San Diego Customs Assn. President Pleads Guilty to Fraud
Gerardo Chavez, the president of the San Diego Customs Broker Association, pleaded guilty to organizing a conspiracy to import foreign-made goods in to the U.S. without paying customs duties, said the U.S. Attorney for the Southern District of California. Another person charged in the case, Carlos Medina, also pleaded guilty, the Justice Department said. As a part of the plea deal, Chavez will cancel his customs broker license, forfeit property, and pay restitution of as much as $18 million.
According to court documents, wholesalers in the U.S. would purchase foreign-made goods, including Chinese apparel and Indian cigarettes, and arrange for them to be shipped to the U.S. Upon arrival of the goods, conspirators acting at Chavez's direction would file customs paperwork saying the goods would be shipped in-bond to Mexico. By claiming that the goods would be transshipped in-bond to another country, Chavez and his co-conspirators falsely represented that no customs duties applied.
Instead of exporting the goods, Chavez and codefendant Carlos Medina would hire truck drivers to move the goods to L.A. or elsewhere in the U.S., "effectively importing foreign-made goods duty-free," the filing said. Many shipments were diverted to warehouse controlled by M Trade, the documents said. The investigation uncovered more than 90 commercial shipments of fraudulently imported Chinese-made apparel, foreign made cigarettes and other goods. As the conspirators had effectively imported the goods tax- and duty-free, they could in turn undercut their competitors, including domestic manufacturers of the same goods.
The scheme resulted in the fraudulent import of more than $100 million in foreign goods, DOJ said. In his plea agreement, Chavez admitted causing more than $18 million in losses to the government, and admitted aiding coconspirators by wiring money out of the U.S. to a business account in Hong Kong.
Pursuant to his plea agreement, Chavez agreed to cancel his individual, local, and national customs licenses, which entitled him to broker imports and exports. He also agreed to forfeit real and personal property -- including land in Tecate, Calif., upon which he operated his customs broker business. Chavez will also be subject to paying restitution which could be as much as, or more than, $18 million, DOG said.
Codefendant Medina also pleaded guilty and admitted to helping coordinate delivery of the fraudulently import goods. Medina will have to pay restitution as a result. Chavez's corporation, International Trade Consultants, LLC, entered a guilty plea and will have to pay restitution as well.
(See ITT's Online Archives 12072626 for summary of charges against Chavez, and 12072724 for summary of NCBFAA comments on the alleged conspiracy.)