How business, doctors and journalists prey on your food anxieties I
How business, doctors and journalists prey on your food anxieties I
How business, doctors and journalists prey on your food anxieties I
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Using ph<strong>on</strong>y invoices, importers are laundering dirty<br />
m<strong>on</strong>ey, cheating the taxpayer <str<strong>on</strong>g>and</str<strong>on</strong>g>, incidentally,<br />
making the U .S . trade baiance look worse than it is .<br />
Salad oil, $720<br />
By Dam<strong>on</strong> Darlin<br />
LAST rF AR's S 166 billi<strong>on</strong> merch<str<strong>on</strong>g>and</str<strong>on</strong>g>ise<br />
trade deficit could ha~e been inflated<br />
by more than S100 billi<strong>on</strong> . That's<br />
becausecrookedimport/exportfirms<br />
cheated the U .S . Treasurv out of<br />
more than S40 billi<strong>on</strong> in tax resenues .<br />
This startling claim comes from John<br />
S. Zdani <str<strong>on</strong>g>and</str<strong>on</strong>g> Sim<strong>on</strong> J . Pak, finznce<br />
professors at Florida Internati<strong>on</strong>al<br />
I ;nit-ersittin Miami .<br />
The amounts ineolved mas be<br />
much less than the nvo researchers<br />
claim, bttt the practice thev uncotered<br />
is distnrbing all the same . Four<br />
years ago the pair began using potrertul<br />
computer sofuvare the%, designed<br />
to examine the prices of<br />
23,000 different products imported<br />
from <str<strong>on</strong>g>and</str<strong>on</strong>g> exported to 235 countries<br />
ba the U<br />
.SThe profs originalle setout to ntea-<br />
Hmmm . . .<br />
Examples of abnormally low U .S. export prices<br />
Product<br />
Radial tires<br />
Snow plows<br />
Spark plugs<br />
Instant-print cameras<br />
Upright pianos<br />
Missile <str<strong>on</strong>g>and</str<strong>on</strong>g> rocket launchers<br />
Exported to<br />
Colombia<br />
Jamaiea<br />
Taiwan<br />
France<br />
France<br />
Egypt<br />
Examples of abnormally high U .S. importprices<br />
Product<br />
S<str<strong>on</strong>g>and</str<strong>on</strong>g><br />
New truck tires<br />
Toilet paper<br />
Brassieres<br />
Spark plugs<br />
Instant-print cameras<br />
o0erreSAmor Pas ano /nM Zda~rwvi¢<br />
N<br />
Imported from<br />
Japan<br />
SNeden<br />
Japan<br />
Italy<br />
Canada<br />
Japan<br />
sure the et ficiencv of the global market<br />
in pricing goodsThee stumbled<br />
ou ecidence that crooks are using<br />
internati<strong>on</strong>al trade as cover tior massi%<br />
-c m<strong>on</strong>et• launderin_e .<br />
Take razor blades imported rrom<br />
israe' <str<strong>on</strong>g>and</str<strong>on</strong>g> priced at 3 cents, «hile<br />
identical blades from Panama tere<br />
invoiced at S29 .35-each . The price<br />
of a simple teleph<strong>on</strong>e imported fr<strong>on</strong>t<br />
H<strong>on</strong>g K<strong>on</strong>g ranged bemeen 53 .18<br />
<str<strong>on</strong>g>and</str<strong>on</strong>g> S2,400 . The profs found S720<br />
bottles ofimported salad dressing <str<strong>on</strong>g>and</str<strong>on</strong>g><br />
S653 smoke detectors, while a helicopter<br />
exported to Kaea was invoiced<br />
for <strong>on</strong>lr S 15,609 .<br />
G .tn R. KcBt-ide, an accounting<br />
professor at California Srate C'nirersin',<br />
Hay~aard, uui an es-adNiser to the<br />
Internal Revenue Senice, esplains :<br />
"Bad guys are learning that banks are<br />
Price per unit<br />
$3 .03<br />
267 .70<br />
0 .01<br />
3 .05<br />
38 .00<br />
38 .20<br />
Price<br />
$6,025/t<strong>on</strong><br />
2,266/unit<br />
6/roll<br />
1 .5761dozen<br />
70/unit<br />
2,538/unit<br />
Fraudulently over-invoicing imports <str<strong>on</strong>g>and</str<strong>on</strong>g> under-invoicing<br />
exports cost taxpayers $40 billi<strong>on</strong> last year .<br />
Sources of lost<br />
