Who is involved:
Chinese billionaire: Zhongtian Liu
His company: China Zhongwang Holdings Ltd.
Key players according to investigators: Zhaohua Chen, Xiang Chun Shao, Perfectus Aluminum Inc, Perfectus Aluminum Acquisitions, four LLC’s that owned the warehouses. A business agent named Po-Chi
What was he importing:
Aluminum pallets that appeared to be “finished” to avoid duties on unfinished aluminum extrusions. The pallets were “spot-welded” to appear to be finished pallets.
Purpose of scam:
Unfinished aluminum is subject to a high rate of duty (up to 400%)
How he scammed Customs:
He imported the aluminum as finished aluminum pallets. Finished aluminum pallets have a lower duty.
How did the scam work?
1. Import aluminum pallets instead of extruded aluminum. Manufactured pallets avoid the duties versus extruded aluminum.
2. The pallets were then stored in warehouses.
3. The pallets were “sold” to entities owned by the billionaire to inflate sales and deceive investors.
4. Investigators believed Liu was going to build a smelting plant to melt the palllets then sell as raw aluminum. The aluminum imported was a higher grade and used in applications such as surgical tools.
How big ($) was the scam?
A total of 2.2 million pallets were imported from 2011 to 2014.
Customs believe the billionaire avoided paying $1.8 billion.
When was the scam discovered?
Started in 2017 with notice of the charges released this week.
What will happen to the people charged?
Probably not much, Liu and the defendants are in China and the US cannot extradite them (no treaty with China).