We Said, No Wire Hangers

Prosecutors in a Chinese steel antidumping prosecution in Los Angeles overreached when they tried to impose a sentence on the defendant for bribery, rather than smuggling.

A Mexican businessman, who evaded antidumping duties on Chinese steel wire coat hangers, should have been sentenced for smuggling, not the much harsher term for bribery of a government official, the 9th U.S. Circuit Court of Appeals ruled Tuesday.

The appeals panel ordered resentencing for Arturo Huizar-Velazquez. Trial Judge John Houston sentenced him incorrectly to 70-months in prison and ordered to pay $7.7 million in restitution and forfeiture of proceeds from the scheme.

“Dumping” refers to the sale of goods at less than fair value.  In 2008, the U.S. imposed antidumping duties on Chinese steel wire hangers to combat perceived dumping in the U.S.

Huizar-Velazquez was accused of importing the hangers from China, through the U.S. then shipped on to Mexico.  The wire was repackaged in Mexico and stamped “Made in Mexico” so it could be sold duty-free in the U.S.

He was charged in a 55-count indictment with conspiracy to defraud the U.S. and entry of goods by means of false statements.

The problem is, the judge applied sentencing guidelines related to bribery, rather than smuggling.

“Huizar-Velazquez did not engage in ‘improper use of government influence,’ bribery, or extortion, nor did he conspire to do so.  He schemed to trick the government out of its money, not to corrupt government officials,” wrote Judge Andrew Kleinfeld.  “Stamping ‘Made in Mexico’ on Chinese coat hangers cannot be confused with bribing public officials and is not subject to the same sentencing guidelines,” he said.

Kleinfeld did not tell the trial judge which rates to apply to the imported coat hangers but ordered a recalculation of the loss and resentencing for a proper prison term.

Case:  U.S. v. Huizar-Velazquez, No. 11-50237