Three Apparel Firms Agree to Pay Over $2.7 Million to Settle Charges of Quota Evasion, Etc.
The Department of Justice reports that in May 2008, apparel companies Intertex Apparel Group, Ltd., J.J. Basics, Inc., and Ben's Clothing Inc. dba Red Zone, as well as their principals, Jack Setton, Marc Setton, Vivek Bendre, Jacob Bensadigh, and Steve Bensadigh, agreed to pay a total of $2,798,872.50 to resolve civil charges that they defrauded the U.S. Government by making false statements in connection with the importation of wearing apparel into the U.S.
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(In agreeing to the settlement, the defendants did not admit any wrongdoing or liability.)
Companies Allegedly Evaded China Quotas, Misrepresented Value, Etc.
According to the complaint filed by U.S. Government, since at least 2001, the defendants engaged in a scheme to defraud the U.S. by systematically importing goods which were manufactured in China, but representing in the required customs entry documents that the goods were manufactured in either Russia or Korea.
This scheme enabled the defendants to evade quotas on goods manufactured in China, and therefore to import goods into the U.S. that otherwise would have been prohibited.
In addition, the Government contends that since at least 2003, the defendants also engaged in a scheme to defraud the U.S. by declaring the value of certain goods entered into the U.S. to be less than the actual cost for those goods charged by the Chinese manufacturers. On occasion, the defendants would also cause the quota category and type of good being imported into the U.S. to be misrepresented on customs entry forms.
Shell Companies Allegedly Used to Carry Out Scheme
To execute the scheme, shell companies were allegedly created and used as the importers of record for the purpose of shielding the identity of the defendant companies as the true purchasers of the goods from the Chinese manufacturers.
Apparel Sold to Retailers Including Wal-mart, J.C. Penney's, Kohls, Etc.
The defendants imported the goods for domestic sale to retailers, including Wal-Mart Stores, Inc., J.C. Penney Co., Inc., Family Dollar Stores, Inc., Kohls Corp. and Marshalls, a Division of TJX Companies, Inc.
Whistleblower Brought Case to Attention of Government
The allegations of wrongdoing were first brought to the attention of the Government by a whistleblower, who filed a complaint under the qui tam provisions of the federal False Claims Act.
(These provisions permit the Government to intervene in cases originally commenced by private parties who have knowledge of fraud committed against the Government.)
U.S. Attorney Southern District of New York press release (dated 05/12/08) available at http://www.usdoj.gov/usao/nys/pressreleases/May08/intertexagreementpr.pdf