Manhattan Attorney General Announces Criminal and Civil Charges Against Apparel Company CEO for Engaging in Customs Fraud | USAO-SDNY



Audrey Strauss, United States Attorney for the Southern District of New York, Peter C. Fitzhugh, Special Agent in Charge of the New York Office of the United States Department of Homeland Security, Homeland Security Investigations (“HSI”), and Marty Raybon, Acting Director, Field Operations, New York, US Customs and Border Protection (“CBP”), announced the filing of criminal and civil charges against GEORGE ILOULIAN, a / k / a “George Illulian” , the CEO of a clothing company located in New York, New York. ILOULIAN was accused, in an unsealed indictment yesterday, of participating in a multi-year scheme to defraud CBP by submitting invoices to CBP that falsely underestimated the true value of the goods his company was importing to United States, thus avoiding the obligation to pay hundreds of thousands of dollars in tariffs.

ILOULIAN was arrested yesterday and brought before US District Judge James L. Cott in Federal Court in Manhattan. The criminal case was assigned to US District Judge Paul G. Gardephe. In addition, a civil fraud lawsuit against ILOULIAN and his company, DELTA UNIFORMS, INC. (“DELTA”), which is also attributed to Judge Gardephe, was unsealed in federal court in Manhattan earlier today. The civil lawsuit claims that ILULIAN and DELTA violated the False Claims Act by distorting the true value and nature of the goods they imported into the United States on the entry documents submitted to CBP. The conduct in this case was first brought to the attention of federal law enforcement by a whistleblower who filed a lawsuit under the False Claims Act.

Manhattan American attorney Audrey Strauss said: “As alleged, George Iloulian defrauded hundreds of thousands of dollars in the United States by having false documents distorting the value of imported goods to be submitted to CBP for avoid paying the legally owed customs duty. Iloulian now faces criminal charges for his alleged fraud, and the government’s civil lawsuit seeks damages and triple penalties against Iloulian and his company.

HSI Special Agent Peter C. Fitzhugh said: “Iloulian would have escaped the obligation to pay hundreds of thousands of dollars in tariffs by using a double-billing system, essentially creating two invoices, one for payment and one for customs. HSI New York and US Customs and Border Protection will continue to partner to protect US commerce from perpetrators who willfully defraud the US government for profit.

CBP New York Acting Field Operations Director Marty Raybon said, “US Customs and Border Protection are proud to have played an important role in this ongoing investigation which has resulted in the dismantling of ‘an elaborate plot to defraud the United States of hundreds of thousands of dollars. In income. This case is a prime example of collaborative law enforcement efforts to uncover and dismantle nefarious companies that seek to defraud the United States government for personal gain while causing economic harm to their competitors.

Based on the allegations contained in the indictment and the government’s civil complaint[1]:

From at least in or around 2010 until at least in or around 2020, ILOULIAN and other known and unknown people, including people associated with foreign manufacturers, conspired to submit fraudulent invoices to CBP which under- estimated the value of clothing imported into the United States, depriving the United States of hundreds of thousands of dollars in customs revenue. ILOULIAN and his co-conspirators obtained lower tariffs on imported goods in two ways: (i) a “double-billing system” and (ii) a “fabric-like system”.

To implement the double billing system, which was perpetrated by ILOULIAN and his co-conspirators from at least in or around 2010 until at least in or around 2020, ILOULIAN used two invoices: one invoice, sometimes mentioned by ILOULIAN and his fellow conspirators as the “actual invoice” or the “for payment” invoice, contained higher prices and reflected what DELTA was actually paying foreign manufacturers for the clothing. The second invoice, which they sometimes called the “customs invoice” or the “customs declaration” invoice, contained falsely lower prices. The information contained in the customs invoice was submitted by DELTA, through a customs broker (the “Customs Broker”), to CBP. CBP relied on the customs invoice information to assess and collect customs duties from DELTA. As a result, by presenting the false customs invoices to CBP, DELTA was able to fraudulently pay customs duties lower than those actually owed by DELTA. In one version of the double-billing system, DELTA ordered a foreign manufacturer to send DELTA two sets of invoices for the same shipment of goods, the actual invoice and the customs invoice. In a second version of the double invoicing system, the foreign manufacturer provided DELTA only with the actual invoice; a customs invoice was created by other means and provided by DELTA to the customs broker.

From at least in or around 2011 until at least in or around 2016, ILOULIAN and his co-conspirators have also engaged in a fabric-type program. To implement the fabric type regime, DELTA ordered a foreign manufacturer to distort the fabric composition of clothing in order to obtain a lower duty rate. Specifically, the invoice would state that the imported goods were made primarily from cotton rather than man-made fibers, even if the reverse was true. The forged invoices were then presented to CBP, which allowed DELTA to pay lower tariffs than actually owed to DELTA, as materials containing more cotton than synthetic materials are subject to lower tariff rates.

These multi-year fraud schemes have resulted in the loss of hundreds of thousands of dollars in customs revenue for the United States.

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ILOULIAN is charged with one count of conspiracy to commit wire fraud, punishable by up to 20 years in prison, one count of wire fraud, punishable by a maximum of 20 years in prison, and one count of falsely bringing goods into the United States, punishable by a maximum sentence of two years. The potential maximum sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any conviction of the defendant will be determined by the judge. ILOULIAN and DELTA are also charged with civil suits under the False Claims Act, whereby the government can recover treble damages and civil penalties arising from its conduct.

Ms. Strauss thanked HSI, CBP and the Special Agents of the United States Attorney’s Office for the Southern District of New York for their efforts and continued support and assistance in the case.

The criminal case is handled by the Bureau’s General Crimes Unit, and US Deputy Prosecutor Kaylan E. Lasky is in charge of the prosecution.

The civil case is handled by the Civil Fraud Unit of the Bureau, and Assistant US Attorney Dominika Tarczynska is in charge of the case.

The charges contained in the indictment are only charges and the accused is presumed innocent until proven guilty.

[1] As the introductory sentence indicates, the entire text of the Indictment and Civil Complaint, as well as the descriptions of the Indictment and Civil Complaint set out herein, constitute only allegations, and each fact described should be treated as an allegation.


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