Giant Conspiracy Alleged in Chinese Garlic

LOS ANGELES (CN) - Chinese garlic exporters are conspiring to extort and economically cripple one of their few competitors that is not charged U.S. anti-dumping duties, Harmoni International Spice claims in a federal RICO complaint.

Harmoni International, in the City of Industry, is the U.S. branch of co-plaintiff Zhengzhou Harmoni spice, of Henan Province in China. It sued 14 people and eight corporations, most of them Chinese, on Jan. 27, accusing them of mail fraud, wire fraud, extortion, tortious interference with contract, trade libel, RICO conspiracy and other charges.

The U.S. garlic market is enormous.

Chinese garlic is milder than its U.S. counterpart and enjoys a 25 percent of the U.S. market. Roughly 65,000 metric tons of garlic was imported from China in 2014, according to the lawsuit: 25 percent of the annual U.S. consumption of 260,000 metric tons. The United States produces about 175,000 metric tons of garlic a year.

"The story begins in 1994," Harmoni says in the 74-page complaint, when the Department of Commerce issued an antidumping order covering fresh garlic from the People's Republic of China.

"As a result of the Chinese Garlic Order, exporters of Chinese garlic were assessed hefty antidumping duties which had to be deposited by their importer customers in the United States," the complaint states.

Since the anti-dumping order was issued, the Department of Commerce has conducted annual reviews of Chinese garlic exporters, old and new. "As a result of these reviews, the vast majority of Chinese garlic is still subject to hefty duties. This is due largely to persistent violations of U.S. antidumping regulations by Chinese garlic exporters," according to the complaint.

"The notable exception is garlic imported by Harmoni from Zhengzhou Harmoni, its wholly owned Chinese subsidiary. Upon commencing its exportation of garlic to the United States in 2001, Zhengzhou Harmoni legitimately obtained a zero-duty rate under the U.S. antidumping laws and has maintained that rate through the present day."

This gives Harmoni a "lawful advantage" over its competitors, because it need not pay the anti-dumping duties.

Harmoni claims that rather than play by the rules, the defendants conspired to defraud the United States, through false statements and forged documents, to obtain favorable duties for themselves and other companies under their control, "and to flood the U.S. market with garlic sold at less than fair value while severely eroding plaintiffs' market share."

At the same time, Harmoni says, the defendants defamed it to the United States, to try to force it to pay millions of dollars in anti-dumping duties it does not owe.

One of the many defendants sent Harmoni a false and defamatory letter "which levels a number of baseless claims against Harmoni and demands an immediate and extortionate payment of $32 million in exchange for its promise not to levy these false accusations more publicly and irreparably damage Harmoni's reputation and relationships with its customers," the complaint states.

Harmoni claims the conspiracy is directed by lead defendant Wenxuan Bai, who owns and/or controls, directly or through family members, a number of co-defendant companies, including Qingdao Tiantaixing Co., Qingdao Lianghe International Trading Co., and Qingdao Xiantianfeng Foods Co. Bai also is "actively involved" in defendant Heibei Golden Bird Trading Co., whose business is "intertwined" with his own companies, Harmoni says.

Key members of the conspiracy include Chinese businessmen Jicheng Ye and Ruopeng Wang and their companies, Harmoni says. It claims that for the past seven years, these businessmen have used a law firm specializing in U.S. customs law to help to "economically cripple Zhengzhou Harmoni" and violate the 1994 federal anti-dumping order.

Harmoni claims that defendant Robert Hume, an attorney with Hume & Associates, formerly of Ojai, Calif., but now based in El Prado, N.M., helped his Chinese clients "repeatedly defraud" U.S. Customs, the Department of Commerce and the U.S. Court of International Trade, by forging documents to get undeserved import rates for themselves, and defame Harmoni.

To evade anti-dumping laws, the defendants, including Wang and Heibei Golden Bird, create new businesses and revive "dormant ones" to secure new shipper designations and claim low anti-dumping duty rates, Harmoni claims.

Shippers then export "huge amounts" of fresh garlic into the United States sourced from garlic producers that should pay higher duty rates, Harmoni says.

"This sleight of hand enabled U.S. importers of that garlic to 'dump' Chinese garlic on the U.S. market for less than fair value, increasing defendants' market share at the expense of both plaintiffs and the domestic garlic industry," the complaint states.

When the Department of Commerce reviews the shippers, Bai and his co-conspirators "simply hang a different shingle on their operations," Harmoni says, by opening a new business or revitalizing a dormant one.

It claims the law firm enlisted defendant New Mexico "hobby farmers" Stanley Crawford and Avrum Katz, "with no financial stake in the outcome of the U.S. antidumping administrative review process, to file baseless review requests containing false and misleading allegations against Zhengzhou Harmoni."

"These filings are part of an ongoing effort to force upon Zhengzhou Harmoni the significant expense and burden associated with administrative review, strip it of its favorable rate, and increase the market share of Hume's real clients-in-interest: Bai, Ye, Wang, and the Chinese corporations under their control," the complaint states.

Though the law firm represents that the farmers' cases are taken on pro bono, it has a $1.6 million "war chest" created at the Chinese Garlic Association's request and formed for the "explicit purpose of destroying plaintiffs' business in the United States," Harmoni claims.

It says defendant fresh garlic reseller C. Agricultural Group Corp. has "close ties" to Bai and sent the "false and defamatory" demand for $32 million to one of Harmoni's customers.

Harmoni seeks an injunction, damages, penalties, treble damages and attorneys' fees.

It is represented by John Schreiber with Winston and Strawn.

Neither Heibei Golden Bird nor the U.S. Department of Commerce immediately responded to requests for comment on Friday.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit