LawFuel.com – Whistleblower Lawsuit Exposing Multiple Invoicing Scheme Leads to $10 Million Settlement Preet Bharara, the United States Attorney for the Southern District of New York, James
T. Hayes, Jr., the Special Agent-in-Charge of the New York Field Office of the U.S. Immigration
and Customs Enforcement’s (“ICE”) Homeland Security Investigations (“HSI”), and Robert E.
Perez, Director of New York Field Operations for U. S. Customs and Border Protection (CBP),
announced today that the United States has settled a civil customs fraud lawsuit against DANA
KAY, INC. and SIOUNI & ZAR CORPORATION (d/b/a DANNY & NICOLE), two importers
of women’s apparel, for cheating the United States out of millions of dollars in customs duties
over the course of a decade through the use of false invoices.
In the settlement, approved today
in Manhattan federal court by U.S. District Judge Colleen McMahon, the defendants accepted
responsibility for under-reporting the value of their imported merchandise and agreed to pay $10
million to the United States as damages and penalties under the False Claims Act.
Manhattan U.S. Attorney Preet Bharara said: “Our Office is committed to pursuing those
who defraud the public for private gain. Here, as our complaint alleges, a whistleblower exposed
a decade-long scheme to defraud the Government out of millions of dollars in customs duties.
Through the settlement announced today, the companies responsible for this fraud will be held to
account, by having to admit to their misconduct and pay $10 million in damages and penalties.”
ICE HSI Special Agent-in-Charge James T. Hayes, Jr. said: “Companies that circumvent
our nation’s customs laws through the use of elaborate frauds cheat the American taxpayers and
their law-abiding competitors simultaneously. These two importers should serve as an example
that HSI is committed to ensuring a level playing field for all who work in the international trade
CBP Director of New York Field Operations Robert E. Perez said: “Working in
partnership with HSI, our CBP officers, auditors, and import specialists demonstrated the highest
level of professionalism, dedication to duty and vigilance in detecting the undervaluation of these
imported goods into the United States.”
According to the Government=s Complaint filed in Manhattan federal court:
From approximately 2003 through 2012, DANA KAY, INC. and SIOUNI & ZAR
CORPORATION engaged in a fraudulent scheme to avoid the payment of customs duties by
presenting the Government with invoices that significantly understated the value of the imported
apparel. The defendants paid their overseas manufacturers the full value of the apparel, but
deducted a flat fee per garment set before calculating the duty on the apparel. The defendants
then recorded only the lower value on the entry forms presented to the Government. Through
this fraud, the defendants avoided paying millions of dollars in customs duties.
As part of the settlement, DANA KAY, INC. and SIOUNI & ZAR CORPORATION
have admitted, acknowledged, and accepted responsibility for:
presenting to the Government commercial invoices for women’s apparel being
imported into the United States that reported less than the total value of the goods
paying apparel manufacturers an amount in excess of that recorded on the commercial
paying the excess amount pursuant to a second invoice referred to as a “debit note”;
failing to disclose to the Government the amounts paid pursuant to the second
invoices, instead reporting only the lesser amounts listed in the commercial invoices,
which the Government then used to assess customs duties.
The allegations of fraud stated in the Complaint and admitted in the settlement agreement
were first brought to the attention of the Government by a whistleblower, who filed a
lawsuit under the qui tam provisions of the False Claims Act. Those provisions allow private
parties who have knowledge of fraud committed against the Government to file suit on behalf of
the Government and share in any recovery. The United States may then intervene and file a
complaint, as it did here.
Mr. Bharara thanked ICE HSI for its work on the case. He also thanked U.S. Customs
and Border Protection for its assistance.
The case is being handled by the Office’s Civil Frauds Unit. Assistant United States
Attorney Jaimie L. Nawaday is in charge of the case.