Friday, October 02, 2015

Duped "Importer" Liable for Customs Fraud

There have been several recent cases at the Court of International Trade that merit discussion. Two, in particular, are primarily of interest to lawyers. They show the truth of the old adage that bad facts make bad law.

The first is United States v. Jeanette Pacheco. In this case, the United States of America is pursuing Ms. Pacheco to the tune of $2.6 million for her "role" in a customs fraud scheme. The "scheme" went like this: A licensed customs broker named Dionicio Bustamante approached Pacheco in a nightclub. He offered her a way to make some fast cash and gave her $200 to sign a customs power of attorney. It is not clear that Pacheco had any additional contact with Bustamante thereafter.

After that, Bustamante began making entry of dried peppers, declaring the value to be $0.11 per kilogram. It turns out that a legally correct value was $3.75 per kilogram. When Customs and Border Protection queried Pacheco about the value, she failed to respond. To complicate matters, the FDA declared the peppers adulterated, refused entry, and demanded redelivery. Pacheco failed to redeliver the peppers to Customs and Border Protection. That resulted in a liquidated damages claim of $184 thousand.

CBP issued penalty and pre-penalty notices to Pacheco. Eventually, the government sued her to collect the penalty and she failed to respond. In this decision, the Court of International Trade imposed a default judgment on Pacheco.

Pacheco's failure to appear in Court acts as an admission of liability. But, the Court of International Trade must still determine the amount of the penalty to be imposed. In doing so, the Court noted that "by providing her identity to Bustamente for $200 so that he could conduct customs business on his own behalf, Pacheco aided and abetted his fraud upon Customs." That emphasis is mine. The Court also noted that as the principal in the relationship, Pacheco can be held liable for the acts of the agent, meaning the broker Bustamente.

Given that, the Court looked at the circumstances to determine the amount of the penalty to be imposed. The Court found some aggravating factors including failing to respond to a request for records and the fact that the importations threatened the public health and safety. Also, although it is not clear when it happened, it appears that Pacheco lied to Customs about whether the peppers were hers. On all of these facts, the Court imposed a penalty in the full amount requested by Customs: $2,651,312.

I hate this case. Not because it is wrong, but because it is probably right. Pacheco did so many things wrong here that she basically sealed her fate. But, there is another story that can be told. It appears that Pacheco made the very stupid choice of signing a power of attorney without any understanding of what that means. She did so for a quick $200, which ended up costing her (at least on paper) $2.6 million.

But, was she really the principal in this transaction? She was legally, because she signed the POA allowing Bustamante to make entry on her behalf. But, it also does not appear that she had any knowledge of the importations, she did not decide to undervalue the goods, she did not know the goods were adulterated. When she "lied" to Customs that the goods were not hers, I suspect she had no idea that the goods were being imported in her name. The peppers probably were not hers as far as she was concerned. As far as I can tell, she did not order them, did not pay for them, and did not take delivery of them.

I'm not even sure she was the principal. In agency law, the agent works for the principal. Here, the agent was working entirely for himself (or so it appears). He duped her into signing the document and then used her identity to make fraudulent imports. I don't see why that is not a mitigating circumstance. My assumption is that Bustamante is the subject of his own penalty case and may even be subject to criminal prosecution. I don't know what happened to him.

This is a bad set of facts. Obviously, Pacheco should never have signed the POA. She should have responded to CBP. She should have responded to the penalty notices. She should have thrown Bustamante under the first bus she could find. But, despite all those mistakes, what we seem to have is identity theft with the victim now on the hook for $2.6 million. While that is probably legally correct, that seems wrong.

9 comments:

Anonymous said...

To me, the facts are murky, and this puts the decision on shaky ground. A Customs import bond is needed for a Customs entry. Did Pacheco actually obtain an IOR Customs bond for these entries; or did she already have one? Did the broker use Pacheco's Customs bond or the broker's bond for the entries? Did Pacheco actually buy and sell the peppers? The decision states that "she provided him with a power of attorney to allow him to use her name to conduct customs business on his own behalf" and that "Pacheco procured a bond at a significantly lower amount, entered the merchandise and sold it for consumption in the U.S." It would appear that Pacheco did not buy or sell the peppers, and the broker's conduct was on "his own behalf." It is unclear if Pacheco was involved in securing a bond and whether her bond was used or not. Criminal conduct can break the link between principal and agent, and the judge should have put the Government to the test and develop those facts, at a minimum, in applying the penalty guidelines. In addition, no mention is made of judicial Complex Machine factors. Bad[ly developed] facts make bad[ly applied] law.

Larry said...

International Trade Today reported on October 1 that Customs is "aware" of the apparent involvement of the broker in this situation. However, citing agency regulations, Customs refused to comment on whether it is taking action against the broker. Keep in mind, that whether the broker is punished is somewhat separate from my concern that the punishment assessed against the individual is too high given her role compared to the role of the broker.

prophet of doom said...

I just saw your comment on this case. I have many problems with the decision. The 8th Amendment to the U.S. Constitution provides that excessive fines shall not be imposed and that any fine must have a degree of proportionality to the offense. This case has, in fact, been applied to U.S. Customs when certain parts of the currency seizure laws were struck down by the U.S. Supreme Court. In this case I think that the penalty is disproportionate to the penalty. Grossly disproportionate.

