United States v. Pacheco

Slip Op. 15-
UNITED STATES COURT OF INTERNATIONAL TRADE
________________________________
:
UNITED STATES, 	:
:
Plaintiff, 	: Before: Nicholas Tsoucalas,
: 	Senior Judge
v. 	:
: Court No.: 14-00289
JEANETTE PACHECO, 	:
:
Defendant, 	:
:
AND 	:
:
INDIVIDUAL A, 	:
:
Intervenor. 	:
________________________________:
OPINION
[Plaintiff’s Motion for Entry of Default Judgment is granted.]
Dated: September 28, 2015
Amended: _________________
Stephen 	C. 	Tosini, 	Senior 	Trial 	Counsel, 	Department 	of 	Justice,
Civil Division, Commercial Litigation Branch, of Washington, D.C.,
for 	Plaintiff. 	With 	him 	on 	the 	brief 	were 	Benjamin 	C. 	Mizer,
Principal 	Deputy 	Assistant 	Attorney 	General, 	Jeanne 	E. 	Davidson,
Director, and Patricia M. McCarthy, Assistant Director.
Luis F. Arandia, Jr. and Robert T. Givens, Givens & Johnston, PLLC,
of Houston, TX, for Intervenor.
Tsoucalas, 	Senior 	Judge: 	Before 	the 	court 	is 	United
States’ 	(“Plaintiff”) 	Motion 	for 	Default 	Judgment 	seeking
$2,651,312.18 	in 	civil 	penalties 	plus 	interest, 	costs, 	and 	fees
against 	Defendant 	Jeanette 	Pacheco 	(“Pacheco”) 	for 	fraud 	under
section 	592 	of 	the 	Tariff 	Act 	of 	1930, 	as 	amended, 	19 	U.S.C. 	§
111
February 11, 2016
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1592 	(2012).1 	Pl.’s 	Mot. 	for 	Entry 	of 	Default 	J. 	at 	6, 	July 	7,
2015, 	ECF 	No. 	9 	(“Pl.’s 	Br.”). 	For 	the 	following 	reasons,
Plaintiff’s motion is granted.
From 	October 	29, 	2009, 	to 	approximately 	December 	23,
2009, Pacheco entered thirty six entries of dried peppers into the
United States from Mexico. 	Pl.’s Br. Decl. of Liza Lopez at ¶ 2,
June 	22, 	2015. 	Individual 	A 	was 	the 	licensed 	customs 	broker 	for
each 	entry.2 	Id. 	at 	¶ 	3. 	Homeland 	Security 	Investigations
conducted 	an 	investigation 	in 	which 	they 	discovered 	that
Individual 	A 	approached 	Pacheco 	in 	a 	nightclub 	and 	told 	her 	that
Individual 	A 	had 	a 	way 	to 	make 	“fast 	cash.” 	Pl.’s 	Br. 	Report 	of
Investigation Ex. B, at 2. 	Subsequently, Individual A gave Pacheco
$200, 	and 	in 	exchange, 	she 	provided 	Individual 	A 	with 	a 	power 	of
attorney to allow Individual A to use her name to conduct customs
business on Individual A’s own behalf. 	Id.
The 	entry 	documents 	submitted 	to 	Customs 	and 	Border
Protection 	(“CBP”) 	declared 	a 	transaction 	value 	of 	approximately
$0.11 per kilogram of dried peppers. 	Pl.’s Br. Decl. of Liza Lopez
1 Further citations to the Tariff Act of 1930 are to the relevant
portions of Title 19 of the U.S. Code, 2012 edition, and all
applicable amendments thereto, unless otherwise noted.
2 Individual A filed a Motion to Intervene for the limited purpose
of amending the Court’s Opinion and removing Individual A’s name
from the Opinion. 	Initially, Plaintiff opposed Individual A’s
Motion; however, thereafter, Plaintiff stated in a
teleconference that it no longer opposed the Motion. 	The Court
granted the Motion.
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at 	¶ 	5. 	The 	median 	transaction 	value 	for 	identical 	or 	similar
shipments 	of 	dried 	peppers 	is 	$3.75 	per 	kilogram. 	Id. 	at 	¶ 	7.
Based on the aforementioned transaction values, CBP was concerned
that 	the 	dried 	peppers 	were 	undervalued, 	and 	consequently 	it
requested 	documents 	to 	verify 	the 	claimed 	transaction 	value
through 	proof 	of 	payment 	and/or 	the 	terms 	of 	sale 	agreement 	for
the entries. 	Id. at ¶ 6. 	Pacheco failed to provide documentation
to 	corroborate 	the 	declared 	transaction 	value 	of 	$0.11 	per
kilogram. 	Id. 	at 	¶ 	8. 	Consequently, 	CBP 	appraised 	the 	entries
using 	a 	transaction 	value 	for 	similar 	merchandise 	to 	determine 	a
dutiable value of $2,285,550.00. 	Id. at ¶ 9.
