A Fashion District clothing company owner was sentenced Monday to a year in federal prison for running a scheme to undervalue imported garments and avoid paying millions of dollars in duties and taxes to the United States.
Ambiance Apparel owner Sang Bum “Ed” Noh agreed to forfeit $81.5 million as part of his plea deal, according to the U.S. Attorney’s Office.
The 67-year-old Bel Air man pleaded guilty last year to one federal count each of conspiracy and filing a false tax return.
Documents filed in Los Angeles federal court 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 U.S. Customs and Border Protection 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, prosecutors said.
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 documenting cash transactions of more than $10,000. Ambiance employees received 364 payments of more than $10,000 over a two-year period, totaling more than $11.1 million, and the company failed to file the required Form 8300 to alert federal authorities to the transactions, prosecutors said.
Prosecutors said 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 he failed to report income for those two years and 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.
Ambiance Apparel — the operating name for Ambiance U.S.A. Inc. and Apparel Line U.S.A. Inc. — pleaded guilty last year to eight counts, including conspiracy, money laundering and customs offenses, according to the U.S. Attorney’s Office. U.S. District Judge Virginia Phillips imposed a five-year probation term, which requires the company to maintain an anti-money laundering compliance and ethics program, and retain a corporate monitor.
Ambiance and Noh were ordered to pay more than $35 million in restitution owed to the Internal Revenue Service and CBP.