When Importers Cheat Customs: Los Angeles Apparel Company Sentenced for $8 Million Duty Evasion — and Why Whistleblowers Matter

Federal prosecutors recently announced the sentencing of a Los Angeles-based apparel importer and its executives for a sweeping customs fraud and money laundering scheme — a case that highlights how import duty evasion can trigger not only criminal prosecution, but also potential liability under the False Claims Act (FCA). The FCA allows private whistleblowers to file suit on behalf of the government, and the whistleblower can earn an award up to 30% of the proceeds, plus attorneys’ fees.

A Pattern of False Declarations and Hidden Cash

C’est Toi Jeans Inc. (“CTJ”), a wholesale clothing importer located in downtown Los Angeles’s Fashion District, and two of its executives were sentenced for evading more than $8 million in customs duties, laundering money, and concealing over $17 million in unreported cash income.

CTJ systematically undervalued clothing imports from China and other countries to avoid paying the full amount of tariffs owed to U.S. Customs and Border Protection (CBP). Over the course of several years, the company wired more than $137 million to foreign suppliers for shipments that were intentionally undervalued by over $51 million, depriving the U.S. government of $8.4 million in customs revenue.

The defendants were also convicted of laundering bulk cash payments derived from drug trafficking, failing to file required currency transaction reports, and omitting millions from their corporate tax filings. Collectively, the company and its executives were ordered to pay tens of millions in fines and restitution and sentenced to lengthy prison terms.

Customs Fraud and the False Claims Act

While the CTJ case was prosecuted as a criminal matter, the underlying conduct — submitting false information to CBP to reduce duties owed — is the kind of fraud that can also violate the False Claims Act.

Under the FCA, it is illegal to knowingly make false statements or submit false records to the U.S. government to avoid paying money owed. In the customs context, that can include:

• Undervaluing imported merchandise on invoices or entry summaries;
  
• Misclassifying goods to obtain a lower tariff rate; or
  
• Concealing country-of-origin information to bypass trade remedies or quota restrictions.

When companies do this, they are defrauding the United States — and the False Claims Act allows the government, or private whistleblowers acting on its behalf, to recover treble damages and substantial civil penalties.

Whistleblowers Can Take Action

The qui tam provisions of the False Claims Act empower private individuals with inside knowledge of customs fraud to file a case confidentially on behalf of the United States. If the government recovers funds, the whistleblower (known as the “relator”) may be entitled to 15–30% of the total recovery, which could add up to millions of dollars.

In customs cases, whistleblowers often include freight forwarders, customs brokers, import managers, accountants, or other insiders who recognize falsified invoices or irregular entry values — the very evidence that often exposes duty evasion. Early legal consultation is essential to ensure the best possible outcome for the case.

Our Firm’s Experience

At Liang + Mooney PLLC our firm represents both companies and individuals in complex customs and trade fraud matters, including False Claims Act and qui tam cases involving undervaluation, transshipment, and import duty evasion.

If you have credible information that a company is undervaluing imports or making false declarations to CBP, you may be able to take action under the False Claims Act. We can help you confidentially evaluate your options and guide you through the process of bringing a whistleblower action. Contact us to schedule a consultation.