CIT Orders Over $2 Million Penalties for Texas Woman Lured Into Broker's Undervaluation Scheme

The Court of International Trade on Sept. 28 ordered a Texas woman to pay over $2 million for her part in a get-rich-quick scheme proposed by a customs broker (here). Dionicio Bustamante, a licensed broker, approached Jeanette Pacheco at a “nightclub” and offered her $200 for her signature on a power of attorney, according to the CIT ruling. He proceeded to import undervalued dried peppers on her behalf. But when CBP caught onto the scheme, Pacheco found herself on the hook as the importer for penalties under 19 USC 1592 for undervaluation and failure to redeliver.

According to the CIT decision, the entry documentation prepared by Bustamante had valued the dried peppers at only $0.11 per kilogram, drawing the attention of CBP officers in Laredo, Texas. Noting the median transaction value for similar peppers is $3.75 per kilogram, CBP requested documentation from Pacheco to support the low valuation. When Pacheco failed to provide it, the agency revalued the dried peppers at the transaction value for similar peppers, causing the dutiable value to rise to $2,285,550. The Food and Drug Administration subsequently refused the dried peppers as adulterated and ordered them redelivered. Pacheco failed to comply, and CBP assessed liquidated damages on Pacheco at the entered value of $184,419.

Pacheco didn’t respond to subsequent pre-penalty and penalty notices, nor did she defend herself in court. Required to accept all of the complainant’s arguments as true, it was left to CIT only to decide whether the government made a good enough case of fraud to justify CBP’s penalty.

In order to assess penalties under 19 USC 1592, the relevant misstatements must be “material.” CIT noted that the dried peppers imported by Pacheco were duty free, so the government suffered no loss of revenue. Nonetheless, CIT found the misstated value on entry documentation to be “material” and subject to penalties because it affected CBP’s assessment of liquidated damages. Restricted merchandise like dried peppers is subject to redelivery, as was the case for Pacheco’s shipment, and liquidated damages if the goods aren’t redelivered as ordered. Had Pacheco stated the correct value, liquidated damages might have been assessed at over $6 million.

And although the broker Bustamante made the false statements, Pacheco could still be held liable as the importer, said CIT. “By providing her identity to Bustamante for $200 so that he could conduct customs business on his own behalf, Pacheco aided and abetted his fraud upon Customs,” said CIT. “Having given Bustamante a power of attorney, Pacheco, as principal, can be held liable for her agent Bustamante’s actions whether or not she authorized the specific unlawful conduct which constituted the violation of section 1592.”

Holding Pacheco liable for fraudulent violations of 19 USC 1592, and finding aggravating but no mitigating factors, CIT ordered Pacheco to pay a penalty of $2,651,312.18. The Justice Department did not comment on whether it is pursuing related charges against Dionicio Bustamante. CBP was unable to immediately respond.

(U.S. v. Pacheco, Slip Op. 15-111, CIT # 14-00289, dated 09/28/15, Judge Tsoucalas)