US Attorney – Apparel Importers To Pay Over $2.7 Million To Settle Civil Fraud Charges

LAWFUEL – MICHAEL J. GARCIA, the United States Attorney for the
Southern District of New York, announced today that apparel
BEN’S CLOTHING INC. D/B/A RED ZONE, as well as their principals
STEVE BENSADIGH (collectively the “defendants”) have agreed to
pay a total of $2,798,872.50 to resolve civil charges that they
defrauded the Government by making false statements in connection
with the importation of wearing apparel into the United States.
United States District Judge NAOMI REICE BUCHWALD approved the
settlement today in Manhattan federal court. According to the
Complaint filed by the United States of America:

Since at least 2001, the defendants engaged in a scheme
to defraud the United States by systematically importing into the
United States goods which were actually manufactured in China,
but representing to the United States 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 United States that otherwise would have been prohibited. 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.

Since at least 2003, the defendants also engaged in a
scheme to defraud the United States by declaring the value of
certain goods entered into the United States 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 United States to be
misrepresented on customs entry forms.

To execute the scheme, shell companies were 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.

In total, the defendants agreed to pay the Government
$2,798,872.50 to settle the charges detailed in the Government’s
239-page Complaint. In agreeing to the settlement, the
defendants did not admit any wrongdoing or liability.

Mr. GARCIA praised the investigative work of U.S.
Immigration and Customs Enforcement and U.S. Customs and Border
Protection in this case.

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. Those provisions permit the Government to intervene
in cases originally commenced by private parties who have
knowledge of fraud committed against the Government.
Former Assistant United States Attorney SHEILA M. GOWAN
and Assistant United States Attorney BENJAMIN H. TORRANCE handled
the case.
08-113 ###

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