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Customs Broker Admits He Did It

SAN DIEGO (CN) - The former president of the San Diego Customs Broker Association pleaded guilty to overseeing a $100 Customs fraud ring that cost the United States $18 million in lost taxes, federal prosecutors said.

Gerardo Chavez, 42, pleaded guilty Thursday to conspiring to import Chinese and other foreign nations' good without paying import taxes, also known as Customs duties.

Chavez, of Spring Valley, directed co-conspirators to prepare paperwork falsely claiming that the imported goods were to be transshipped to Mexico or elsewhere, the U.S. Attorney's Office said in a statement.

"Chavez and codefendant Carlos Medina would hire truck drivers to haul the shipments to warehouses throughout Southern California," prosecutors said in the statement. "After generating the false paperwork and database entries, the goods would then be diverted back to Los Angeles and other destinations for shipment throughout the United States. As the conspirators had now effectively imported the goods tax-free, they could in turn sell more merchandise at cheaper prices, and reap greater profits, than their law-abiding competitors, including domestic American manufacturers of the same goods.

"As reflected in court records, Chavez's scheme led to the fraudulent importation of more than $100 million in foreign goods. In entering his plea, Chavez admitted causing more than $18 million in losses to federal, state and other taxing authorities. He also admitted aiding coconspirators by wiring money out of the United States to a business account in Hong Kong, China."

Medina, 34, of Chula Vista, also pleaded guilty Thursday, the U.S. Attorney's Office said.

Both will have to pay restitution, which in Chavez's case may come to $18 million.

Chavez faces a maximum sentence of more than 25 years in federal prison. Medina faces up to 5 years. Both will be sentenced on Jan. 14, 2013.


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