Convictions Handed Down in Seafood Mislabeling Case; Investigation Uncovered Massive Fraud in Shrimp Trade

On Monday, Chau-Shing (“Duke”) Lin and Christopher Scott Ragone were sentenced for their role in a seafood mislabeling scheme involving pangasius falsely imported and marketed as other fish species.  Mr. Lin received a sentence of three years probation, one hundred hours of community service, and a fine of $60,000.  Mr. Ragone received three years probation with an order for one hundred hours of community service and a fine of $5,000.  The sentencing for Mr. Lin and Mr. Ragone follows an order handed down the week prior that Seafood Solutions, Inc. be placed on three years probation, pay a fine of $700,000, make an additional community service payment of $300,000, and forfeit all remaining inventory of pangasius falsely labeled “ponga” held by either Seafood Solutions or Ocean Duke Corporation.

The investigation that led to the prosecutions also uncovered massive illegal evasion of the antidumping duty orders on shrimp imports.  Arguing that a strong sentence should be issued, the Assistant U.S. Attorney summarized Ocean Duke’s alleged use of fraud to avoid paying millions of dollars in antidumping duties:

As to shrimp from countries subject to anti-dumping duties, particularly Vietnam, Ocean Duke transhipped the shrimp through Cambodia and labeled it, falsely, as product of Cambodia (thus not subject to anti-dumping duties). After the imposition of the anti-dumping duties on shrimp in 2004, between May 2004 and July 2005 Ocean Duke imported as product of Cambodia over 15 million pounds of aquacultured, or farmed shrimp, with a declared value of over $42 million. However, during all of 2004 and 2005, Cambodia produced only an estimated 385,000 pounds of aquacultured shrimp. Internal emails and statements of former employees confirm the transhipment of shrimp from Vietnam through Cambodia, thus making possible the export of 15 million pounds.

Transshipment of shrimp through Cambodia was one of the most obvious illegal evasion schemes employed after the petitions for trade relief were filed in December of 2003.  In the fifteen years between 1989 and 2003, Cambodia exported less than 35 thousand pounds of shrimp to the United States; an annual average of about 2.3 thousand pounds a year.  After trade relief petitions were filed in December of 2003, Cambodia exported nearly 22 million pounds of shrimp to the United States in the three years between 2004 through 2006; an annual average of nearly 7.3 million pounds – or a 317,291% increase over the annual average of the previous fifteen years.  In total, shrimp worth $67 million was imported into the U.S. from Cambodia following the initiation of the trade cases.

In response to the astronomical leap in Cambodian shrimp exports, the Southern Shrimp Alliance worked with federal government officials to close down the circumvention.  By 2007, all shrimp imports from Cambodia had stopped.

The documents filed by the government in the prosecution of Seafood Solutions mark the first public confirmation that shrimp imports from Cambodia were fraudulently entered.  In the course of the federal investigation, the Director General of the Cambodian Fisheries Administration told U.S. government officials that total farmed shrimp production in Cambodia was less than 400,000 pounds for all of 2004 and 2005.  Yet Ocean Duke, on its own, was alleged to have formally declared that 15 million pounds of shrimp, worth $42 million, shipped between May 2004 and July 2005 were obtained from shrimp farms in Cambodia.

According to the documents submitted to the federal court, the extent of the evasion was not limited to shrimp.  Immigration and Customs Enforcement (ICE) investigation reports indicate that in 1999 the Ocean Duke was found by investigators to have been falsely declaring the exporter of Chinese crawfish tails to receive a lower dumping duty deposit rate and was fraudulently undervaluing the merchandise to lower duty liability.  ICE investigation reports in 2006 indicate that Ocean Duke was found by investigators to be involved in transhipping pangasius fillets from Vietnam and mislabeling the fillets as other fish species to evade antidumping duties.

The sentences handed down to Mr. Lin and Mr. Ragone were considerably more lenient than a number of criminal sentences assigned in other recent seafood mislabeling cases.  Last May, Karen L. Blyth was sentenced to 33 months in prison, David H.M. Phelps was sentenced to 24 months in prison, and John J. Popa was sentenced to 13 months in prison for their respective roles in broad seafood mislabeling schemes that included falsely labeling imported shrimp as domestic, wild-caught shrimp.  In July of 2010, Thomas George, the former Chief Executive Officer of Sterling Seafood, was sentenced to 22 months in prison for mislabeling fish products.  And in May 2009, Peter Xuong Lam, the former president of Virginia Star Seafood Corp., was sentenced to 63 months in prison for selling catfish as sole, grouper, and other species.

Given the scope of the fraud alleged to be involved in the Ocean Duke investigation, the probationary sentences are surprising but nevertheless reflect a crackdown on seafood mislabeling by federal regulatory agencies.  The Southern Shrimp Alliance is grateful for the extraordinary efforts of National Oceanic and Atmospheric Administration, Office of Law Enforcement and the Department of Homeland Security, Immigration and Customs Enforcement to investigate and shut down these illegal mislabeling and duty evasion schemes and to the Environmental Crimes Section of the Department of Justice and the U.S. Attorney’s Office for the Central District of California for prosecuting these cases.

In comments filed Wednesday with U.S. Customs and Border Protection (CBP) in advance of a public meeting of the Advisory Committee on Commercial Operations of Customs and Border Protection (COAC), the Southern Shrimp Alliance emphasized the scope and breadth of the illegal circumvention schemes employed by exporters and importers to evade antidumping duties and food safety laws.  To date, public reports issued by the federal government have confirmed the Southern Shrimp Alliance’s allegations of transshipment of shrimp through Indonesia, Malaysia, and Cambodia, as well as the fraudulent declaration of shrimp as “dusted” to evade tens of millions of dollars in antidumping duties.  Nevertheless, despite numerous criminal and administrative proceedings resulting in convictions and penalty assessments, fraud in the shrimp market remains rampant and the Southern Shrimp Alliance continues to work with law enforcement agencies to identify and stop these illegal schemes.

Read SSA’s Comments to the COAC here:

https://www.shrimpalliance.com//wp-content/uploads/2012/02/SSA-Statement-to-COAC-February-2012.pdf

 

Read the Assistant U.S. Attorney’s full reporting of the Cambodian shrimp transshipment scheme here:

https://www.shrimpalliance.com//wp-content/uploads/2012/02/US-Sentencing-Position.pdf

 

Read the ICE Reports on the investigations of Ocean Duke here:

https://www.shrimpalliance.com//wp-content/uploads/2012/02/Ocean-Duke-ICE-Reports.pdf

 

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