But that's not the biggest problem. Federal Judges are supposed to apply the law fairly and avoid gross mis-carriages of justice. In other words, just because the United States asked for the relief, it does not mean that the Court should award the relief. In fact, other CIT Judges have rejected penalty cases in which the defendant defaults and refused to simply "approve" the decision. It is hard to fathom why this happened in this case. This claim is so over the top that the Court should have had grave concerns.

And, for course, to add "insult to injury", the broker at issue went to the CIT and convinced the Court to re-issue this opinion to remove their name.

jenna p said...

Thank u I think, I am amazed to find people discussing my surpeise case!?? I had no role whatsoever except being a stupid gf to the biggest schemer i ever knew.he or the broker himself or HIS gf, forged my signature on POA and before I knew it I was being hauled to the bridge in Mex. Being scolded and questioned to my surprise.. My ex answered all the agents questions, not me..that should have tipped they off. F***end up and said the dry peppers were NOT mine..i had no idea what that even meant.what do u mean not yours?? Your the IOR, I froze, I literally had not one thing to say. My ex took over and he was only starting to betray me. But somehow my story which was all a lie anyway, gets to be center attention on the court docs against me. No one notified me, talked to me, no letters. Shit, I guess this is our America now..innocent ignorants are easier to say case closed to then going after the real bad guys like the broker and getting these stupid agency regs updated...I mean what the f??

jenna p said...

Thank u I think, I am amazed to find people discussing my surpeise case!?? I had no role whatsoever except being a stupid gf to the biggest schemer i ever knew.he or the broker himself or HIS gf, forged my signature on POA and before I knew it I was being hauled to the bridge in Mex. Being scolded and questioned to my surprise.. My ex answered all the agents questions, not me..that should have tipped they off. F***end up and said the dry peppers were NOT mine..i had no idea what that even meant.what do u mean not yours?? Your the IOR, I froze, I literally had not one thing to say. My ex took over and he was only starting to betray me. But somehow my story which was all a lie anyway, gets to be center attention on the court docs against me. No one notified me, talked to me, no letters. Shit, I guess this is our America now..innocent ignorants are easier to say case closed to then going after the real bad guys like the broker and getting these stupid agency regs updated...I mean what the f??

jenna p said...

WTF..I recently came to find legal papers against me for 2.6 million on a international trade fraud thing. The united States court of Intl. Trade. I was a simple minded ignorant that didn't suspect a thing..a guy I know basically used me, my name, to be importer on record, I never signed the power of att. Paper, forged my signature and a customs broker knowing it was a unspoken common thing that goes on..put it all on me that I defaulted in not returning trailers back to Mex. Fda refused the entry's but by then the loads are already gone up to new York, LA, Chicago to be sold and eaten. Homeland security have to know I was never involved in the architecture of it all, but I know a lot of things...how is the broker not at all the main culprit?? It astounds me, its up to these brokers what gets allowed into USA and if u need to do returns then that's on you to not let them leave without fda approval. But becuz someone forged my signature and totally fooled... Then beaten to not say a word..I thought I was opening a legit prodcuce business. Court house, paid $12 and opened a D.B.A. under my name..anyone can do it. Let alone to find out its all gonna be faked.this was in 2009/10..and I'm barely seeing the whole huge under belly. I have to know if you've ever heard of this, dealt with this. Its not american or just for this to have happened..and the real criminals get to keep on repeating it? Looking for a passionate lover of law /justice..there must be a way to argue/explain my side as a stupid girl in "love" ,in fear, manipulated, into this world of people I had no clue even existed...but its there and I know it now and I got a story, documents upon documents. Dammn

jenna p said...

Its so creepy stumbling across a site where people are actually discussing this "case" and just believe and discuss it as a matter of fact. Its not a fact...its all untrue..I had to make up a story and homeland refused to believe that I never even met the broker. So its like OK..I'm gonna get beat up bad at home or worse, locked in a jail cell if I don't say something. This is totally bullshiiii, and really disgusts me that the govt, knowing full well at least after face to face meeting that there is no way I'm involved... But on the flip side..I know a lot, a lot...a lot of what I just happened to see or be around or meet day to day..no big alarm I just thought this was work. But it wasn't work or could have been had the trailers not be allowed to take off unless FDA approved.

jenna p said...

Man, I'm just doomed to be the patsy..all for the joy of the criminals who r still doing this, putting crap produce not fda approved in people's homes and meals..and the us govt for letting it be repeated instead of updating the regulations..how is this not all on the brokers, like seriously... Massive massive loop hole.. My name will die in debt...money I can't even imagine being to make in a lifetime. Hopefully trump will balance things out and call out what should be called out. Shame on this country, it really needs to be stopped. Pay attention to your food.. Especially dry hot peppers

jenna p said...

I don't know how to get a bond...not even a freakin bail bond. But I remember someone else trying to secure bonds online, my guess now is that must have been some other idiot either willing and knowing or just stolen and bought identitys of unsuspecting victims... Freakin crap.