NEWARK, N.J. — Federal authorities have cracked one of the largest counterfeit goods smuggling operations in history, involving fake products valued at more than $300 million.
The goods, which involved some of the best-known brands in apparel and accessories as well as a large amount of drugs, were smuggled in from China through the Port Newark-Elizabeth Marine Terminal in New Jersey.
“Ugg boots, Timberland boots, Nike sneakers, Burberry scarves, Gucci handbags and boots, Lacoste shirts, Coach handbags, Polo sweatshirts, Louis Vuitton handbags, all of these and more, in total of more than $325 million worth of counterfeit Chinese goods imported into the United States through Port Newark and Port Elizabeth over the last two to three years by two different criminal conspiracies with overlapping members — [making it] one of the largest counterfeit goods cases ever prosecuted by the Department of Justice, and not just clothing and footwear but counterfeit cigarettes and pure crystal methamphetamine,” said Paul J. Fishman, U.S. Attorney for the District of New Jersey, opening a press conference at his offices in the Peter W. Rodino Federal Building in downtown Newark.
Indictments and criminal complaints unsealed Friday detail two overlapping, elaborate schemes to smuggle goods and contraband by defeating federal border and port security measures at Port Newark-Elizabeth Marine Terminal, the largest such facility on the East Coast. The schemes were discovered using undercover agents and investigators from Homeland Security Investigations, the Federal Bureau of Investigation, Customs & Border Patrol and Immigration & Customs Enforcement and employing court-authorized wiretaps. Of the 29 people charged in New Jersey in an indictment and three criminal complaints as a result of the investigations, 23 were in federal custody on Friday. Twenty of those were arrested just hours before the noon press conference in downtown Newark. One was said to be en route to the country and was to be apprehended upon arrival. Arrests were made in New Jersey, New York, Texas and the Philippines capital of Manila.
Fishman said the conspirators discussed expanding into other lines of counterfeit products, without regard to the health and safety of consumers. For example, he cited a conversation detailed in the indictment from Dec. 7, 2010, in which Hai Yan Jiang, charged with counterfeit conspiracy and conspiracy to evade financial reporting requirements, spoke with Lin Wu, charged with conspiracy to traffic counterfeit goods, about the importation of counterfeit cosmetics. Yan stated that the cosmetics were “counterfeit, but of good quality,” according to Fishman. When Wu asked Yan whether these products would be harmful to the users, Yan allegedly said, “All I care about is to make money, other things do not matter.” When Wu stated that “business needs to be done with a clear conscience,” Yan replied, “Then go be a monk.”
Authorities said the conspirators used stolen corporate identities and false personal identification documents to compromise security at the port and attempt to import more than 135 containers of counterfeit goods into the U.S. They concealed the counterfeit goods, among other ways, by using generic outer lids on boxes and generic labels on products to hide the counterfeit brand name labels beneath. Once the products cleared the ports, they would remove the outer lids and cut off the generic labels. Some conspirators obtained the information of legitimate companies and used it on false shipping paperwork, it is charged, then managed the flow of false paperwork between China and the U.S. and supervised the illegal import process. Others created and used false and fraudulent personal identification documents, such as Social Security cards, to continue the scheme, while some managed the distribution of the goods after they arrived, delivering them to warehouses and distributing them throughout New Jersey, New York and elsewhere.
Conspirators acting as wholesalers obtained counterfeit goods from the directors of the scheme and sold them to retailers, authorities detailed in their criminal complaint. Some members of the scheme then laundered the profits by wiring millions of dollars to China without reporting the funds as required by federal law.
Fishman said the sophisticated scheme even listed products on import manifests as ones with lower tariff rates than the actual fake goods in order to pay lower import duties. The conspirators also bribed undercover agents to releases their goods early from customs warehouses and approve phony paperwork.
In addition, Fishman noted that the operation involved a form of money laundering, where the conspirators made hundreds of thousands of dollars in cash deposits in amounts less than $10,000 to avoid federal reporting requirements.
Robert E. Perez, CBP director of New York Field Operations, said the initial tip that began the investigation came into the federal Intellectual Property Rights Center in Virginia. Fishman indicated that it was one of the companies that had its identity stolen in false documents that reported the incident. He declined to name the company.
Perez said the extensive interagency investigation to uncover the ring represented “the face of law enforcement in the 21st century.”
Many of those involved used the profits of their crimes to maintain lavish lifestyles, buying luxury automobiles and tens of thousands of dollars in jewelry. Facing the stiffest penalty is Soon Ah Kow, 72, of Hong Kong, who is charged with 14 counts including conspiracy to import methamphetamine, which carries a maximum penalty of life in prison. Hui Sheng Shen, 45, and Huan Ling Chang, 41, both of Taiwan, also face the methamphetamine charge. Shen and Chang were arrested in New York on Feb. 25, and Kow was arrested in Manila on the same day and is expected to be extradited.
Fishman said the operation also included “processing” the merchandise once it came into the U.S. warehouses to make them appear more genuine.
“The cost of counterfeiting is incredibly high, in the billions of dollars lost to legitimate companies,” Fishman said. “Counterfeit goods cheat American and other companies that create tremendous value for their employees. Companies go to great lengths to establish reputations for quality, symbolized by their brands, and consumers seek out those brands believing that they can buy from them with confidence. The threat of piracy is not just a threat to that confidence but also to innovation and it destroys jobs, and the ultimate victims are consumers, not just because they are buying inferior products for too much money, but because some counterfeit products can be a huge risk to health and safety.”
HSI executive associate director James Dinkins said, “The enormity of this case and the fact that we followed the investigative leads directly to the source in China, where so many counterfeit goods originate, is a stern warning to counterfeiters and smugglers everywhere. We are vigilantly watching our ports of entry for criminal activity that undermines legitimate commerce and potentially threatens the security of the United States.”
The government is represented by Assistant U.S. Attorneys Zach Intrater and Andrew Pak, and deputy chief Erez Liebermann of the U.S. Attorney’s Office Economic Crimes Unit in Newark.
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