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Financial Crimes
07/01/2013

Ex-head of San Diego Customs Brokers Association sentenced for evading duties on millions worth of foreign-made goods

SAN DIEGO — The former president of the San Diego Customs Brokers Association and his corporation have been sentenced for their role in a multimillion dollar commercial fraud scheme to evade paying import duties on goods they imported into the United States.

The sentencing is the result of a four-month wiretap investigation led by special agents with U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI); the U.S. Food and Drug Administration's (FDA) Office of Criminal Investigations (OCI); and U.S. Customs and Border Protection (CPB).

During a sentencing hearing in federal court Monday, U.S. District Judge Michael M. Anello sentenced Gerado Chavez, 42, of San Diego, to 37 months in federal prison. In addition to the prison term, Chavez was ordered to forfeit real property in Tecate, Calif., and to appear at a future restitution hearing. Chavez's corporation, International Trade Consultants, LLC, was sentenced to five years of probation.

According to court records, Chavez served as president of the San Diego Customs Brokers Association, a trade group for licensed professionals in the import-export field, between 2007 and 2012. During that period, Chavez and his companies supervised numerous shipments of commercial goods while coordinating one-half billion dollars in trade between merchants in the United States and other countries.

In November, as part of a plea agreement, Chavez admitted to running the elaborate customs fraud scheme. He cancelled his customs licenses as part of the plea agreement, effectively ending his career as a customs broker.

"Our system of international trade relies on the honesty and integrity of all participants; and perhaps most of all, of customs brokers, to ensure that applicable taxes are paid, and that hazardous materials do not cross our country's borders," said San Diego U.S. Attorney Laura Duffy. "Gerardo Chavez abused the trust this country instilled in him, endangering public health and stealing from the United States treasury at a time when we could ill afford it – all for his personal, fraudulent gain."

"Today's sentencing illustrates the importance of Department of Homeland Security components working seamlessly to prevent criminals from exploiting the commercial trade corridor in the San Diego-Tijuana region," said Derek Benner, special agent in charge for HSI in San Diego. "HSI will continue to prioritize investigations involving suspected customs fraud in an effort to maintain the highest degree of integrity in cross border trade."

"Today's sentencing demonstrates OCI's commitment to investigating and holding accountable those who conspire to import adulterated and potentially life-threatening products to the unsuspecting public," said Lisa Malinowski, special agent in charge for FDA in Los Angeles. "OCI will continue to join with our law enforcement counterparts to pursue those who place consumer's health at risk for financial gain."

"CBP is charged with protecting the revenue of the United States," said Pete Flores, director of CBP field operations in San Diego. "This case demonstrates our commitment to that mission and the importance of working with our federal partners. Joint efforts such as this are crucial to maintaining our nation's economic security and competitiveness."

According to the court records, Chavez and other co-conspirators procured foreign goods, such as Chinese-made apparel and cigarettes manufactured in India, that were transported via ship to the Port of Long Beach. Before the goods entered the U.S., Chavez directed other members of the conspiracy to prepare fraudulent paperwork and make erroneous entries into a government database so it appeared the goods were being transshipped to Mexico and not subject to customs duties. However, instead of transshipping the goods to Mexico, the merchandise was delivered to warehouses in Southern California and eventually sold in the U.S. for less than similar items offered by their law-abiding competitors.

Investigators say Chavez allowed his co-conspirators to use his lucrative customs license. In doing so, co-conspirators in the case succeeded in importing adulterated Mexican food products, as well as produce infected with the life-threatening salmonella bacteria. He also advised the co-conspirators how to erase evidence from their computers and aided them by wiring money out of the United States to a business account in Hong Kong.

As part of the larger conspiracy, one of Chavez's co-conspirators, Sunil Mirwani and his Los Angeles-area company, M Trade Inc. were convicted in June by a federal jury of conspiracy to evade customs duties on more than $30 million in Chinese-made jeans, skirts, shorts and other apparel they imported to the U.S. During that trial, some of Chavez's former co-conspirators testified under oath about Chavez's fraudulent operations. Mirwani and his corporation are scheduled to be sentenced Sept. 9 in federal court.