The firms sought to evade high anti-dumping and countervailing duties on aluminum extrusions imported into the U.S.
Six Southern California companies, all with ties to one of Asia’s largest manufacturers of aluminum extrusions, were ordered to pay nearly $2 billion in restitution after evading import duties and participating in a scheme to artificially inflate the revenues of the Chinese company, federal prosecutors said.
The complex scheme involved China Zhongwang Holdings Ltd. and its former president and chairman, Zhongtian Liu, importing aluminum extrusions — long portions of the metal that serve as raw material — that were spot-welded together to appear as finished and functional pallets, according to the U.S. attorney’s office for the Central District of California.
Aluminum extrusions are subject to high anti-dumping and countervailing duties, put into effect in 2011, while finished aluminum products such as pallets are not.
China Zhongwang Holdings and other companies controlled by Liu imported 2.2 million “pallets” of extruded aluminum from China through the ports of Los Angeles and Long Beach between 2011 and 2014, federal prosecutors said.
The duties would have amounted to about 400% of the value of the raw materials, according to a 2019 indictment.
The metal was then stored in warehouses around Southern California, and China Zhongwang Holdings stated to investors that high volumes of the metal were being sold, prosecutors said.
In fact, none of the pallets were being sold, and the metals sat in warehouses around Southern California and at least one location in New Jersey.
Money was funneled through shell companies to the aluminum firms that were “buying” and storing the wares, which were controlled by Liu, and eventually back to China Zhongwang Holdings to appear that sales were made and that revenues were up.
The six limited liability companies ordered Monday to pay restitution were pivotal players in that scheme, federal officials said.
The companies were identified as:
- Perfectus Aluminium Inc., of Ontario
- Perfectus Aluminium Acquisitions, a subsidiary of Perfectus Aluminium formed to oversee companies that received the pallets
- Scuderia Development, owner of a warehouse in Riverside
- Von Karman – Main Street, owner of a warehouse in Irvine
- 1001 Doubleday, owner of a warehouse in Ontario
- 10681 Production Avenue, owner of a warehouse in Fontana
A federal jury found the two aluminum companies and four warehouse companies guilty of conspiracy, wire fraud and passing false or fraudulent papers through a customhouse.
The Perfectus Aluminium companies were also found guilty of seven counts of international promotional money laundering.
“The Perfectus and Warehouse defendants were integral participants in this conspiracy,” prosecutors wrote in a sentencing memorandum. “Indeed, they existed only to perpetrate it.”
Liu, China Zhongwang Holdings and two others — including Xiang Chun Shao, who is accused of managing the companies — were charged in Los Angeles federal court with the scheme in May 2019 but have yet to appear in court as the U.S. does not have an extradition treaty with China.
Liu resigned as president of China Zhongwang Holdings in 2016 and as board chairman in 2017.
Investigators believe that Liu had planned to build or buy a smelting plant, with one possible location in Barstow, to melt the aluminum down and resell it in the U.S. at a reduced price.
The aluminum seized during the investigation is estimated to be worth approximately $70 million, federal officials said.
This story originally appeared in Los Angeles Times.