Intertex Apparel Group, J.J. Basics Inc. and Ben’s Clothing Inc., as well as their principals, agreed to pay $2.8 million to settle civil charges brought by Brooklyn U.S. Attorney Michael Garcia that they misrepresented where goods were made to avoid quotas.
The companies and their principals — Jack Setton, Marc Setton, Vivek Bendre, Jacob Bensadigh and Steve Bensadigh — did not admit any wrongdoing in the settlement, which resolved charges that they defrauded the government.
A government complaint accused the companies of importing goods made in China, starting in 2001, but presenting them as having been manufactured in Russia or South Korea, a practice known as transshipping that would allow companies to evade quotas. With the exception of certain key goods from China, the quotas were eliminated in 2005. The defendants also were accused of undervaluing the cost of goods imported to the U.S.
The firms sold to Wal-Mart Stores Inc.; J.C. Penney Co. Inc.; Kohl’s Corp.; Marshalls, a division of TJX Cos. Inc., and Family Dollar Stores Inc.
“To execute the scheme, shell companies were created and used as the importers of record for the purpose of shielding the identity of the defendant companies as the true purchasers of the goods from the Chinese manufacturers,” the government said in announcing the settlement.
The allegations initially came from a whistle-blower.