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(800) LA TIMESFounded Dec. 4, 1881
Vol. CXXXVIII No. 241
LOS ANGELES TIMES (ISSN 0458-3035)
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manufacture medical devic-
es, military equipment or
aircraft, said Jeremy Scott,
assistant special agent in
charge for Homeland Secu-
rity Investigations in Los
Angeles.
About 260,000 of the pal-
lets are now sitting in a
seizure warehouse owned by
the federal government.
The alleged scheme is an
example of a battle federal
authorities have long fought
against Chinese firms ac-
cused of evading tariffs to
dump steel and aluminum
into the U.S., hurting do-
mestic suppliers. President
Trump has vowed to crack
down on what he considers
these and other Chinese
trade abuses at the center of
the current trade war.
“Our national security is
jeopardized when domestic
industry loses its ability to
develop and supply prod-
ucts for U.S. defense and
critical infrastructure appli-
cations, forcing us to be-
come dependent on unreli-
able imports from other
countries,” Joseph Macias,
special agent in charge for
Homeland Security Investi-
gations in Los Angeles, said
in a statement.
Liu resigned as president
of China Zhongwang Hold-
ings Ltd. in 2016 and as board
chairman in 2017. He could
not be reached for comment,
and the company did not im-
mediately return calls.
The aluminum was
“spot-welded together” to
resemble pallets because
finished goods are exempt
from the anti-dumping du-
ties, which in this case would
have amounted to about
400% of the value of the raw
materials, the indictment
states.
Prosecutors said the ma-
terial was imported through
the ports of Los Angeles and
Long Beach and sold to a
string of companies that ap-
peared to be independent
but were actually controlled
by Liu. It was then stock-
piled at warehouses in
Southern California that
were owned by companies
Liu controlled, according to
the indictment.
China Zhongwang Hold-
ings Ltd. drew on the “bogus
sales” in its annual reports
to mislead investors by cre-
ating “a false narrative that
there was a robust demand
for aluminum pallets in the
United States,” according to
a news release issued by fed-
eral prosecutors.
To conceal the activity,
the indictment alleges, Liu
and his associates funneled
hundreds of millions of dol-
lars through shell compa-
nies to the U.S.-based alumi-
num companies controlled
by Liu and then transferred
it to China Zhongwang
Holdings Ltd.
Investigators believe Liu
had intended to either build
a smelting plant in Barstowor buy one in Delair, N.J., so
he could melt down the alu-
minum and resell it on the
U.S. market at “a signifi-
cantly reduced price,” Scott
said. He appears to have
been thwarted by environ-
mental processing or licens-
ing issues, he said.
Instead, Scott said, Liu
exported some of the alumi-
num to Vietnam and had
planned to melt it down
there and possibly reintro-
duce it back into the U.S. as
non-Chinese aluminum be-
fore the alleged scheme was
discovered.
“It was very compli-
cated,” Scott said. “I’d say it
was pretty ambitious. But
had they been able to maybe
get the smelting plant online
sooner, I think this plancould have actually worked.”
The Aluminum Assn., a
trade group, said in a state-
ment that it “has long ex-
pressed concern about duty
evasion, misclassification
and transshipment distort-
ing the global and domestic
market for aluminum.”
“The charges against
China Zhongwang Holdings
Inc. place these issues in
stark relief,” the group said.
“In addition to enforcing ex-
isting trade law, it is criti-
cally important that the U.S.
implement an aluminum im-
port monitoring system to
help minimize threats to a
fair and level playing field for
the entire industry value
chain.”
U.S. Atty. Nick Hanna
said in a statement that “therampant criminality de-
scribed in this case also
posed a threat to American
industry, livelihoods and in-
vestments.”
In addition to Liu and
China Zhongwang Holdings
Ltd., the 24-count indict-
ment names Zhaohua Chen,
60, whom authorities de-
scribed as a close friend of
Liu and “a key player in the
scheme”; Xiang Chun Shao,
58, who managed a string of
companies that imported
the aluminum; one of those
companies, Perfectus Alu-
minum Inc.; and a subsidi-
ary, Perfectus Aluminum
Acquisitions.
They all face charges of
conspiracy, wire fraud, pass-
ing fraudulent documents
through a customhouse,
money laundering and re-
lated offenses. Also indicted
were the four LLCs that
owned the warehouses,
which face the same charges,
absent the money launder-
ing counts.
Most of the defendantsare believed to be outside
the U.S., and some, includ-
ing Liu, are in China, Scott
said. The U.S. has no extra-
dition treaty with China, so
federal investigators are
working with overseas part-
ners in an attempt to bring
the men into custody, he
said.
If convicted, Liu, Chen
and Shao each face up to five
years in prison for the con-
spiracy charge and up to 20
years for each of the remain-
ing 23 counts, while the com-
panies face “substantial
monetary penalties,” prose-
cutors said.
A fourth man, Po-Chi
Eric Shen, 41, whom investi-
gators described as a “busi-
ness agent” of Liu, was
charged with tax offenses in
a separate case filed late
Tuesday. He has agreed to
plead guilty and cooperate
with the investigation,
which authorities said re-
mains ongoing.Times staff writer Piper
McDaniel contributed to
this report.Indictment alleges $1.8-billion tariff scam
A CHINESE BILLIONAIREand his firm are accused of disguising aluminum shipments at the ports of L.A.
and Long Beach and then engineering bogus sales of the metal in the U.S. to inflate the company’s revenues.Damian DovarganesAssociated Press[Aluminum,from A1]
The aluminum
was ‘spot-welded
together’ to
resemble pallets
because finished
goods are exempt
from the U.S.
tariffs.
Gun violence:In the July
30 Section A, an article
about gun control proposals
referred to Robin Lloyd as
managing director of the
Giffords Law Center to Pre-
vent Gun Violence. She is
managing director of an af-
filiated group, Giffords:
Courage to Fight Gun Vi-
olence.FOR THE
RECORD