Manufacturer, Importer Admit Fraud in New York Trade Case - Global Trade Magazine
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  August 3rd, 2016 | Written by

Manufacturer, Importer Admit Fraud in New York Trade Case

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  • Importers agree to pay U.S. government $13,375,000 to settle fraud case.
  • Settlement is the largest customs fraud case ever resolved in New York.
  • Customs fraud case was brought to the attention of prosecutors by a whistleblower.

The defendants in a civil False Claims Act case pending in a U.S. district court in New York have admitted to their scheme and agreed to pay the federal government $13,375,000.

Motives, Motives Far East, Richard Stotter, and Barry Blikstein, manufacturers and importers of apparel, admitted to undervaluing their imports to avoid paying millions of dollars in tariffs. The recent settlement is the largest customs fraud case ever resolved in New York. The case was brought to the attention of prosecutors by a whistleblower.

The settlement follows a similar settlement in 2014 by Dana Kay and Danny & Nicole, importers of women’s dresses, in the amount of $10 million.

Motives executed its scheme by supplying a commercial invoice to U.S. Customs officials declaring the value of the imported clothing items without disclosing that a separate payment was made to the factory for the same items. This procedure, referred to as undervaluing, went on for over 10 years, and resulted in ripping off Uncle Sam of between 55 cents and 75 cents per garment. Since Motives imports millions of dresses, skirts, and garments, the fraud amounted to a significant loss to United States taxpayers.

“Motives disguised the true value of goods imported into the United States to cheat the government out of millions of dollars in customs duties,” said Angel M. Melendez,the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. “This scheme backfired, and now Motives will pay millions for trying to skirt America’s customs laws. Trade fraud threatens the U.S. economy and restricts competitiveness of U.S. industry in the world markets.”

“Customs fraud is a somewhat intricate area as there are many ways for an importer to value the imported product,” said Michael D. Fitzgerald, a lawyer representing the whistleblower. “However, this was a fairly straightforward fraud. The documents proving the fraud were available to only a few employees within the company and had this [whistleblower] not come forward, it is possible that the information may never have seen the light of day.” The whistleblower was terminated after his employer learned of the reporting of the fraudulent scheme to the United States government.”

As part of the settlement, Motives admitted, acknowledged, and accepted responsibility for engaging in conduct between 2009 and 2013 that included repeatedly presenting to the government commercial invoices for apparel being imported into the United States that reported less than the total value of the goods imported.

The customs fraud uncovered in the Motives case appears to show a pervasive practice in the clothes importing industry, according to Fitzgerald. In the 2014 case, Dana Kay asserted that it failed to advise the United States government of the true value of the imported goods due to the fact that this was an “industry practice.”

“Savvy importers who have cheated the government in the last decade,” said Fitzgerald, “should quickly attend to traveling to the U.S. attorney’s office to avoid more severe punishment in the future.”