NEW YORK — Seizing $200 million in fake goods, Federal officials here on Wednesday broke up what they called one of the largest-ever counterfeit smuggling rings for apparel, shoes and accessories.

This story first appeared in the December 6, 2007 issue of WWD. Subscribe Today.

The products seized included items labeled Chanel, Nike, Burberry, Polo Ralph Lauren and Baby Phat. Federal officials in Manhattan arrested and arraigned 10 people on Wednesday, including a licensed Customs broker. The busts occurred after a one-year investigation that included an undercover agent. The goods were discovered in more than 100 shipping containers packed full of cases of fake sneakers, handbags, jeans and other apparel.

“These criminal charges follow a long-term undercover investigation into an elaborate scheme to defeat Federal border and port security measures,” said U.S. Attorney Michael Garcia during a press conference in the lobby of the U.S. Attorney’s Office in lower Manhattan.

The raid reflects stepped-up efforts by Federal and local officials in seizing counterfeit goods, a major plague for fashion and luxury brands. In October, a raid was carried out by the New York Police Department at a commercial building in the College Point section of Queens that resulted in 13 arrests and the seizure of an estimated $4 million in counterfeit apparel. Brands from Louis Vuitton to Cartier also have been stepping up their own legal efforts to blunt the sale of counterfeits from China, focusing a lot of their attention on the streets around Canal Street in New York. (For more on the area, see sidebar.)

Wednesday’s $200 million port raid involved smugglers bringing in fake goods through metro area ports inside shipping containers. The items were mislabeled, and bills were falsified to get the goods through. Nike-branded sneakers, for example, were labeled as “refrigerated noodles.”

The defendants were charged with attempting to smuggle the counterfeit apparel through Port Newark-Elizabeth Marine Terminal from China by circumventing border security. The goods seized were bound for retail outlets in Brooklyn and Queens, not street vendors, investigators said.

When questioned during the press conference about whether there’s a gap in port security, Garcia said, “It shows a risk, not a gap.”

The smugglers also were charged with attempting to bribe an undercover U.S. Immigration and Customs Enforcement agent posing as a corrupt longshoreman’s union official by offering $500,000 in cash bribes.

Investigators’ initial contact with the smugglers was through Michael Chu, 70, who solicited the help of the undercover agent to move containers through the Newark port in August 2006. Chu continued to provide the agent with container numbers and bribes since then, and allegedly worked with several associates.

Additionally, Chu asked the agent to help him smuggle in at least one container of goods for Hsi Feng Li, who was called “The General.” Li also was named as a defendant in the case.

Other defendants named in legal proceedings included Grace Qeuzon, Yee Khiong Ting, Troy King, Wing Ki Lee and Dick Ong. All had multiple aliases. Robin Huff, a licensed Customs agent, was charged with exploiting his access to the Customs and Border Protection database in addition to the smuggling and trafficking accusations. Chi On Wong and Man Wai Cheng, operators of Brooklyn-based trucking company KT Express Inc., allegedly charged the smugglers a premium to transport the containers of counterfeits.

The charges are the culmination of more than a year of investigation into the ring. Four search warrants were executed Wednesday morning in the New York metropolitan area. In addition to counterfeit merchandise, two trucks used to transport goods were seized.

Shipments of goods were disguised in different ways. According to court documents, the smuggling ring planned to mislabel products to avoid quotas and detection. For example, the smugglers told the undercover agent they planned to label jeans as pants and leather sneakers as PVC. The “refrigerated noodle” cases of Nike sneakers surfaced on a number of occasions during the probe.

According to the complaint, the smuggling ring enlisted the help of a federally licensed Customs broker to track containers through the ports. Among other things, a Customs broker is able to keep track of whether or not a case has been opened as it passes through Customs.

After the counterfeits cleared Customs, a Brooklyn-based husband-and-wife trucking company moved them to warehouse locations for storage. The goods were distributed from there to retail outlets in Brooklyn and Queens.

The complaint contains allegations of conspiring to smuggle goods into the U.S., smuggling goods into the U.S. and trafficking in counterfeit goods. If convicted, the members of the smuggling ring could face a maximum sentence of 35 years in jail and fines of up to $2.4 million and an obligation to pay restitution to the brand owners of the goods that were counterfeited.

During the press conference, Garcia called the group a “major smuggling” outfit and said the case does highlight a risk that exists at the country’s ports. In this instance, he said, that risk was identified and addressed.

Garcia said regardless of the categories of goods being smuggled into the U.S., it is “deeply troubling” whenever a criminal organization tries to circumvent the Customs process.

“It’s not good enough to just keep counterfeits off the street. We need to dismantle the organizations,” said Kyle Hutchins, special agent-in-charge, Immigration and Customs Enforcement, Newark Field Office. He also spoke at the press conference.

At the press conference unveiling the complaints, Hutchins issued a special thanks to Nike for the company’s technical expertise and patience in assisting with the case. “It is important that companies work together with law enforcement to protect the public from inferior products entering the marketplace while also upholding their trademarks,” said Dave Simpson, director of corporate security, Nike, in a statement about the raid.

Other brand owners involved either did not return calls for comment Wednesday or could not be reached by press time.

The defendants were scheduled to appear in front of U.S. Magistrate Judge Frank Maas Wednesday afternoon. At press time, officials at the court could not confirm if the defendants did indeed appear before the judge.