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December 10, 2020Los Angeles, CA, United StatesFinancial Crimes

ICE probe leads to indictment of LA Fashion District wholesaler and 2 associates in schemes to avoid tariffs, launder drug money and avoid taxes

Case is the result of ongoing investigation by ICE’s Homeland Security Investigations-led Financial Crimes Task Force targeting business linked to money laundering and drug cartels

LOS ANGELES – A federal grand jury has returned a 35-count indictment alleging that a Fashion District outfit was at the center of two schemes, one that avoided the payment of more than $10 million in customs duties on imported clothing, and a second “Black Market Peso Exchange” scheme in which the company laundered narcotics proceeds and failed to report on tax returns over $17 million derived from cash transactions.

This case was investigated under the aegis of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Los Angeles-led El Camino Real Financial Crimes Task Force, which includes representatives from the office of the U.S. Attorney for the Central District of California, the Drug Enforcement Administration, the FBI and IRS Criminal Investigation.

The schemes are outlined in a 49-page indictment, which was filed late Wednesday and is the latest case resulting from an operation in Sept. 2014 when law enforcement authorities executed dozens of search warrants as part of an investigation into money laundering and other crimes at Fashion District businesses. During one of those searches at a downtown condominium linked to the defendants in this case, authorities seized more than $38.3 million in cash.

“The Los Angeles business community understands that law enforcement will not tolerate criminal activities by individuals or organizations that exploit our legitimate financial and trade systems, rob our government of vital revenues or contribute to the devastation of our communities brought on by the international drug cartels,” said David A. Prince, Special Agent in Charge for Homeland Security Investigations Los Angeles. “HSI, along with our partners on the El Camino Real Financial Crimes Task Force, will work diligently to protect legitimate businesses in the financial sector by targeting criminal activity and encouraging companies to comply with import/export regulations.”

The defendants named in the indictment are:

  • C’est Toi Jeans, Inc. (CTJ), an importer of apparel from countries such as China, and exporter of clothing to customers in Mexico, Central America and South America;
  • Si Oh Rhew, 67, of La Cañada Flintridge, the president of CTJ and a 75% owner of the company; and
  • Lance Rhew, who is Si Oh Rhew’s son, 33, of downtown Los Angeles, a CTJ corporate officer and the owner of another company called GLLR, Inc. that did business as CTJ.

The indictment contains charges of conspiracy; entry of goods falsely classified; entry of goods by means of false statements; passing false and fraudulent papers through customhouse; international promotional money laundering; failure to file reports of $10,000 currency transactions; and aiding, assisting and procuring the filing of a false tax return.

The first scheme outlined in the indictment allegedly involves the avoidance of customs duties and tariffs by purchasing garments from overseas manufacturers, including from China, but then submitting false information to U.S. Customs and Border Protection (CBP) that understated the true value of the items being imported in the U.S. As a result, the import duties owed on the shipments were lowered. The indictment alleges that the defendants sent 515 individual wire transfers totaling $137,156,726 to pay overseas suppliers for undervalued garments. Overall, according to the indictment, CTJ imported goods that were undervalued by more than $62 million, causing approximately $10,269,068 in unpaid tariffs and duties that should have been paid to CBP. Some of this conduct occurred prior to authorities executing search warrants at CTJ and GLLR in 2014, but the indictment alleges that undervaluation resumed in 2018 and lasted until at least July 2020.

In the second scheme, the Rhews used CTJ “to receive large amounts of bulk United States currency, including from narcotics proceeds, as payment for outstanding merchandise orders from customers in Mexico and elsewhere,” according to the indictment. CTJ allegedly accepted large cash payments of up to $70,000 even after the law enforcement action targeted their businesses in 2014. The defendants failed to file currency transaction reports, which are required for any transaction involving more than $10,000 in cash, and they concealed the cash receipts from an accountant who prepared their taxes, which led the Rhews to fraudulently omit more than $17.6 million in gross sales from tax returns filed with the IRS, the indictment alleges.

The court will issue summons directing the three defendants to appear for arraignments in U.S. District Court on Feb. 4.

If convicted of the charges in the indictment, the Rhews would each face potential sentences of decades in federal prison, and CTJ could face fines of as much as $100 million.

This case is the product of an ongoing investigation by HSI, IRS Criminal Investigation, U.S. Customs and Border Protection, the Monterey Park Police Department, the El Segundo Police Department, LA IMPACT, the Long Beach Police Department, the Los Angeles Police Department, the Gardena Police Department and the West Covina Police Department. This investigation was conducted with the support of the Organized Crime Drug Enforcement Task Force.

This matter is being prosecuted by the U.S. Attorney for the Central District of California’s International Narcotics, Money Laundering and Racketeering Section.

Updated: 12/18/2020