The Boston Business Journal reports on the case of a customs broker intentionally misleading a Danish company into paying customs duties on duty-free items.
Gregory Manuelian, the customs broker, was sentenced today to 24 months in prison, followed by 3 years of supervised release. The company, B-K Medical systems, is a Danish subsidiary of Analogic Corporation. They discovered the scheme in 2006 - after Manuelian had defrauded the company over time out of $1.2 million.
How did he do it? Lying about Trade Compliance! (The horror!)
The Boston Business Journal gives a good overview in layman's terms:
During the course of Manuelian’s fraud, the U.S. Attorney’s Office said, B-K reimbursed him for invoices he faxed to the Massachusetts company, which showed money owed on duties and brokerage fees. However, in 2006 the U.S. Department of Commerce had begun to eliminate the duties on the very type of medical equipment that B-K imports and, by 2009, those goods were completely duty free.
To legitimize his customs forms, Manuelian mailed fake customs forms to B-K that showed customs fees of 5.3 percent of the medical equipment’s value. The amounts of Manuelian’s invoices ranged from $1,000 to $9,000, according to the U.S. Attorney’s Office.
But, I know all you trade compliance pros want to know the real details, so here is some elaboration from the Department of Justice (Massachusetts) release announcing Manuelian's charges in 2005- before today's announcement of his conviction.
After 1999, the U.S. Government phased out duties on the medical equipment that B-K imported, but MANUELIAN continued to represent to B-K that he was paying duties on B-K's behalf. In fact, he paid no such duties. MANUELIAN provided B-K with bogus forms showing that a duty was owed on the medical equipment, usually equal to 5.3% of their import value.
The bogus Customs Forms 7501 that MANUELIAN prepared often described the medical equipment as "electric cables," which were components of the equipment. According to the Indictment, MANUELIAN further concealed his fraud by falsely reporting to B-K personnel that, by characterizing the goods in such fashion, B-K would qualify for a duty lower than that which applied to medical equipment.
It is alleged that, through these misrepresentations, MANUELIAN repeatedly induced B-K to reimburse Marquis Clearance for duties that Marquis Clearance never actually paid, in amounts ranging from $1000 to $9000. It is also alleged that over the course of his scheme, MANUELIAN submitted over three hundred fraudulent invoices to B-K, which induced B-K to pay a total of over $1.1 million to Marquis Clearance.
If convicted on these charges, MANUELIAN
Manuelian faced up to 20 years imprisonment, to be followed by three years of supervised release and a $250,000 fine on each of the wire fraud counts, and 5 years imprisonment, 3 years supervised release and a $250,000 fine on each of the forged customs document counts. He ended up receiving 2 years imprisonment and 3 years supervised release.
Hmm, I get the feeling there's a lesson here. He intentionally classified the items correctly when submitting to CBP but then gave the company falsified documents listing the incorrect classifications, so that the duty charges would appear to be 5.3% of the items' value. If the company had a way to electronically submit these records, receiving an actual copy of what the broker submitted, this would have been discovered immediately. Or, at the very least, they should have an expert double-check their broker's work (which may be how the fraud was discovered.)
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