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Screenplay-Worthy Sting Op Nets $300 Million in Counterfeit Goods & Drugs

29 charged in New Jersey in international schemes to import counterfeit goods and drugs, launder profits

NEWARK, N.J. -- Massive conspiracies to import hundreds of millions of dollars in counterfeit goods from China and illegal drugs from Taiwan to the U.S. have been disrupted. The case was investigated by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI), the FBI, U.S. Customs and Border Protection (CBP), and the Department of Justice's Organized Crime and Gangs Section, Office of Enforcement Operation and Office of International Affairs.

Undercover agents and court-authorized wiretaps helped uncover two elaborate schemes to defeat federal border and port security measures at Port Newark-Elizabeth Marine Terminal in Elizabeth, N.J. Of the 29 charged in New Jersey in an indictment and three criminal complaints as a result of those investigations, 23 are currently in federal custody.

Federal agents arrested Hui Sheng Shen, aka "Charlie," and Huan Ling Chang, aka "Alice," Feb. 25, 2012, in New York. Soon Ah Kow, indicted in January 2012, was also arrested Saturday in the Philippines. Twenty defendants were arrested this morning in a coordinated, multi-agency takedown. Six of the charged defendants remain at large.

The federal investigations into the smuggling of counterfeit goods also uncovered an alleged scheme to import 50 kilograms of crystal methamphetamine. Approximately 1 kilogram of nearly pure crystal meth was purchased from the defendants as part of the operation, which stopped the importation of dozens of additional kilograms of the drug.

In addition to the arrests, federal authorities are seeking to seize and forfeit all proceeds of the counterfeiting scheme and property used to commit the counterfeiting scheme, including automobiles, U.S. currency and other valuables, and the home of one of the leaders of the counterfeiting ring.

"Thanks to the efforts of HSI and our law enforcement partners, we were able to take down a massive counterfeit smuggling enterprise - a scheme involving individuals who were stealing corporate identities and smuggling counterfeit merchandise out of China," said HSI Executive Associate Director James Dinkins. "Had they not been caught, approximately $300 million worth of illicit goods would have been smuggled into our country. The enormity of this case - and the fact that we followed the investigative leads directly to the source in China, where so many counterfeit goods originate - is a stern warning to counterfeiters and smugglers everywhere. We are vigilantly watching our ports of entry for criminal activity that undermines legitimate commerce and potentially threatens the security of the United States."

"The cost of counterfeit goods is not limited to massive financial harm to American businesses and consumers," said U.S. Attorney Paul Fishman. "Criminals can exploit the same channels to import other material that threatens our health and safety. We remain dedicated, through global, inter-agency cooperation and long-term investigations like this one, to ensuring that criminals who see the ports as a gateway to America's black market instead face American justice."

"CBP is on the front line of intellectual property rights enforcement, partnering with other federal agencies, industry and foreign governments to fight cross-border trade in counterfeit and pirated goods. We are proud to have been part of this important effort to safeguard our nation," said Robert E. Perez, CBP Director, New York Field Operations.

According to the criminal complaints and indictment unsealed today:

Patrick Siu et al. scheme

An investigation led by HSI uncovered a massive scheme to smuggle counterfeit goods manufactured in China into the United States through containers falsely associated with legitimate importers. The investigation was supported by officers from CBP, who helped target, identify and process the suspect containers. Many of the containers of goods were worth millions of dollars each and together had an estimated retail value of more than $300 million were they legitimate.

The conspirators used stolen corporate identities and false personal identification documents to compromise security at Port Newark-Elizabeth Marine Terminal to help import and attempt to import more than 135 containers of counterfeit goods - primarily Coach, Louis Vuitton and other handbags, footwear such as UGG boots and Nike sneakers, and clothing - into the United States.

The conspirators concealed the counterfeit goods, among other ways, by using generic outer lids on boxes and generic labels on products to hide the counterfeit brand name labels beneath. Once the products cleared the ports, the conspirators would remove the outer lids and cut off the generic labels. Some conspirators obtained the information of legitimate companies and used it on false shipping paperwork. They then managed the flow of false paperwork between China and the United States, and supervised the importation of counterfeit goods. Others created and used false and fraudulent personal identification documents, such as Social Security cards, to continue the scheme.

Other conspirators managed the distribution of the goods after they arrived in the United States, delivering them to warehouses and distributing them throughout New Jersey, New York and elsewhere.

Conspirators acting as wholesalers obtained counterfeit goods from the directors of the scheme and supplied the retailers who sold them to the ultimate customers in the United States. Some members of the scheme then laundered the profits by wiring millions of dollars to China without reporting the funds as required by federal law.

Many used the profits of their crimes to maintain lavish lifestyles - buying luxury automobiles and tens of thousands of dollars in jewelry. During the course of the investigation, the conspirators sought out undercover federal agents (HSI UCs), who purported to have connections at the port allowing them to release containers that were on hold and pass them through to the conspirators.

The conspirators discussed expanding into other lines of counterfeit products, without regard to whether the counterfeit products harmed the health and safety of consumers in the United States. For example, on Dec. 7, 2010, Hai Yan Jiang spoke with Lin Wu, considering the importation of counterfeit cosmetics. Yan stated that the cosmetics were "counterfeit, but of good quality." When Wu asked Yan whether these products would be harmful to the users, Yan said, "All I care about is to make money, other things do not matter." When Wu stated that "business needs to be done with a clear conscience," Yan replied, "Then go be a monk."

