The president of the San Diego Customs Brokers Association, along with three international trade companies and seven other individuals, are facing federal charges following a probe targeting a multimillion dollar customs fraud scheme in Southern California.
A 56-count criminal complaint filed in U.S. District Court for the Southern District of California accuses the 11 defendants in Southern California and Tijuana, Mexico, of orchestrating a lucrative customs fraud scheme that resulted in more than $10 million in lost customs duties, taxes and other revenue. The criminal charges include conspiracy to defraud the United States, falsely bringing in foods and obstruction of justice. These charges carry a maximum sentence of up to 20 years in federal prison.
U.S. Immigration and Customs Enforcement (ICE) said that to date, the investigation has identified more than 90 commercial shipments from several countries. The estimated value of these shipments is more than $100 million.
According to the court documents, the defendants operated a ring and devised an elaborate scheme to exploit the in-bond import process, a routine feature of international trade that provides for duty-free importations on goods that do not formally enter into U.S. commerce.
Three of the defendants, including Gerard Chavez, 42, the president of the San Diego Brokers Association, were taken into custody by Homeland Security Investigations (HSI) special agents early Wednesday.
As part of their scheme, Chavez and others procured foreign goods, such as apparel made in China and cigarettes made in India, that were shipped via ocean to the Port of Long Beach, Calif. They are accused of falsely generating paperwork and electronic entries into a government database to make it appear the shipments would be transshipped to Mexico, therefore not entering into U.S. commerce.
Instead of transshipping the goods to Mexico, the defendants allegedly hired drivers to deliver them to warehouses in Southern California, where they were eventually sold in the U.S. market. Chavez and others allegedly forged U.S. customs certifications to make it appear the shipments went to Mexico.
It is alleged one of Chavez' customers, Sunil Mirwani, a 36-year-old importer who was taken into custody Wednesday by HSI special agents, received dozens of shipments of illegally imported Chinese-made apparel at Los Angeles-area warehouses.
Mirwani marketed and sold the apparel using his Los Angeles-based import company, M Trade Inc., which is also a defendant in the case. Similarly, other defendants distributed various shipments of illegally imported cigarettes to warehouses, self-storage units and residences throughout Southern California.
A third defendant, Carlos Medina, 34, of Chula Vista, Calif., was also taken into custody Wednesday. Medina allegedly hired truck drivers and coordinated the delivery of illegally imported goods.
The charges are a culmination of a year-long investigation led by ICE's Homeland Security Investigations, which was assisted by U.S. Customs and Border Protection (CBP) and the Internal Revenue Service (IRS).
"This investigation pulled back the curtain on a potentially costly fraud scheme operating in one of the world's busiest commercial centers," said ICE Director John Morton. "Instead, HSI, aided by our law enforcement partners, exposed and dismantled this criminal ring and now those responsible will be held accountable."
The other defendants charged in the fraud scheme case, all of whom are being sought by law enforcement, are:
- Rene Trahin, 32, of San Diego, who allegedly distributed illegally imported cigarettes to warehouses, self-storage units and residences throughout Southern California.
- Joel Varela Gonzalez, 32, of Tijuana, who allegedly used Chavez' broker's license to facilitate fraudulent shipments. He also allegedly conspired with others to cover up the shipments linked to salmonella and prohibited dye, and also allegedly forged certifications on shipments.
- Elizabeth Sandoval, 50, of San Diego, allegedly conspired with others to mislabel foods that contained prohibited dye.
- Enrique Perez Soltero, 39, allegedly facilitated the laundering of illicit proceeds linked to the fraud.
- Juan Porter, 58, of Tijuana, allegedly managed a local trucking company that assisted in the diversion of cigarettes.
- Tecate Logistics LLC, one of Chavez' companies allegedly used in the fraudulent trade activity. The company operates as a small contract trucking and hauling service.
- International Trade Consultants LLC, one of Chavez' companies allegedly linked to the criminal activity.
ICE said that during the investigations, law enforcement uncovered shipments of produce linked to the defendants that were infected by salmonella. It said in at least one of those shipments, several defendants acted to evade future inspection by the U.S. Food and Drug Administration of prickly pear cactus they were importing. They also allegedly conspired to mislabel Mexican snack foods that contained a prohibited dye.
Investigators say in addition to depriving the United States of the customs duties owed on the diverted shipments, the defendants also harmed lawful domestic businesses. By exploiting the in-bond process, the defendants imported duty-free goods, which were sold at cheaper prices, undercutting American manufacturers and hindering the U.S. economy.
The telephone at the San Diego Brokers Association was not answered Thursday.
"Brokers are licensed by the federal government and entrusted with a unique responsibility to facilitate legitimate trade," Alan Klestadt, customs counsel for the National Customs Brokers and Forwarders Association of America, said in a statement. "The majority of individuals and businesses engaged in this profession are dedicated, hard working, law abiding citizens. Unfortunately, accusations of wrongdoing leveled against an individual, whether true or not, impugn the reputation and accomplishments of the entire industry. We support the efforts of ICE and CBP to remove wrongdoers from our industry and encourage the legitimate flow of trade." - Chris Dupin