Italian Textile Company, US Subsidiary Settle Whistleblower Suit Alleging Sham Intermediary Sales
An Italian textile manufacturer and its U.S. subsidiary will pay $650,000 to settle allegations in a False Claims Act whistleblower lawsuit that it artificially used “sham intermediary ‘sales’” to underpay duties, the U.S. Attorney’s Office for the Southern District of New York said in a Sept. 12 press release. Miroglio Textile declared on customs documentation that it sold fabric to Miroglio USA at arbitrarily discounted prices, when it was actually selling it directly to consumers at higher prices than it declared.
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“Importers cannot use related-party companies to simply make up values out of whole cloth, but must pay duties based on legitimately reported values,” U.S. Attorney Geoffrey Berman said. “We will be vigilant to ensure that companies pay the customs duties they owe when importing goods into the country.”
According to the government’s complaint, the lawsuit was originally filed by Angelo Morrongiello, who was chief executive officer at Miroglio USA until January 2017. For each sale to a U.S. customer, Miroglio Textile created false invoices that showed fake sales prices that were artificially discounted so the Italian company could pay less in duties and make more of a profit. That was the value that Miroglio declared on entry documentation.
Miroglio USA never made any payment to Miroglio Textile, nor did it take any inventory besides samples. It had no role in selecting the end customers or setting the terms of sale. Instead, Miroglio Italy sent the goods directly to U.S. end customers, and payments were routed through Miroglio USA’s bank account. “The sham sales by Miroglio [Textile] to Miroglio USA existed solely on paper and solely for the purpose of falsely undervaluing goods and reducing the customs duties that would apply,” DOJ said.
Miroglio admitted guilt and accepted responsibility for its conduct as part of the settlement. Miroglio Textile and Miroglio USA also agreed under the settlement agreement to implement a written customs compliance policy within 60 days. The settlement directs them to submit reports summarizing implementation of the policy every year for the next three years to CBP.