Two used-clothing exporters gave payments over 13 years to top Salvation Army officers in return for a steady supply of clothes, cheated companies that handled shipments to 11 countries and deprived those nations of customs revenues, a prosecutor said today.
"There are several officers of the Salvation Army being investigated. The investigation is continuing," said Stephen Wehner, chief of the fraud section in the U.S. attorney's office here.
Exporters Harry Usatch, 70, of Hollywoood, Fla., and his son, Jerald Usatch, 45, of Philadelphia have been charged with paying kickbacks to several Salvation Army officers to win favored treatment in buying used clothing and rags, Wehner said.
Coast to Coast
The Philadelphia Inquirer quoted sources as saying the investigation centered on Salvation Army offices in Los Angeles, New York, Atlanta and Chicago. Wehner declined comment on the number or location of Salvation Army officers involved in the investigation.
The Salvation Army collects millions of tons of used clothing and sells some to its Thrift Shops around the nation. Some of it is surplus or unusable and is sold in bulk as rags.
Wehner said the Usatches, in trying to guarantee a steady supply of used clothing, paid off Salvation Army officers to favor them over other buyers.
A criminal information filed in U.S. District Court charged the Usatches and their Dumont Export Corp. with conspiracy and mail fraud. An information is an alternative to an indictment for filing charges.
The Usatches will be arraigned and have a bail hearing before a U.S. magistrate Thursday, Wehner said.
The men understated the value and weight of used-clothing shipments to 11 countries by almost 5 million pounds over four years, depriving the nations of customs tax revenues, Wehner said. The Usatches also misidentified shipments to circumvent laws banning imports of used clothing into Nigeria and of unsanitized clothing into other countries, Wehner said.
At first, as many as 30 Salvation Army officers and employees were being investigated, the Washington Post reported today. But the newspaper quoted unidentified sources as saying the inquiry has narrowed to between five and 11 officials.
The Salvation Army officers received the illegal payments from Dumont from 1970 to May, 1983, the information said. Dumont shipped castoff clothing to Third World and European countries, where it was resold.
The men supplied seven shipping companies with at least 310 certificates understating the weight of shipments of clothing and rags by nearly 4.9 million pounds, and the fraudulent documents cost 11 foreign nations $443,145 in lost revenues, according to the criminal information.
The defendants also undervalued 21 shipments to Italy, Benin, Pakistan, France and India by about $123,217, causing losses to nations which charge a customs tax of approximately 5% of the clothing's value, the document said.