A Fashion District clothing company and its owner pleaded guilty Friday to federal charges for a scheme to undervalue imported garments and avoid paying millions of dollars in duties and taxes to the United States.
Ambiance Apparel — the operating name for two corporations, Ambiance U.S.A. Inc. and Apparel Line U.S.A. Inc. — pleaded guilty to eight counts, including conspiracy, money laundering and customs offenses, according to the U.S. Attorney’s Office.
Ambiance owner Sang Bum “Ed” Noh, 66, of Bel Air, pleaded guilty to one count each of conspiracy and filing a false tax return and will be sentenced on April 26, prosecutors said.
U.S. District Judge Virginia Phillips accepted Ambiance’s binding plea agreement and imposed a five-year probation term, which requires the company to create/maintain an anti-money laundering compliance and ethics program, and retain an independent corporate monitor. Ambiance was also ordered to pay more than $35 million in restitution owed to the Internal Revenue Service and U.S. Customs and Border Protection, and the court entered the money judgment of forfeiture for more than $81 million as agreed to by the parties, federal prosecutors said.
Court documents outline separate schemes involving Ambiance and Noh, ending in September 2014 when law enforcement authorities executed dozens of search warrants as part of an investigation into money laundering and other crimes at Fashion District businesses.
In the customs fraud scheme, Ambiance imported clothing from Asian countries and submitted fraudulent invoices to CBP that undervalued the shipments and allowed Ambiance to avoid paying the full amount of tariffs owed on the imports.
At Noh’s direction, the Asian manufacturers prepared two invoices for the clothing ordered by Ambiance — one that usually reflected 60% to 70% of the actual price and was paid by letter of credit, and one that reflected the balance of the actual price and was paid by wire transfer. The first invoice, which fraudulently reduced the value of the shipment, was submitted to CBP and was used to calculate the tariffs due on the imports.
As a result of the scheme, over the course of 4 1/2 years, Ambiance undervalued imports by about $82.6 million and failed to pay more than $17.1 million in tariffs, according to the government.
In the second scheme outlined in court papers, Ambiance admitted it failed to file reports with the Secretary of the Treasury that documented cash transactions of more than $10,000. Ambiance employees received 364 payments of more than $10,000 over a two-year period — which totaled more than $11.1 million — and the company failed to file a single Form 8300 to alert federal authorities to the cash transactions, prosecutors said.
In conjunction with those cash transactions, Ambiance used two sets of books to record sales, one of which documented only cash transactions and was not reported to Ambiance’s outside accountants. Noh also directed some of the second set of transactions to be underreported to the accountants.
The lower sales figures were reported on 2011 and 2012 tax returns filed by Noh. He admitted that he failed to report income for those two years and now owes the Internal Revenue Service a total more than $16.8 million, which includes unpaid taxes, penalties and interest, according to the U.S. Attorney’s Office.
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