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Financial Crimes
07/25/2012

HSI special agents crack $100 million customs fraud scheme

SAN DIEGO – The president of the San Diego Customs Brokers Association, along with three international trade companies and seven other individual co-conspirators, are facing federal charges following a probe targeting a multi-million dollar customs fraud scheme in Southern California. The charges are a culmination of a year-long investigation led by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI). HSI received substantial assistance from U.S. Customs and Border Protection (CBP) and the Internal Revenue Service (IRS).

To date, this investigation has identified more than 90 commercial shipments from several countries. The estimated value of these shipments is valued at more than $100 million.

Three of the defendants, including Gerard Chavez, 42, the president of the San Diego Customs Brokers Association, were taken into custody by HSI special agents early Wednesday.

A 56-count criminal complaint accuses the 11 defendants in Southern California and Tijuana, Mexico, of orchestrating a lucrative customs fraud scheme that resulted in more than $10 million in lost customs duties, taxes and other revenue. The criminal charges include conspiracy to defraud the United States, falsely bringing in foods and obstruction of justice. These charges carry a maximum sentence of up to 20 years in federal prison.

"This investigation pulled back the curtain on a potentially costly fraud scheme operating in one of the world's busiest commercial centers," said ICE Director John Morton. "Instead, HSI, aided by our law enforcement partners, exposed and dismantled this criminal ring and now those responsible will be held accountable."

"Every day, U.S. Customs and Border Protection officials work to protect the United States and interdict fraudulent goods from entering the country," said CBP Acting Commissioner David V. Aguilar. "I commend the work of our officers for their instinct and diligence, and recognize the seamless coordination across government agencies. Joint efforts such as this are crucial to maintaining our nation's economic security and competitiveness."

According to the court documents, the defendants operated a ring and devised an elaborate scheme to exploit the in-bond import process, a routine feature of international trade that provides for duty-free importations on goods that do not formally enter into U.S. commerce.

As part of their scheme, Chavez and others procured foreign goods such as apparel made in China and cigarettes made in India that were shipped via ocean to the Port of Long Beach, Calif. They are accused of falsely generating paperwork and electronic entries into a government database to make it appear the shipments would be transshipped to Mexico, therefore not enter into U.S. commerce. Instead of transshipping the goods to Mexico, the defendants allegedly hired drivers to deliver them to warehouses in Southern California where they were eventually sold in the U.S. market. Chavez and others allegedly forged U.S. customs certifications to make it appear the shipments went to Mexico.

It is alleged one of Chavez's customers, Sunil Mirwani, a 36-year-old importer who was taken into custody Wednesday by HSI special agents, received dozens of shipments of illegally imported Chinese-made apparel at Los Angeles-area warehouses.

Mirwani marketed and sold the apparel using his Los Angeles-based import company, M Trade Inc., which is also a defendant in the case. Similarly, other defendants distributed various shipments of illegally imported cigarettes to warehouses, self-storage units and residences throughout Southern California.

A third defendant, Carlos Medina, 34, of Chula Vista, Calif., was also taken into custody Wednesday. Medina allegedly hired truck drivers and coordinated the delivery of illegally imported goods.

The other defendants charged in the fraud scheme case are:

  • Rene Trahin, 32, of San Diego, who allegedly distributed illegally imported cigarettes to warehouses, self-storage units and residences throughout Southern California. She is being sought by law enforcement.
  • Joel Varela Gonzalez, 32, of Tijuana, who allegedly used Chavez's broker's license to facilitate fraudulent shipments. He also allegedly conspired with others to cover up the shipments linked to salmonella and prohibited dye. He also allegedly forged certifications on shipments. He is being sought by law enforcement.
  • Elizabeth Sandoval, 50, of San Diego, allegedly conspired with others to mislabel foods that contained prohibited dye. She is being sought by law enforcement.
  • Enrique Perez Soltero, 39, allegedly facilitated the laundering of illicit proceeds linked to the fraud. He is being sought by law enforcement.
  • Juan Porter, 58, of Tijuana, allegedly managed a local trucking company that assisted in the diversion of cigarettes. He is being sought by law enforcement.
  • Tecate Logistics LLC, one of Chavez's companies allegedly used in the fraudulent trade activity. The company operates as a small contract trucking and hauling service.
  • International Trade Consultants LLC, one of Chavez's companies allegedly linked to the criminal activity.

During the investigations, law enforcement uncovered shipments of produce linked to the defendants that were infected by salmonella, a potentially life-threatening bacterium. In at least one of those shipments, several defendants acted to evade future inspection by the U.S. Food and Drug Administration of prickly pear cactus they were importing. They also allegedly conspired to mislabel Mexican snack foods that contained a prohibited dye.

Investigators say in addition to depriving the United States of the customs duties owed on the diverted shipments, the defendants also harmed lawful domestic businesses. By exploiting the in-bond process, the defendants imported duty-free goods, which were sold at cheaper prices, undercutting American manufacturers and hindering the U.S. economy.