Case 3:18-cr-00466-BR Document 1 Filed 10/09/18 Page 1 of 7

FILED 9 0CT71814:33JSDC~P

UNITED STATES DISTRICT COURT

DISTRICT OF OREGON

PORTLAND DIVISION

UNITED STATES OF AMERICA 3:18-cr- 4 lt (o - Bf<-

v. INFORMATION

MICHAEL MODRICH, 18 u.s.c. § 1343

Defendant.

THE UNITED STATES ATTORNEY CHARGES:

COUNT ONE
(Wire Fraud)
(18 U .s.c. § 1343)

1. At all times relevant, defendant MICHAEL MODRICH (MODRICH) was a

resident of the District of Oregon.

2. MODRICH served as President and Member of Med-Tech Resource, LLC (Med-

Tech), a limited liability company with a principal place of business at 29485 Airport Road in

Eugene, Oregon. Med-Tech imported medical, sewn, and equine goods and marketed and resold

several of these products to emergency, fire and rescue professionals and entities. Med-Tech

imported merchandise primarily through a trading company in China that used a variety of

names, including MedSource International Co., Ltd. and MedSunline.

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IMPORT PROCEDURES

3. Title 19, United States Code of Federal Regulations, generally prescribed the

requirements and procedures for the "entry" of imported merchandise through a port of entry into

the United States. Importation procedures required the submission of entry papers containing

import data that was relied upon by the Department of Homeland Security, Customs and Border

Protection (Customs) to assess duties, collect statistics on imported merchandise, and determine

compliance with applicable law and regulations. Entry papers and import data generally

included the importer's identification number, the merchandise's identification number, and a

commercial invoice, among other things.

4. Regulations required a commercial invoice to set forth: (1) the port of entry; (2)

the identities of the buyer and seller; (3) a detailed description of the merchandise; (4) the

quantity in weights and measures of the merchandise; (5) the value of the merchandise, which is

customarily the price actually paid or payable to the supplier; (6) an itemized list of charges; (7)

the country of origin; and (8) the identity of the person or entity invoicing the merchandise,

among other things. To assess import duties, Customs relied upon the authenticity of, and the

material representations contained within, the commercial invoice.

5. Import duties were taxes assessed on the value, classification and price of the

imported merchandise and generally accrued when the merchandise arrived within a United

States Customs port of entry. Customs determined the amount of import duties owed based upon

the importer's representation as to value, classification and price of the imported merchandise as

taken from the commercial invoice and read in conjunction with the applicable rate of duty from

the Harmonized Tariff Schedule of the United States (HTSUS), which was a standardized duty

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and coding classification system. The payment of import duties was a personal liability of the

importer.

6. Importers, including MODRICH and Med-Tech, sometimes employed the

services of "Customs brokers," who were licensed to transact Customs business, including the

filing of entry papers, the submission of import data and the payment of import duties, based on

the representations provided by, and on behalf of, their clients.

7. MODRICH's and Med-Tech's Customs brokers customarily filed entry papers

and submitted import data, including merchandise value, classification and price information

from commercial invoices, to Customs through the Automated Broker Interface (ABI), a

voluntary program that permitted qualified participants to electronically file entry papers and

submit import data with Customs. MODRICH's and Med-Tech's Customs brokers routinely

filed entry papers and submitted import data, including commercial invoices, electronically to

ABI's servers located in Virginia.

THE SCHEME TO DEFRAUD

8. From on or about January 1, 2013, through on or about March 31, 2015, in the

District of Oregon and elsewhere, MODRICH and others devised and engaged in a scheme and

artifice to defraud the United States out of money, namely import duties owed on imported

merchandise.

9. In furtherance ofthis scheme to defraud, MODRICH and others created, used

and maintained fraudulent entry papers that included t_wo versions of the same commercial

invoice: (a) a supplier invoice that contained the actual value and purchase price of the

merchandise which MODRICH and others used in making payments owed to the supplier; and

(b) a fraudulent invoice that contained a lower value, misclassified merchandise or lower
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purchase price of the merchandise which MODRICH and others caused to be transmitted to

Customs.

10. As a further part of the scheme to defraud, MODRICH and others submitted, and

caused to be submitted, fraudulent entry papers and import data to Customs through the ABI,

namely fraudulent commercial invoices with materially false representations regarding the

values, classifications and purchase price of the imported merchandise.

11. As a further part of the scheme to defraud, MODRICH caused Customs to rely

upon Med-Tech 's materially false commercial invoices that MODRICH submitted, or caused to

be submitted in assessing duties owed on Med-Tech 's imported merchandise.

12. As a further part of the scheme to defraud, after submission of the materially false

commercial invoices to Customs, MODRICH and others paid thousands of dollars less in import

duties than was actually owed to the United States.

