(CN) - Chinese scrap metal importers must face claims that they sent counterfeit mutilated coins to the United States Mint for over a decade, reaping over $47 million in legitimate currency in return, a federal judge ruled.
On March 20, 2015, the federal government filed a two-count complaint for civil forfeiture of property against America Naha Inc., Kei Yi Loung aka Kenneth "Kenny" Loung, Chien Chieng Loung, Harry Kenneth Loung, Lisa Marie Loung, and Mary Robin Loung.
The amended complaint alleges that in June 2014, the defendants sent the Mint a large shipment of mutilated coins to be melted down and converted into new currency in Iowa and Illinois foundries, via the Mint's Mutilated Coin Redemption Program.
Under the program, once coins are melted down, the Mint sends either a check or wire transfer to the redeemer, the government says. But since each mutilated coin's metallic content is worth less than its face value, the program operates at a loss, according to the feds.
America Naha and the Loungs intended to dupe the government by sending it coins that contained elements "not found in genuine United States coins" and "insufficient amounts of certain types of metals typically found in United States coins," the complaint states.
Indeed, the coins were mutilated "in a uniform manner," the government claims.
The government nonetheless claimed it owed America Naha and the Loungs over $5.45 million, and acquired a seizure warrant on Sept. 4, 2014, in New Jersey federal court.
It now seeks to seize the intercepted funds, as well as the Dallas warehouse of one of Loung's companies, Phoenix 10212 LLC, bought for nearly $1.1 million in 2009, and a 2014 Black Porsche Cayman Coupe, which Loung bought for $81,000 in 2013.
The government alleges that Loung has already received $6.4 million in payments from the Mint through the coin program, in three separate transactions wired from New Jersey.
A week after receiving the first payment, Loung allegedly wired nearly $745,000 to Phoenix's account and had the firm pay off his mortgage for the Dallas warehouse in full.
Loung bought the Porsche just nine days after receiving the second wire, the feds say.
America Naha and the Loungs moved to dismiss or sever the claims against the property.
But U.S. District Judge Jose Linares in Newark denied the motion Oct. 20.
"The amended complaint alleges that the moving claimants were involved in a systematic scheme to defraud the Mint for as much as 10 years for over $47 million," the unpublished ruling states. "It lays out convincing evidence that rationally leads to the conclusion that most, if not all, mutilated coin imports from China were counterfeit for the past 15 years, including government-led chemical and statistical analyses, as well as on-site inspections of scrap metal yards."
The feds also sufficiently alleged that Loung used the Mint money to buy the Dallas warehouse and Porsche, the judge ruled, noting the quick turnaround.
"While the amended complaint admittedly does not directly link Loung's Texas property and Porsche to the alleged fraudulent activity, nothing at this stage suggests that the government cannot prove this link after discovery," Linares wrote. "Thus, giving all favorable inferences to the government, this court is satisfied that the amended complaint sufficiently relates the forfeiture to the alleged fraud, in light of the broader scheme to defraud."
Noting that the Mint is located in Philadelphia, the judge transferred the case there.
Matthew Reilly, a spokesman for the New Jersey U.S. Attorney's Office, declined to comment on the ruling.
The moving claimants have yet to return a request for comment.The Mint says it has received more mutilated half dollars in the past ten years than it ever manufactured, and that, were the coins actually found in old U.S. cars shipped out for scrap metal, as the importers claim, each car would have had to contain $900 in mutilated coins.
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