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Chinese billionaire charged with evading US$1.8 billion in US duties

LIU Zhongtian, the former president of aluminium producer China Zhongwang Holdings Ltd, has been indicted by the federal court in Los Angeles for allegedly masterminding a fraudulent scheme to evade paying of US$1

Chinese billionaire charged with evading US$1.8 billion in US duties

LIU Zhongtian, the former president of aluminium producer China Zhongwang Holdings Ltd, has been indicted by the federal court in Los Angeles for allegedly masterminding a fraudulent scheme to evade paying of US$1

07 August 2019 - 19:00

LIU Zhongtian, the former president of aluminium producer China Zhongwang Holdings Ltd, has been indicted by the federal court in Los Angeles for allegedly masterminding a fraudulent scheme to evade paying of US$1.8 billion in anti-dumping duties on Chinese aluminium imported by the US as 'pallets'.

The 55-year-old Chinese billionaire disguised the shipments as 'pallets to avoid customs duties of up to 400 per cent and 'sold' the purported pallets to related entities to fraudulently inflate the company's revenues and deceive investors around the world,' said the US Department of Justice.



The 53-page indictment alleges that China Zhongwang Holdings, Asia's largest aluminium extrusion company, Liu, and several individual and corporate co-defendants lied to US Customs.



The aluminium sold to US-based companies controlled by Liu were simply aluminium 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 statement said.



The aluminium was imported through the ports of Los Angeles and Long Beach and the stockpiled at four large warehouses in southern California, 'all of which were purchased at Liu's direction,' it said.



Liu and his co-defendants orchestrated the bogus sales of aluminium to Liu-controlled companies in southern California to falsely inflate the value of China Zhongwang, according to the indictment. Liu is a major shareholder of China Zhongwang, which has been listed on the Hong Kong Stock Exchange since a 2009 initial public offering that raised $1.26 billion.



The defendants allegedly inflated China Zhongwang's sales volumes and its volume of exports to the US by engaging in transactions with entities controlled by Liu, and then falsely claimed in China Zhongwang's annual reports that the aluminium was being sold to independent third parties, when it was actually being stockpiled by Liu-controlled entities in southern California.



'The indictment also alleges a massive money laundering scheme that was used by the defendants to funnel hundreds of millions of dollars through shell companies to the US-based aluminium companies controlled by Liu. The funds were then transferred to China Zhongwang and the other shell companies as payments for the aluminium,' the statement said.



Co-conspirators named in the 24-count indictment include Zhaohua Chen, 60, a Chinese national and a close friend of Liu; Xiang Chun Shao, 58, who managed a collection of southern California businesses that pretended to be independent third parties importing the Chinese aluminium; and Ontario, California-based Perfectus Aluminium Inc, which was controlled by Liu and managed by Shao.



Perfectus Aluminium Acquisitions, a subsidiary of Perfectus Aluminium formed in late 2014 to take over a string of companies that had received aluminium pallets shipped to the US after the duties were imposed on Chinese aluminium in 2011.



Also indicted were four limited liability companies controlled by Liu that were established to purchase warehouses in Riverside, Ontario, Irvine and Fontana where the aluminium pallets were stockpiled.



Half of the 279,808 aluminium structures in the shape of pallets were seized in early 2017 at the ports of Los Angeles and Long Beach, and the other half were seized from three other warehouses Perfectus was using to store the pallets.



At present, Liu, Chen and Shao are not believed to be in the US. If convicted on the charges, the men face a maximum penalty of five years in federal prison for the conspiracy charge and up to 20 years for each of the remaining 23 counts. Liu's companies also face 'substantial' monetary penalties.


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