U .S, taxes due to abnormal<br />
trade pricing (Smllll<strong>on</strong>s)<br />
Total : $39,540<br />
9ingapore=g<br />
Germany 2;59I<br />
Mezico<br />
Canada<br />
Taiwan<br />
Fmnce<br />
2;448<br />
2,355<br />
1,609<br />
1,493<br />
China 1,345<br />
Fl<strong>on</strong>g K<strong>on</strong>g 1,278<br />
All other 15,434<br />
countries<br />
a hard place to launder m<strong>on</strong>l so<br />
thev're turning to the export/import<br />
<str<strong>on</strong>g>business</str<strong>on</strong>g> ." FF'hY did that guy pac vou<br />
S 100,000? Because I sold him 200<br />
razor blades .<br />
The feds ita\ 'e alreada tracked a tew<br />
cases of suspected invoicing fraud .<br />
Sunrider Internati<strong>on</strong>al is a 5300 milli<strong>on</strong><br />
direct-sales retailer ofherbal cosmetics<br />
<str<strong>on</strong>g>and</str<strong>on</strong>g> health <strong>food</strong>s based in Torrance,<br />
Calif. It is ou-ned bv Palos<br />
Verdes Estates, Calif. residents Tei-<br />
Fu Chen <str<strong>on</strong>g>and</str<strong>on</strong>g> his ~eife, Oi-Lin Chen .<br />
Federal custotms agents claim Sunrider<br />
imported raw materials from<br />
Taiwan, Japan <str<strong>on</strong>g>and</str<strong>on</strong>g> South America<br />
<str<strong>on</strong>g>and</str<strong>on</strong>g> inflated the imports' values <strong>on</strong><br />
invoices bv as much as 900'Ye . Suruider<br />
paid a little extra in customs duty,<br />
Nchich generallv runs under 10% of<br />
inroiced value, but sa% ed much more<br />
in taxes . HoNv4 Simple . It had shipped<br />
most of the profits to H<strong>on</strong>g K<strong>on</strong>g<br />
disguisedastiieco_stofimports . A20-<br />
count indictment filed in March by'<br />
U .S . attornevs in Los Angeles against<br />
Sunrider <str<strong>on</strong>g>and</str<strong>on</strong>g> the Chens asserts rhev<br />
evaded paving almost S40 milli<strong>on</strong> in<br />
ta_ es bern'een 1986 <str<strong>on</strong>g>and</str<strong>on</strong>g> 1990 .<br />
Through an attornev the Chens denanp wr<strong>on</strong>gdoing <str<strong>on</strong>g>and</str<strong>on</strong>g> insist the matter<br />
is a civil tax dispute . Originall ' ~ to have<br />
begun this fall, their trial has been<br />
postp<strong>on</strong>ed .<br />
In a similar case eark this vear,<br />
federal prosecutors in Virginia %r<strong>on</strong><br />
c<strong>on</strong>victi<strong>on</strong>s of four Pakistanis who<br />
used a Springfield, Va .-based medical<br />
supplies importer, Falc<strong>on</strong> Instruments,<br />
to funnel $1 .4 milli<strong>on</strong> to Pakisran<br />
. In <strong>on</strong>e insrance cited br the<br />
prosecutors during the trial, Falc<strong>on</strong><br />
imported equipment that probabt}cost it about $ 19,000 but itnoiced it<br />
at $42,000, sending the tull amount<br />
to Pakistan . The scheme had a sec<strong>on</strong>d<br />
benetlc One of the men used the<br />
invoice scam to avoid paying his pers<strong>on</strong>al<br />
LCS- income taxes .<br />
Floricia Internati<strong>on</strong>al L'nicersin''s<br />
Zdanowicz <str<strong>on</strong>g>and</str<strong>on</strong>g> Pak claim softmare<br />
the\- hm e deN roloped could, «ith additi<strong>on</strong>al<br />
informati<strong>on</strong> mailable to the<br />
goaernmenr, put the cops <strong>on</strong> the trail<br />
oEinternati<strong>on</strong>al m<strong>on</strong>ec launderers oy<br />
tlagging suspicious imporr invoices .<br />
II,S . Treasw, Department officials<br />
have visited the professors for a dem-<br />
Ollstra[l<strong>on</strong> <str<strong>on</strong>g>and</str<strong>on</strong>g> expressed interest iil<br />
the sofm are but have no current plans<br />
to buv !t. 111111111<br />
i6<br />
~ ~ ~ ~ ~ ~ , s~ Forbes . Atrgust L4, 1995<br />
~<br />
http://legacy.library.ucsf.edu/tid/agf97d00/pdf