Feds Ask to Intervene in Whistleblower Suit Against Apparel Importer for Duty Underpayment
The U.S. government on Jan. 8 told a federal court in New York that it intends to take part in a whistleblower suit against an apparel importer for underpayment of duties. The false claims suit alleges several affiliated apparel companies in New York underreported the dutiable value on invoices provided to CBP for imports of women’s apparel by using a second, unreported invoice for part of the purchase price. That resulted in a loss of revenue to the federal government of at least $3 million per year in unpaid duties, says the complaint.
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Michael Krigstien filed the whistleblower suit in 2011 in the Southern New York U.S. District Court against Alan Hakimian and Afshin Hakimian, and their companies Siouni and Zarr Corp., Danny & Nicole, and Dana Kay. The case remained sealed, however, until December 2013. The complaint only identifies Krigstien as someone “familiar with the facts and circumstances” of the case. Krigstien’s lawyer at Sgarlato & Sgarlato did not immediately respond to a request for comment.
According to the complaint, the Hakimians and their companies import women’s apparel for sale at small specialty stores and department stores like Sears, J.C. Penney, Ann Taylor and Dress Barn. Since 2001, they have knowingly engaged in a scheme to defraud the U.S. government by underdeclaring the value of their imported apparel, says the complaint. The entire purchase price of the apparel would not be declared on the commercial invoice provided to their customs broker for use in CBP entry documentation. Instead, a second bill called a “debit-note” would be created, and between $1 and $3 of the price of each garment would be billed on this second invoice, the complaint said. The complaint says the defendants characterized the charge as an “assist” to be deducted from the dutiable value for marking and grading of the apparel.
The Hakimians did not provide the “debit-note” to their customs broker, so only the value of the commercial invoice was reported to CBP. As a result, the dutiable value of the entries was effectively reduced by $1-$3 per garment. According to the complaint, the defendants imported about five million garments per year, so the value of the debit-notes quickly added up. At the applicable duty rate of 21.985% to 28.285%, a “conservative” estimate of the revenue lost to the government is about $3 million per year, said the complaint. The procedure was “universally followed” by the defendants over a period of eight years, despite warnings from an industry expert that the scheme was illegal, it said.
The whistleblower suit seeks a $10,000 penalty per entry, to be calculated on a “per garment basis.” It also requests a penalty of eight times the loss that occurred to the government because the defendants allegedly engaged in fraud. According to filings by the government in support of their motion to intervene, the defendants have been under investigation since February 2013.
Email ITTNews@warren-news.com for a copy of the complaint.