilty in the Brooklyn Supreme Court on 198 counts of Enterprise Corruption, Money Laundering and Evading $5.3 million in taxes. RAMADAN was sentenced to 4 – 12 years and ordered to forfeit $1.2 million. As a result of this investigation, agents arrested 14 additional individuals, executed numerous Federal and State search warrants and seized over $7 million. Agents also seized counterfeit cigarette tax stamps and thousands of cartons of untaxed cigarettes. The investigation was a joint investigation conducted by HSI New York, New York State Attorney General’s Office OCTF, New York City Police Department and with significant assistance provided by HSI Baltimore, HSI Philadelphia and HSI Newark.

https://ag.ny.gov/press-release/ag-schneiderman-nypd-commissioner-kelly-announce-take-down-massive-eastern-seaboard

https://ag.ny.gov/press-release/ag-schneiderman-announces-198-count-conviction-ring-leader-massive-eastern-seaboard

$180 Million Antidumping Circumvention

In February 2013, five individuals and two domestic honey-processing companies were charged in a multi-year HSI-led undercover investigation which involved allegations of buying, processing, and trading Chinese honey that illegally entered the U.S. on the “demand side” of the industry.  The investigation asserts that the Chinese-origin honey was transshipped through other countries to hide its country of origin and was falsely declared as various sweeteners and syrups.  The seven defendants allegedly evaded antidumping duties totaling more than $180 million.

Honey Holding I, Ltd., doing business as Honey Solutions, of Texas, and Groeb Farms Inc. of Michigan – two of the nation's largest honey suppliers – have entered into deferred prosecution agreements with the government.  Honey Holding I, Ltd., which cooperated   extensively in HSI’s undercover investigation, has agreed to pay $1 million in fines.  Groeb Farms has agreed to pay $2 million in fines.  Both companies must implement corporate compliance programs and enhanced supply chain traceability measures as part of their respective agreements.  The individual defendants include three honey brokers, the former director of sales for Honey Holding, and the president of Premium Food Sales Inc., a broker and distributor of honey in Bradford, Ontario.  Multiple foreign and domestic HSI and CBP offices participated in and supported this global investigation. 

Illegal importation of goods from China Smuggling Operation

On November 28, 2012, Jin Qing Huang, a citizen of the People’s Republic of China, was convicted of one count of 18 U.S.C. § 541 (entry of goods falsely classified) and sentenced to 16 months in prison followed by one year of supervised release for evading antidumping duties of plastic bags.  According to his plea agreement and court documents, from 2006 to 2010, Huang operated Woncity, Inc. and other corporations operating in Maryland and Washington D.C. that imported plastic bags and other restaurant supplies from China.

Plastic bags imported from China are subject to a 77.5% antidumping duty.  Huang admitted that he underpaid the legally required duty on the imports.  HSI Baltimore investigated this case based on a lead from U.S. Customs and Border Protection.

Hong Kong Jewelry Exporter Pleads Guilty to Customs Fraud

On August 24, 2012, A Hong Kong-based jewelry exporter Fai Po Jewelry (H.K.) Co., LTD (Fai Po) pleaded guilty to customs fraud charges and faces nearly $2 million in fines and restitution in a scheme discovered by U.S. Customs and Border Protection Regulatory Audit Unit and investigated by U.S. Immigration and Customs Enforcement, Homeland Security Investigations.  The company was ordered to pay an $800,000 criminal fine, restitution of $1,017,737, and $144,324 for the costs of the investigations.   The company is also placed on three years’ probation.

Fai Po admitted to intentionally submitting false invoices to the U.S. government in connection with the importation of merchandise in order to avoid paying more than $1 million in customs duties.  Since early 2007 to late 2009, Fai Po enclosed false invoices in their direct shipments to U.S. purchaser ShopNBC while sending the actual full value invoice to the purchaser by email. Fai Po advised the purchaser to ignore the invoice enclosed in the shipment because it was there only to avoid customs clearance issues.

$3 Million Penalty for Customs Fraud and Criminal Conviction

On January 7, 2013, Isidoro Garbarino, an Italian national, was sentenced in the Southern District of New York to time served – approximately four months and was deported from the United States for violations of 18 U.S.C. § 541 (entry of goods falsely classified) and 18 U.S.C. § 542 (entry of goods by means of a false statement).  Garbarino was also ordered to pay $3 million in restitution to CBP, representing the duties, penalties, and accrued interest owed for unlawfully importing caviar.  Pursuant to a guilty plea, Garbarino admitted to unlawfully importing more than 100,000 pounds of Russian and Iranian caviar into the United States between 1984 and 1987, with an estimated value of $10 million. 

Between 1984 and 1987, Garbarino used several schemes including significantly undervaluing the weight and value of the caviar he was importing to evade duties.  Garbarino was arrested pursuant to a criminal complaint in July 1987 and indicted in November 1987.  Garbarino was released on bail and fled the country in July 1989.  Garbarino, a fugitive for 23 years, was arrested at Houston International Airport by CBP officers in September 2012, and plead guilty in November 2012.