The U.S. Department of Justice (DOJ) reported that a federal jury has found six corporate entities guilty of attempting to defraud the U.S. via a wire-and-customs fraud scheme. The fraud was said to have been designed to avoid paying $1.8 billion in anti-dumping and countervailing duties imposed in 2011 on certain types of extruded aluminum imported into the U.S. from China.
The six entities include two aluminum businesses and four warehousing companies located in Southern California. All six companies are controlled by Zhongtian Liu, former president and chairman of China Zhongwang Holdings Ltd.
According to the evidence in the trial, these six companies conspired to disguise huge amounts of aluminum as “pallets,” which were comprised of aluminum extrusions that were spot-welded together to make them appear to be functional pallets. In fact, there were no customers for the 2.2 million pallets imported by the Liu-controlled companies between 2011 and 2014, and no pallets were ever sold.
According to the DOJ, these fake pallets were exported to the U.S. and fraudulently sold to inflate a China-based company’s revenues and deceive investors worldwide. The department stated:
After the AD/CVD duties were put in place in 2011, the company’s annual reports falsely claimed that there was a robust demand for the aluminum pallets in the U.S. Although the annual reports asserted that the aluminum pallets were being sold to independent third parties, and defendants used these reported “sales” to inflate Zhongwang’s reported sales volume and purported volume of exports to the United States, in fact the aluminum was being stockpiled by Liu-controlled entities in more than 2 million square feet of warehouse space owned by the warehouse defendants in Southern California, as well as at Liu’s New Jersey facility.
Since there was no actual demand for the pallets, defendants Liu and China Zhongwang arranged for aluminum melting facilities to be built and acquired, which were to be used to reconfigure the aluminum imported as pallets into a form with commercial value.
The Aluminum Extruders Council (AEC), which has participated in recent scope challenges and circumvention cases, with the aim of achieving level competition in the international extrusion industry, announced their support for the results of the trial.
“The Aluminum Extruders Council applauds the Department of Commerce for their work in this matter, Customs and Border Protection for their diligence in uncovering the aluminum, and the Department of Justice for their prosecution in this case,” said Jeff Henderson, president of the AEC. “This should be a warning sign to others intending to violate our trade orders. You will be discovered and prosecuted.”