Manhattan’s U.S. Attorney said Wednesday that he simultaneously filed and settled a civil fraud lawsuit with Hong Kong-based Noble Jewelry Ltd. and its New York subsidiary Chad Allison Corp.
According to Preet Bharara, U.S. attorney for New York’s Southern District, the jewelry companies used bogus invoices to cheat the U.S. government out of more than $1 million in customs duties over the course of a decade.
The defendants did not return calls for comment by press time.
In the settlement, approved by Judge John Koeltl, the defendants accepted responsibility for under reporting the value of their imported goods, and agreed to pay $3.9 million as damages and penalties under the False Claims Act.
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“Companies that break our nation’s customs laws gain an unfair advantage over law-abiding competitors,” said James Hayes Jr., a special agent from the Office of Immigration and Customs Enforcement’s Homeland Security Investigations unit.
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“ICE HSI will use all of its resources to investigate companies that try to beat the system and bring them to compliance.”
Filed in Manhattan federal court, the complaint said from about 1998 to 2010, the jewelry companies defrauded the government in order to avoid the payment of customs duties by presenting fake invoices, which “significantly understated” the value of the imported jewelry. Those invoices were used to calculate customs duties, according to the U.S. attorney, who added that the defendants maintained a second set of books with accurate invoices, which were originally withheld from the government.
In one instance, Noble Jewelry shipped a parcel, fraudulently declaring its value in the amount of $140,763. Based on that bogus invoice, Noble paid a duty of $7,795.61, or about 5.5 percent of the declared value. The true value of the merchandise was $200,446. The duty on that amount was $11,064.47, or roughly 5.5 percent of the true value of the merchandise, and according to the lawsuit, was about 40 percent greater than the amount actually paid by the defendants.
As a result, the jewelry companies caused the U.S. damages totaling $3,268.86.
Allegations of such episodes of fraud were brought to the attention of law enforcement by a whistle-blower, who filed a lawsuit under the False Claims Act. The act allows private parties to file suit on behalf of the government and share in the recovery. The government may then intervene and file its own suit for treble damages and penalties, as it did in this case.