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07/25/2011

9 indicted in multi-million dollar apparel smuggling scheme

Government losses from illegal importation of Chinese-made clothing exceeds $2 million

9 indicted in multi-million dollar apparel smuggling scheme
9 indicted in multi-million dollar apparel smuggling scheme

LOS ANGELES — The operator of a Los Angeles-area foreign trade zone (FTZ) and eight other individuals face federal charges, including smuggling, money laundering and wire fraud violations, for illegally importing nearly 200 shipments of Chinese-made apparel into the United States to avoid millions of dollars in import duties.

Authorities say the elaborate scheme, detailed in two separate indictments handed down here July 21, involved more than $12 million worth of imported clothing, mostly denim, which was destined for retailers throughout the U.S. U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI) agents, who headed the two-year probe, estimate the defendants' actions cost the U.S. government from $2 to $4 million in lost tax revenues. ICE HSI received substantial assistance with the case from U.S. Customs and Border Protection (CBP).

"Commercial smuggling schemes like this not only rob the government of vital revenues, they also penalize businesses that follow the rules and undermine our economy," said Claude Arnold, special agent in charge of ICE HSI in Los Angeles. "We will not allow unscrupulous importers who break the law in an effort to cut corners and costs to get rich at America's expense."

The indictments, each of which contain scores of charges, describe several ways in which the defendants allegedly avoided paying some or all of the duty on clothing shipments dating back to August 2009. Their methods included filing fraudulent paperwork with CBP that grossly undervalued the purchase price of the imported apparel. Another tactic involved misclassification of merchandise. In one example noted in the indictment, jeans were described as "woven pants," which are taxed at a rate of less than 3 percent compared to a duty of nearly 17 percent levied on denim versions. In some instances, the defendants avoided paying duty altogether by falsely claiming apparel was entering the U.S. for transshipment to other countries when, in fact, the merchandise was being distributed domestically.

"U.S. Customs and Border Protection (CBP) is committed to ensuring that U.S. trade laws are vigorously enforced and that those who try to evade those laws are identified and brought to justice," said Todd C. Owen, director of CBP Field Operations in Los Angeles. "This indictment reflects the exceptional partnership and multiagency coordination in intercepting individuals engaged in fraudulent trade activities."

According to the indictments, one of the key figures in the scheme was Wei "Julia" Lai, 39, owner of a customs bonded and licensed FTZ based in the City of Industry, Calif., known as the Industry Free Trade Zone. It is alleged Lai charged importers, several of whom are named in the indictment, from $5,000 to $10,000 a shipment to divert merchandise through the Industry Free FTZ. Lai's fee depended on how much she saved the importers in duties. The indictment claims Lai used a series of "straw" bank accounts to launder proceeds from the illegal activities.

The remaining eight defendants include a loose-knit group of importers who attempted to use shell import companies to shield themselves from law enforcement detection during the scheme. They are:

  • Joel Elder, 29, of Long Beach, Calif., an employee of a company called ITC Diligence who worked as an "on-site" consultant for Lai at the Industry Free FTZ;
  • Jianying "Jonathan" Huang, 42, a Chinese national who owns and operates several China-based export companies;
  • Xiaoqiong "Joan" Hou, 43, of Diamond Bar, Calif., a Chinese national who allegedly coordinated illegal shipments;
  • Rebecca Ho, 39, of Alhambra, Calif., who allegedly brokered illegal shipments for commission;
  • Yuling Wang, 43, of Walnut, Calif., who allegedly assisted in brokering illegal shipments for commission;
  • Keen "Alven" Wai Choo, 40, of Rowland Heights, Calif., the owner of a company that allegedly received illegal shipments;
  • Taylor "David" Wong, 49, of Arcadia, Calif., the owner of several shell import companies; and
  • Tsu "Nick" Wei Lin, 41, of Arcadia, Calif., who operated a company that received illegal shipments.

All of the defendants were originally charged by criminal complaint and seven of them, including Lai, made their initial appearances in federal court earlier this month. Those defendants are currently free on bond pending further court proceedings. At this time, Huang and Wang remain at large and are still being sought.

 In addition to the smuggling, money laundering and wire fraud violations, the indictment also charges the defendants with conspiracy; entry of goods by means of false statements; relanding of goods; making false statements; and aiding and abetting. The penalties for those violations range from a maximum term of two years in prison for the counts involving the entry of goods by false statements to up to 20 years in prison for each of the smuggling allegations.

ICE HSI officials emphasize the investigation into the commercial smuggling scheme is ongoing.