Major Sentencing in Los Angeles Clothing Importer’s Money Laundering Scheme

In a significant legal development, a Los Angeles-based wholesale clothing importer, C’est Toi Jeans Inc. (CTJ), along with its executives, has been sentenced for evading over $8 million in customs duties and engaging in a money laundering operation. This case highlights the intersection of international trade, financial crime, and the ongoing battle against illicit activities in the fashion industry.

Background of the Case

C’est Toi Jeans, located in the bustling Fashion District of downtown Los Angeles, specialized in importing apparel from countries like China and exporting to markets in Mexico, Central America, and South America. The company’s operations came under scrutiny after law enforcement discovered a staggering $38 million in cash linked to one of the defendants, prompting a deeper investigation into their financial practices.

U.S. District Judge Mark C. Scarsi presided over the case, which culminated in a sentencing hearing on Tuesday. The court imposed a five-year probation period on CTJ, alongside a hefty fine of $11.5 million and an additional restitution payment exceeding $15 million. This ruling underscores the seriousness with which the judicial system views financial misconduct, particularly in industries susceptible to exploitation.

Key Figures in the Scheme

Si Oh Rhew, the 71-year-old president of CTJ and a significant shareholder, received a sentence of eight years and seven months in federal prison. Rhew was also fined $8 million and ordered to pay over $19 million in restitution. His son, Lance Rhew, 38, who served as a corporate officer for CTJ, was sentenced to four years in prison and fined $500,000. The Rhew family’s involvement in the company raises questions about the ethical responsibilities of family-run businesses in the competitive landscape of international trade.

The Mechanics of the Fraud

The Rhews orchestrated a complex scheme that involved receiving large sums of cash, allegedly derived from drug trafficking, as payment for customer invoices. This cash was delivered by couriers who were not affiliated with CTJ or its clients. According to the U.S. Attorney’s Office in Los Angeles, the Rhews failed to file required currency transaction reports for cash transactions exceeding $10,000, leading to the fraudulent omission of over $17 million in gross sales from their tax returns.

The investigation revealed that CTJ imported goods that were significantly undervalued, resulting in unpaid tariffs and duties. The defendants submitted false information to U.S. Customs and Border Protection (CBP), which allowed them to evade customs duties. This manipulation of import values not only harmed the U.S. economy but also placed honest businesses at a competitive disadvantage.

Legal Proceedings and Findings

Following a six-week trial, the Rhews and CTJ were found guilty of multiple charges, including conspiracy and failure to file currency transaction reports. The indictment detailed 515 individual wire transfers totaling $137.1 million made to overseas suppliers for undervalued garments. The total undervaluation of imported goods exceeded $51 million, leading to approximately $8.4 million in unpaid tariffs.

The case was part of Operation Take Back America, a nationwide initiative aimed at combating illegal immigration and dismantling transnational criminal organizations. This operation reflects a broader governmental effort to address financial crimes that often intersect with other forms of illegal activity, including drug trafficking.

Implications for the Fashion Industry

The ramifications of this case extend beyond the individuals involved. It raises critical questions about the integrity of the fashion industry, particularly in regions like Los Angeles, where the intersection of legitimate business and illicit activities can be blurred. The Fashion District, known for its vibrant marketplace, is now under scrutiny for potential financial crimes that could undermine the entire sector.

Ciaran McEvoy, a spokesperson for the U.S. Attorney’s Office, emphasized the scale of cash laundering operations in the area, stating, “There were enormous amounts of cash being laundered in the Los Angeles Fashion District.” This statement serves as a stark reminder of the vulnerabilities within the industry and the need for increased regulatory oversight.

Conclusion

The sentencing of C’est Toi Jeans Inc. and its executives marks a pivotal moment in the fight against financial crime in the fashion industry. As the U.S. government continues to crack down on illicit activities, businesses must remain vigilant in adhering to legal and ethical standards. The case serves as a cautionary tale for other companies operating in the global marketplace, highlighting the importance of transparency and compliance in an increasingly interconnected world. The repercussions of this case will likely resonate throughout the industry, prompting a reevaluation of practices and policies to prevent similar occurrences in the future.