LOS ANGELES (CN) – Federal prosecutors in Los Angeles accused a Chinese billionaire of selling aluminum disguised as shipping pallets to U.S companies he controlled in order to avoid paying nearly $2 billion in tariffs.
In order to deceive U.S. Customs and Border Protection officials, prosecutors say Zhongtian Liu, 55, welded aluminum pieces together to appear like shipping pallets, which are considered finished goods not subject to tariffs.
According to a federal grand jury indictment unsealed Tuesday, Liu never sold the 2.2 million pallets he shipped into the ports of Los Angeles and Long Beach between 2011 and 2014.
Instead, Liu stockpiled the pallets at four large Southern California warehouses which were purchased at his direction, the 53-page indictment says.
Liu – the former president and chairman of China Zhongwang Holdings Limited – then orchestrated the sale of the bogus pallets to U.S.-based companies he controlled.
After U.S. antidumping and countervailing tariffs targeting Chinese aluminum imports were established in 2011, officials at China Zhongwang, Asia’s largest aluminum exporter, began inflating sales volume and export figures.
In company reports, the China Zhongwang officials falsely claimed there was robust demand for aluminum pallets in the United States with third-party companies purchasing their products, prosecutors said.
Since no such demand existed, prosecutors say “defendants Liu and China Zhongwang would direct that aluminum melting facilities be built and acquired to be used to reconfigure the aluminum imported as pallets into a form with commercial value.”
Liu and company officials also orchestrated a massive money-laundering scheme in which hundreds of millions of dollars were funneled through shell companies to make payments for the aluminum, according to the indictment.
U.S. Attorney Nick Hanna of the Central District of California said in a statement Wednesday that the schemes put investors around the world at risk.
“This indictment outlines the unscrupulous and anticompetitive practices of a corrupt businessman who defrauded the United States out of $1.8 billion in tariffs due on Chinese imports,” Hanna said in the statement. “The rampant criminality described in this case also posed a threat to American industry, livelihoods and investments.”
Liu, who maintained a home in Orange County, California for some time, is not currently in the United States, prosecutors said.
Zhaohua Chen, 60, a Chinese national and close friend of Liu, and Xiang Chun Shao, 58, who managed businesses importing aluminum, are also named defendants but are not believed to be in the U.S., prosecutors said.
Prosecutors have charged the men with conspiracy, wire fraud and passing false and fraudulent papers through a customs house.