Penalty Case Against CEO of Importer Not Named in Penalty Notice Can Proceed, CIT Says
The Court of International Trade on Dec. 2 declined to dismiss a penalty case brought by the government against an importer’s chief executive officer that claimed he was improperly notified. The CEO, Julio Lorza, said CBP only included his company, International Trading Services (ITS), on pre-penalty and penalty notices of Section 592 violations related to entries of sugar. CIT, citing previous cases on the subject, found (here) that CBP is not required to name a company’s corporate officers in a penalty notice for the government to bring a case against them, and that Lorza in any case knew he could be held responsible.
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Lorza and the now-defunct ITS had allegedly entered “falsely classified commercial shipments of sugar” in 2007. Lorza had contacted CBP that year about a notice of action related to the sugar entries, and the pre-penalty notice, though naming only ITS, was sent to his residence in 2009. The penalty notice, which again named only ITS, and a demand for payment were sent to an address maintained by Lorza -- though not his main residence at the time -- in 2011. Lorza emailed CBP in April 2011 to ask about the case, and CBP sent him the penalty notice and demand for payment. He responded that “he was ‘looking at [the documents] from [his] phone’ and could see that they concerned ‘some incorrect entries’ from when ‘we were importing sugar.’” In 2012, Lorza received the original penalty notice, which informed him that he and ITS were “jointly and severally liable for the penalty.”
Lorza claimed CBP did not complete the administrative case against him, as required to bring a court case seeking penalties, because he was not personally named on the pre-penalty and penalty notices. However, in a 1986 decision involving a company called Priority Products, the U.S. Court of Appeals for the Federal Circuit found that naming a corporate officer in pre-penalty and penalty notices is not a requirement for CIT to hear a penalty case against the corporate officer. CAFC “has held that subject matter jurisdiction over a [Section] 1592 recovery action is not conditioned on whether the complaint names the same ‘parties expressly named in the administrative proceedings,’” CIT said.
Lorza also said he was denied due process because he never had the opportunity to rebut CBP’s allegations. But even if he was never included on the CBP notices, Lorza had “constructive notice” that he might be held responsible and the time to argue his case to CBP, CIT said. CBP sent the pre-penalty and penalty notices and the demand for payment to “addresses maintained by Lorza,” and Lorza was aware of the misclassification from the time he received the notice of action in 2007, CIT Said. Lorza also confirmed his receipt of the 2011 mail, “recognized that the misclassified entries involved sugar ‘we’ had imported, and assumed responsibility for reviewing the file. The cover letter to the penalty notice he received in 2012 told him he was jointly and severally liable for the penalty. “Accordingly, at the very least, Lorza ‘should have been aware’ of the potential for personal liability,” CIT said.
(U.S. v. Int'l Trading Servs., LLC, Slip Op. 16-112, dated 12/02/16, Judge Barnett)
(Attorneys: Mollie Finnan for plaintiff U.S. government; Peter Herrick for defendant Julio Lorza)