Chinese billionaire faces charges in $1.8-billion scheme to smuggle aluminum through L.A.

A Chinese billionaire and the company he founded were accused of hatching a scheme to avoid paying $1.8 billion in tariffs by disguising “huge amounts” of aluminum as pallets and smuggling the material into the United States, according to a federal indictment unsealed late Tuesday.

China Zhongwang Holdings Ltd., Asia’s largest aluminum extrusion company, and Zhongtian Liu, 55, former president and chairman, are also accused of engineering bogus sales of the aluminum to related entities to inflate the company’s revenues and deceive investors, authorities announced.

“The aluminum sold to United States-based companies controlled by Liu were simply aluminum extrusions that were spot-welded together to make them appear to be functional pallets, which would be finished goods not subject to the duties,” according to the indictment. “In reality, there were no customers for the 2.2 million pallets imported by the Liu-controlled companies between 2011 and 2014, and no pallets were ever sold,” the U.S. attorney said in a statement.

Authorities added that the aluminum was shipped through Southern California ports and stockpiled in local warehouses that were owned by companies under Liu’s control.

Representatives of China Zhongwang Holdings Ltd. did not immediately return an emailed request for comment.

In addition to Liu and China Zhongwang Holdings Ltd., the 24-count indictment names Zhaohua Chen, 60, whom authorities described as a close friend of Liu and “a key player in the scheme”; Xiang Chun Shao, 58, who managed a string of companies that imported the aluminum; one of those companies, Perfectus Aluminum Inc.; and a subsidiary, Perfectus Aluminum Acquisitions. They all face charges of conspiracy, wire fraud, passing fraudulent documents through a customhouse, money laundering and related offenses. Also indicted were the four LLCs that owned the warehouses, which face the same charges, absent the money laundering counts.

If convicted, Liu, Chen and Shao each face up to five years in prison for the conspiracy charge, and up to 20 years for each of the remaining 23 counts, while the companies face “substantial monetary penalties,” prosecutors said.

The indictment was returned by a grand jury on May 7 in Los Angeles.

“This indictment outlines the unscrupulous and anti-competitive practices of a corrupt businessman who defrauded the United States out of $1.8 billion in tariffs due on Chinese imports,” said U.S. Atty. Nick Hanna in a statement. “Moreover, the bogus sales of hundreds of millions of dollars of aluminum artificially inflated the value of a publicly traded company, putting at risk investors around the world. The rampant criminality described in this case also posed a threat to American industry, livelihoods and investments.”

Founded in 1993, Zhongwang Group, which consists of China Zhongwang Holdings Ltd. and its subsidiaries, describes itself as “a world-leading fabricated aluminum product developer and manufacturer. Its products are widely used in the ecological construction, transportation, machinery and equipment, and electrical engineering sectors. Through the provision of innovative products, the Group is committed to driving the light-weight development of these sectors.”