The 	Food 	and 	Drug 	Administration 	(FDA) 	issued 	a 	Notice
of FDA Action refusing these entries as adulterated under section
402 	of 	the 	Federal 	Food, 	Drug, 	and 	Cosmetic 	Act, 	21 	U.S.C. 	§ 	342
(2012)3 and 	barred 	them 	from 	entering 	the 	commerce 	of 	the 	United
States under 21 U.S.C. § 381(a). 	Id. at ¶ 12. 	The Notice of FDA
Action 	required 	Pacheco 	to 	redeliver 	the 	entries 	for 	exportation
or destruction. 	Id. 	Pacheco failed to redeliver the goods. 	Id.
at ¶ 13.
3 Further citations to the Federal Food, Drug, and Cosmetic Act
are to the relevant portions of Title 21 of the U.S. Code, 2012
edition, and all applicable amendments thereto, unless otherwise
noted.
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As 	a 	result 	of 	Pacheco’s 	failure 	to 	redeliver 	the
entries, CBP assessed claims for liquidated damages for the subject
entries 	at 	the 	$0.11 	per 	kilogram 	figure 	provided 	by 	Pacheco 	for
a 	total 	of 	$184,419.00. 	Id. 	at 	¶ 	10; 	Pl.’s 	Br. 	Jeanette 	Pacheco
Claims for Liquidated Damages, Ex. D.
CBP issued a Pre-Penalty notice to Pacheco on April 16,
2013, informing her that it sought a monetary penalty in the amount
of $2,651,312.18 for fraud under 19 U.S.C. § 1592. 	Pl.’s Br. Pre-
Penalty Notice Ex. F, at 1.
On April 24, 2013, CBP issued a penalty notice to Pacheco
seeking $2,651,312.18 for fraud under 19 U.S.C. § 1592. 	Pl.’s Br.
Penalty 	Notice 	Ex. 	G, 	at 	1-2. 	CBP 	sent 	to 	Pacheco 	demands 	for
payment of the penalty on May 7, 17, & 30, 2013, and June 14, 2013.
Pl.’s 	Br. 	Decl. 	of 	Liza 	Lopez 	at 	¶ 	18. 	To 	date, 	CBP 	has 	not
received any payments from Pacheco. 	Id. at ¶ 19.
Plaintiff filed the instant action on October 29, 2014.
Compl., Oct. 29, 2014, ECF No. 2. 	Pacheco failed to answer or
otherwise 	respond 	to 	the 	complaint. 	As 	a 	result, 	the 	Clerk 	of
Court entered Pacheco’s default on May 19, 2015. 	Entry of Default,
May 19, 2015, ECF No. 8. 	Plaintiff now moves for entry of default
judgment. 	Pl.’s Br. at 1.
JURISDICTION
The 	court 	possesses 	jurisdiction 	under 	section 	201 	of
the 	Customs 	Courts 	Act 	of 	1980, 	28 	U.S.C. 	§ 	1582(1) 	(2012) 	over
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this 	civil 	penalty 	action 	brought 	by 	the 	United 	States 	under 	19
U.S.C. § 1592.
DISCUSSION
Pursuant to 19 U.S.C. § 1592(e)(1), the Court determines
all issues de novo, including the amount of any penalty. 19 U.S.C.
§ 1592(e)(1). 	In evaluating a motion for a default judgment, the
Court 	accepts 	as 	true 	all 	well-pled 	facts 	in 	the 	complaint 	but
must reach its own legal conclusions. 	United States v. Callanish
Ltd., 	37 	CIT 	____, 	____, 	Slip 	Op. 	13-43 	(Mar. 	28, 	2013) 	(citing
Nishimatsu 	Constr. 	Co., 	Ltd. 	v. 	Hous. 	Nat’l 	Bank, 	515 	F.2d 	1200,
1206 (5th Cir. 1975)). 	“Although a defendant’s default acts as an
admission 	of 	liability 	for 	all 	well-pled 	facts 	in 	the 	complaint,
it 	does 	not 	admit 	damages.” 	United 	States 	v. 	Freight 	Forwarder
Int’l, 39 CIT ____, ____, 44 F. Supp. 3d 1359, 1362 (2015) (citing
Greyhound 	Exhibit 	Grp. 	Inc. 	v. 	E.L.U.L. 	Realty 	Corp., 	973 	F.2d
155, 	158 	(2d 	Cir. 	1992)). 	“An 	entry 	of 	default 	alone 	. 	. 	. 	does
not 	suffice 	to 	entitle 	a 	plaintiff 	to 	the 	relief 	that 	it 	seeks.”
United 	States 	v. 	Country 	Flavor 	Corp., 	36 	CIT 	____, 	____, 	825
F.Supp. 	2d 	1296, 	1301 	(2012). 	“Even 	after 	an 	entry 	of 	default,
‘it 	remains 	for 	the 	court 	to 	consider 	whether 	the 	unchallenged
facts 	constitute 	a 	legitimate 	cause 	of 	action, 	since 	a 	party 	in
default 	does 	not 	admit 	mere 	conclusions 	of 	law.’” 	Id. 	(quoting
10A C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure
§2688, p. 63 (3d ed. 1998)). 	“Because section 592(e) directs that
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the 	court 	determine 	‘de 	novo’ 	the 	amount 	of 	penalty 	to 	be
recovered, 	the 	penalty 	cannot 	be 	considered 	a 	‘sum 	certain’ 	to
which 	plaintiff 	has 	established 	its 	entitlement 	as 	a 	matter 	of
right.” 	United 	States 	v. 	Inner 	Beauty 	Int’l 	(USA) 	Ltd., 	35
CIT____, ____, Slip Op. 11-148 (Dec. 2, 2011).
In 	the 	case 	at 	bar, 	the 	Clerk 	of 	Court 	has 	entered 	the
Defendant’s 	Default, 	and 	Plaintiff 	supported 	the 	Motion 	for
Default 	Judgment 	with 	an 	affidavit 	showing 	the 	amount 	due. 	Entry
of 	Default; 	Compl. 	at 	¶27, 	Ex. 	B; 	Pl.’s 	Br. 	Decl. 	of 	Liza 	Lopez.
Thus, 	the 	court 	must 	address 	whether 	the 	unchallenged 	facts
constitute 	a 	legitimate 	cause 	of 	action 	and 	what 	amount, 	if 	any,
should be awarded Plaintiff.
1. The Unchallenged Facts Constitute a Legitimate Cause of
Action Per § 1592
Under 19 U.S.C. § 1592(a)(1) it is unlawful for a person,
by 	fraud 	to 	enter, 	introduce, 	attempt, 	or 	aid 	or 	abet 	any 	other
person in introducing merchandise into the commerce of the United
States by means of any document or electronically transmitted data
or information, written or oral statement, or act which is material
and 	false, 	or 	any 	omission 	which 	is 	material. 	19 	U.S.C.
§1592(a)(1). 	“A document, statement, act, or omission is material
if 	it 	has 	the 	natural 	tendency 	to 	influence 	or 	is 	capable 	of
influencing 	agency 	action 	including, 	but 	not 	limited 	to 	a 	. 	.
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.[d]etermination 	of 	the 	classification, 	appraisement, 	or
admissibility of merchandise . . . .”) 19 C.F.R. Part 171, appendix
B § (B) (2015) (“Penalty Guidelines”).
In 	the 	instant 	case, 	the 	misrepresented 	entered 	value
was 	material 	because 	it 	influenced 	CBP’s 	decision 	regarding 	the
admissibility of the peppers. 	Restricted merchandise such as dried
peppers are subject to inspection, may be conditionally released,
or 	the 	shipment 	may 	be 	placed 	on 	hold 	and 	later 	refused 	entry.
Customs may request redelivery of the refused shipment. 	A refusal
to 	comply 	with 	the 	redelivery 	requirement 	may 	result 	in 	Customs
assessing 	liquidated 	damages 	at 	three 	times 	the 	value 	of 	the
merchandise. 	19 C.F.R. § 141.113(c)(3) (2015). 	Customs assessed
liquidated damages in the amount of $184,419.00 relying on the low
values provided by the importer. 	Pl.’s Br. Jeanette Pacheco Claims
for Liquidated Damages Ex. D, at 1-2. 	Had the importer given the
correct 	value 	of 	$3.75 	per 	kilogram, 	Customs 	would 	have 	assessed
liquidated damages at $6,856,650.00 and required that the importer
post a bond in the amount of $6,856,650.00 or refused entry to the
merchandise. 	Pl.’s Br. Decl. of Liza Lopez Ex. A, at ¶ 11. 	Rather,
Pacheco 	misrepresented 	the 	value 	of 	the 	peppers, 	procured 	a 	bond
at 	a 	significantly 	lower 	amount, 	and 	sold 	the 	merchandise 	for
consumption in the U.S. 	Id.
Furthermore, by providing the power of attorney for $200
so that Individual A could conduct customs business on Individual
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A’s 	own 	behalf, 	Pacheco 	aided 	and 	abetted 	Individual 	A’s 	fraud
upon 	Customs. 	Pl.’s 	Br. 	Report 	of 	Investigation 	Ex. 	B, 	at 	2.