13. On or about the date set forth below, in the District of Oregon and elsewhere,

MODRICH, for the purpose of executing a scheme and artifice to defraud the United States of

money as to a material matter, and for obtaining money by means of materially false and

fraudulent pretenses, representations, promises, and omissions, did knowingly transmit and cause

to be transmitted the following wire communication in interstate or foreign commerce to the ABI

in Virginia:

Fraudulent Invoice Supplier Invoice

Transmitted
Count Date Description of Description of Merchandise
From
Merchandise Value Value
Entry No. FN501259637 Invoice No. MTR-5009
One 11/20/2014 Washington
indicating $49,003 indicating $106,467

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14. In furtherance of the scheme to defraud, MODRICH caused Med-Tech to evade

import duties in the amount of approximately $144,686.34.

15. In violation of Title 18, United States Code, Section 1343 .

COUNT TWO
(Wire Fraud)
(18 u.s.c. § 1343)

16. Paragraphs 1 and 2 of Count One are hereby re-alleged and incorporated by

reference as if set forth in full herein.

17. In or about April of 2014, MODRICH and Med-Tech hired a financial consulting

and professional services firm (Firm) to review and analyze Med-Tech's Quickbooks data files

and accounting records.

SET-ASIDE PROGRAM

18. The Small Business Act of 1953 promoted the participation of small businesses

and businesses owned by individuals in certain socio-economic categories in federal contracting.

To comply, federal government agencies utilized the set-aside program to encourage certain

businesses to obtain and perform federal government contracts and streamlined the ability of

these business to participate in federal contracting. The set-aside program limited competition to

businesses whose ownership falls in particular categories, including woman-owned business,

small business and woman-owned small business.

19. The General Services Administration (GSA) offered opportunities to contract

with agencies through Multiple Award Schedules (MAS). Through MAS, an agency is

permitted to order and purchase directly from suppliers, all of whom are already vetted for

participation in the program. In doing so, a federal agency avoids the traditional public bidding

process, receives volume discount pricing for commercial products and services, shortens
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procurement lead times and lowers administrative costs. Those businesses participating in the

set-aside are eligible for contracting opportunities through MAS.

20. Pursuant to contract number XX-XXX-0509Y, GSA certified the Firm to

participate in the set-aside program on the basis it was a woman-owned business, small business

and woman-owned small business. Pursuant to the set-aside program, the Firm was eligible to

secure federal government contracts through the MAS without further competition.

THE SCHEME TO DEFRAUD

21. From on or about September 11, 2014, through on or about September 16, 2014,

in the District of Oregon and elsewhere, MODRICH and others devised and engaged in a

scheme and artifice to defraud the United States out of money, namely proceeds payable from

the sale of firefighter boots.

22. In furtherance of this scheme to defraud, MODRICH and others falsely and

fraudulently advertised, promoted and represented, and caused to be advertised, promoted and

represented on its website that Med-Tech was a GSA set-aside business, woman-owned business,

small business and woman-owned small business, and held set-aside contract number XX-XXX-

0509Y.

23. As a further part of the scheme to defraud, MODRICH and others falsely and

fraudulently advertised, promoted, used and participated in MAS to promote Med-Tech's

products and services, all while materially misrepresenting Med-Tech was a GSA set-aside

business, woman-owned business, small business and woman-owned small business, and held

set-aside contract number XX-XXX-0509Y.

24. As a further part of the scheme to defraud, MODRICH and others falsely and

fraudulently submitted via MAS a quote for 89 pairs of firefighter boots in the amount of
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$26,343.11 , all while materially misrepresenting the Firm as the supplier and set-aside contract

number XX-XXX-0509Y on the quote.

25. A federal government agency relied upon the materially false representations

made by MODRICH and others in procuring a contract to purchase 89 pairs of firefighter boots

in the amount of $26,343.11.

26. On or about the date set forth below, in the District of Oregon and elsewhere,

MODRICH, for the purpose of executing a scheme and artifice to defraud as to a material

matter, and for obtaining money by means of materially false and fraudulent pretenses,

representations, promises, and omissions, did knowingly transmit and cause to be transmitted the

following wire communications in interstate commerce to Florida:

Transmitted
Count Date Wire Description of Quote
From
Quote No. RFQ924396-ZIL for
Two 9/11/2014 Oregon
$26,343.11

27. In violation of Title 18, United States Code, Section 1343.

Dated: October 9, 2018 Respectfully submitted,

BILLY J. WILLIAMS
United States Attorney

CQ .W r____. . ._
Clemon D. Ashley, IL #6294839
Assistant United States Attorney

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