Fashion Label Alexis Caught Evading Trade Tariffs, Faces $7.6M Settlement

Luxury label Alexis has launched collections sold in more than 250 boutiques and luxury department stores worldwide, including Neiman Marcus and Saks Fifth Avenue as well as Revolve and Moda Operandi.

In 2021, Target said Alexis’ “sophisticated, feminine aesthetic speaks to the modern traveler” and featured the brand in the retailer’s second Designer Dress Collection. The Kardashians were some of the first celebrities to wear Alexis, back when they had a store in L.A. Beyoncé, Taylor Swift, Kate Hudson, Hailey Baldwin and Olivia Culpo have all been spotted in Alexis pieces since.

Recent developments have been less positive. The Miami-based clothing company just signed a $7.6 million-plus settlement in a False Claims Act case for engaging in a double-invoicing scheme. The scheme allegedly allowed the luxury brand to evade the customs duties instituted under President Trump on imported garments.

Brought to the government’s attention by a whistleblower, the civil action brought against the Florida-based limited liability company (LLC) by the United States of America, acting on behalf of U.S. Customs and Border Protection (CBP) is based on inaccurate customs entries and underpaid duties and fees, submitted between 2015 and 2022. Filed “ex parte” and under seal, the complaint-in-intervention claims Alexis did so in four ways.

This included “failing to report to CBP the correct valuation of goods imported into the country, using double-invoicing, failing to apportion the value of assists in the form of fabric and garment trims to the customs value of imported merchandise, and submitting customs entries with incorrect Harmonized Tariff Schedule of the United States (HTSUS) classifications and port of entry,” the suit, filed in the Southern District of Florida on May 7, reads. 

As a result, the brand founded by mother-daughter duo Ana Barbara and Alexis Barbara Isaias in 2008 allegedly violated the False Claims Act by “materially misreporting” the valuation of imported merchandise, thereby avoiding paying the total amount of customs duties and fees owed on said imports.

Meanwhile, the luxury brand’s Instagram account, @shopalexis, shows no signs of trouble as it’s still posting seemingly standard content for its 343,000 followers. However, the clothing store’s outpost in Miami’s Atlas Plaza (at 143 NE 39th Street) is marked as temporarily closed by Google as of July 24. As of Jul. 30, Alexis’ legal entity identifier (LEI) was marked as “non-conforming” by the nonprofit organization GLEIF as its policy lapsed last August.

“When I was contacted, we talked about the type of evidence that the whistleblower had; one of the allegations here being the double-invoicing scheme,” Mary Inman, partner at Whistleblower Partners, told Sourcing Journal. “When you’ve got a set of invoices that reflects the true price and one that reflects a lower price, there’s not a lot of reasons for going to those kinds of lengths and creating those kinds of systems; particularly when you weigh that against the fact that, although the wrongdoing didn’t start out during the Trump tariff era, there was an additional 7.5 percent Section 301 tariff applied, so that gives you additional motive for why you want to try and avoid responsibility to pay your full customs duty.”

The whistleblower was employed at Alexis from November 2021 through April 2022. On May 3, 2022, the relator formed the LLC “CABP Ethics and Co.” in Delaware—perhaps choosing the corporate capital because of the Delaware False Claims and Reporting Act statute that allows whistleblowers to file “qui tam” lawsuits. 

“We had to create a cheeky name,” Inman said of the LLC’s moniker. “We could have just had a generic name, [but] we wanted to call back to Customs and Border Protection—that’s why it’s CABP—and ‘Ethics and Co.’ is just our cheeky way of saying, you know, why did we create a Delaware corporation? We created it for this purpose: to help enforce ethics in the Customs and Border Protection space.”

Four days after the LLC’s incorporation, the whistleblower filed under seal an action under the False Claims Act alleging, among other things, that Alexis submitted entry records with false claims that “materially underreported” to CBP the value of certain apparel imported into the country. On Oct. 12, 2023, the whistleblower filed a First Amended Complaint for Violations of the Federal False Claims Act—specifically section 3729, commonly known as the “reverse” false claims act—against the Miami-based brand.

“So here, instead of upcoding to get more money than they were entitled to, they paid less than they are owed; it’s like tax evasion,” Inman said of the reverse false claims element. “But the hammer over the head is that, if it had gone to trial and the jury said they’re liable and here’s how much in customs duties was avoided that they should have paid that was improperly undervalued, the judge is required to triple that.”

Not to mention the penalties, Inman continued. Each false invoice submitted carries a penalty of up to $30,000. If the suit alleged that false invoices were submitted for seven years, Alexis would have gotten “flayed” in front of a jury, Inman said, and “hammered as fraudsters,” thus likely the reason the brand took the settlement. 

In any case, the whistleblower alleged that one of the luxury label’s vendors revealed that Alexis required the vendor to cook the books and give the brand an invoice with lower unit prices than the actual unit prices that were paid.

When the informant filed the “qui tam” action, they shared with the government a copy of a purchase order (No. 62713) from mid-October 2021 in which Alexis ordered 1,768 pieces of women’s apparel from a vendor in China. That purchase order covered six styles and indicated the unit price for each style. According to the relator’s records (obtained during their employment at the brand), Alexis did not declare the total value of the cut, make and trim (CMT) costs to CBP. These records indicated that Alexis did not include the value of fabric and trim that was bought separately by the brand and then given to the CMT vendor to produce the merchandise ordered and imported by Alexis. Furthermore, the whistleblower contends that the vendor issued two corresponding invoices covering the same purchase order number. Both have the same invoice number and both dated Jan. 26, 2022. Per the suit, this double invoice scheme’s purpose was to provide unit price values of less than what Alexis paid its vendor.

“As a result of such false statements, the subject apparel was entered at a lower duty rate than would have been applicable, had the entries been properly stated,” the suit reads. “Alexis thereby avoided paying the full amount of customs duties owed.”

Within the complaint-in-intervention’s appendix is a list of some of the entry numbers that Alexis either used a double-invoicing scheme, failed to report the correct valuation, failed to apportion the value assists in the form of fabric and garment trims to the customs value of imported merchandise or submitted with incorrect HTSUS classifications. The appendix contains about 400 entries (all occurring between 2018-2022) that qualify as transgressions.

“My whole view on this is that it harms your competition; it’s obvious that it harms other businesses when you’re not playing fair, right? Like everyone has to pay their fair share and to do otherwise harms your competitors and puts them at a competitive disadvantage,” Inman said. “It also undermines the purpose of the customs laws, which have many goals as we know from Trump’s protectionist goals and other goals—whether you agree with those goals or not, we all have to play by them.”

A motion to dismiss was filed on Jul. 17, following the settlement agreement reached on Jul. 12. Per the motion, all claims against Alexis (within the “covered conduct” scope of the settlement) were dismissed. The whistleblower was dismissed with prejudice—meaning the case cannot be brought back to court.

Judge Federico Moreno signed the order dismissing the case on Aug. 6. All contents of the court’s file in this action that are currently sealed will remain sealed unless otherwise ordered by the court. In return, Alexis paid a total of $7,691,999.63 to the United States. 

“Rather than cutting corners and inventing clever double-invoicing schemes to evade the duties they owe, clothing retailers should listen to the warnings their whistleblower employees are raising internally,” Inman said. “When it comes to submitting customs entries to CBP, importers in the fashion industry would be wise to heed the old adage, ‘A stitch in time saves nine.’”

What will happen to Alexis next is unclear. Neither the label nor its lawyers responded to Sourcing Journal’s request for comment. A day before the government’s press release detailing the settlement Alexis launched its up-to-75-percent-off sale of the summer.