Having 	given 	Individual 	A 	a 	power 	of 	attorney, 	Pacheco, 	as
principal, can be held liable for her agent Individual A’s actions
whether or not she authorized the specific unlawful conduct which
constituted 	the 	violation 	of 	section 	1592. 	See 	United 	States 	v.
Pan Pac. Textile Grp. Inc., 29 CIT 1013, 1022-23, 395 F. Supp. 2d
1244, 	1252 	(2005) 	(holding 	that 	when 	determining 	a 	principal’s
liability, it is irrelevant whether or not the principal authorized
their 	agent’s 	conduct 	which 	constituted 	the 	violation 	of 	section
1592).
Thus, 	the 	court 	finds 	that 	Plaintiff 	has 	demonstrated
that the unchallenged facts constitute a legitimate cause of action
under 19 U.S.C. § 1592.
2. Amount of Damages
Fraud is punishable by a civil penalty in an amount not
to exceed the domestic value of the merchandise. 	19 U.S.C. § 1592
(c)(1). 	A “Plaintiff is not necessarily entitled to be awarded a
judgment for the maximum penalty available under section 592 as a
‘sum 	certain,’ 	as 	that 	term 	is 	used 	in 	Rule 	55 	. 	. 	. 	It 	is
appropriate that the court consider the facts and circumstances as
shown in plaintiff’s submissions.” 	Inner Beauty, 35 CIT at ____.
The 	Court 	examines 	whether 	there 	are 	aggravating 	or 	mitigating
factors 	present 	in 	assessing 	the 	penalty. 	Id. 	Although 	not
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binding 	on 	the 	Court, 	the 	guidelines 	published 	by 	Customs 	are
informative 	on 	the 	general 	question 	of 	what 	constitutes
aggravating 	and 	mitigating 	circumstances. 	Id. 	Under 	those
guidelines, 	for 	a 	Non-Duty 	Loss 	Violation, 	“[a] 	penalty
disposition 	greater 	than 	80 	percent 	of 	the 	dutiable 	value 	may 	be
imposed 	in 	a 	case 	involving 	an 	egregious 	violation, 	or 	a 	public
health and safety violation, or due to the presence of aggravating
factors, 	but 	the 	amount 	may 	not 	exceed 	the 	domestic 	value 	of 	the
merchandise.” 	Penalty Guidelines §(F)(2)(a)(ii). 	Undervaluation
of 	duty-free 	merchandise 	such 	as 	dried 	peppers 	from 	Mexico
constitutes a non-duty loss violation. 	Id. at §(D)(2).
Providing 	misleading 	information 	to 	Customs 	concerning
the 	section 	1592 	violation 	and 	failing 	to 	comply 	with 	a 	lawful
demand 	for 	records 	are 	aggravating 	factors 	that 	permit 	a 	penalty
of 	up 	to 	the 	domestic 	value 	of 	the 	merchandise. 	Id. 	at 	§(H)
(3),(7). 	In 	this 	case, 	Pacheco 	initially 	lied 	to 	investigators
about whether the peppers were hers, and she failed to comply with
Customs’ 	lawful 	demand 	for 	documentation 	verifying 	the 	declared
transaction 	value 	of 	$0.11 	per 	kilogram. 	Pl.’s 	Br. 	Report 	of
Investigation Ex. B, at 1-2; Request for Information Ex. C, at 1-
2; Decl. of Liza Lopez Ex. A, at ¶ 8. 	Thus, the court finds that
aggravating factors are present in this case.
Additionally, the following factors may be considered in
mitigation 	of 	the 	penalty: 	contributory 	customs 	error 	(where
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Customs provides Defendant with misleading or erroneous advice in
writing); 	Defendant’s 	cooperation 	with 	the 	investigation;
immediate 	remedial 	action 	taken 	by 	Defendant; 	inexperience 	in
importing (only where the violation is not due to fraud); prior
good 	record 	(excluding 	fraud 	violations); 	inability 	to 	pay 	the
Customs 	penalty; 	and 	Customs’ 	failure 	to 	notify 	Defendant 	of 	a
violation, in non-fraud cases, where Customs had actual knowledge
of 	a 	violation. 	Penalty 	Guidelines 	§(G). 	The 	court 	finds 	that
there 	are 	no 	mitigating 	factors 	present 	on 	the 	record 	before 	the
court.
The court grants Plaintiff’s Motion for Default Judgment
and awards Plaintiff the domestic value of the merchandise, in the
amount of $2,651,312.18 due to the presence of aggravating factors
and the absence of mitigating factors, plus post-judgment interest
as provided by law. Plaintiff shall bear its own costs and fees.
/s/ Nicholas Tsoucalas
Nicholas Tsoucalas
Senior Judge
Dated:________________
New York, New York
February 11, 2016
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