Ning Guo et al. scheme

Simultaneously, the FBI was conducting a parallel investigation into targets operating a smuggling scheme at the port. As the investigations developed, law enforcement discovered targets that connected the conspiracies. The FBI then joined together with HSI, CBP and the U.S. Attorney's Office for the District of New Jersey to coordinate operations.

This scheme also involved a large-scale international counterfeit goods smuggling and distribution conspiracy and falsified shipping paperwork. As part of the investigation, law enforcement set up a front company as a purported importer of goods. Through the smuggling scheme, the conspirators imported over 35 containers of counterfeit goods with a retail value of over $25 million, including counterfeit Nike sneakers and UGG boots; Burberry, Louis Vuitton, Coach and Gucci handbags; and cigarettes, among other items.

Some of the conspirators engaged in a conspiracy to launder what they believed to be the proceeds of narcotics and illegal gambling activity through banks in China, the United States and elsewhere.

Kow, Shen and Chang scheme

Soon Ah Kow - charged by indictment with drug importation, smuggling and counterfeit goods trafficking offenses by a Newark federal grand jury Jan. 6, 2012, was arrested over the weekend following an operation by law enforcement which lured Kow from his residence in Hong Kong.

In February 2012, undercover law enforcement agents lured Kow, who was unaware he was indicted, to the Philippines under the guise of paying him for past transactions and discussing future illegal activities. The Department of Justice, working closely with Philippine authorities, obtained a provisional arrest warrant for Kow, who was arrested by Philippine law enforcement agents as he stepped off his plane in Manila. Kow is in the business of brokering international transactions of illegal goods. Operating out of Southeast Asia, he has met with and introduced his co-conspirators to undercover federal agents (the "FBI UCs") on numerous occasions for the purpose of importing counterfeit goods and narcotics from Asia to the United States.

The FBI learned in August 2008 that Kow was looking for assistance in importing several containers of counterfeit cigarettes and clearing them through customs. Depending on the size, each such container is worth approximately $2.5 million to $5 million. Kow contacted FBI UCs posing as individuals who, with associates, could clear counterfeit goods through customs and have them removed from ports on both the east and west coasts of the United States. Kow and several of the conspirators charged in the Guo et al. complaint then used UCs to import several containers of counterfeit goods and counterfeit cigarettes worth millions of dollars.

In late 2010, Kow began discussions with FBI UCs about narcotics importation, meeting in February 2011 with FBI UCs in Manila where he introduced them to his associates, Hui Sheng Shen and Huan Ling Chang. In Manila, Kow told the FBI UCs that Shen and Chang represented the interests of Kow's associates, wealthy narcotics dealers who had been trafficking drugs for over 25 years. Kow and Shen arranged for the delivery of a sample of crystal methamphetamine to the FBI UCs' hotel lobby, which arrived within hours of a call Ah Kow placed to an associate in Hong Kong.

Following negotiations over recorded telephone calls and intercepted emails, the FBI UCs wired approximately $70,000 to a bank account in Taiwan to cover the price of 1 kilogram of crystal meth, shipping costs, and a broker's fee for Kow. In July 2011, the UCs received a bill of lading for the container that included the meth, which arrived at the port August 9, 2011. The drugs were discovered secreted within the container by CBP officers in the exact location described by Shen and Chang. The meth was hidden inside closed bags of Chinese tea placed within a metal tower-type computer, which was then placed within the packaging for such a computer.

During negotiations for the 1 kilogram meth deal, Shen and Chang made clear they usually did larger transactions, but agreed to do a smaller transaction to establish trust among the parties. During recorded meetings with FBI UCs in February 2012, Shen and Chang finalized the negotiations for a series of large-scale international narcotics transactions, which would result in more than 50 kilograms of methamphetamine to be imported into the United States, and hundreds more sent to Japan and elsewhere. The defendants provided the FBI UCs with information for a bank account they had opened for these transactions.

ZONE DEFENSE: Counterfeit NBA Gear Seized

I.C.E. Agents confiscate thousands of counterfeit goods at NBA All-Star Weekend

  • Agents confiscate thousands of counterfeit goods at NBA All-Star Weekend
  • Agents confiscate thousands of counterfeit goods at NBA All-Star Weekend

 More than 2,500 counterfeit items were confiscated as the result of a joint operation by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI), the Orlando Police Department and the Orange County Sheriff's Office during the 2012 NBA All-Star Weekend in Orlando.

"Counterfeiters prey on sports fans at events like the NBA All-Star Game," said Susan McCormick, special agent in charge of HSI Tampa. "I urge buyers to beware. Counterfeiting is not a harmless crime. Counterfeiting costs U.S. businesses more than $200 billion each year and accounts for the loss of more than 750,000 American jobs."

During the days leading up to the NBA All-Star Game, HSI special agents operated in teams throughout the Orlando area, targeting suspicious activity that might lead them to counterfeiters. HSI special agents seized counterfeit items including t-shirts, caps and jerseys. The items are valued at more than $69,000. Ten individuals were arrested for possessing or offering to sell counterfeit NBA merchandise in violation of Florida state law.

"The NBA is committed year-round to protecting both our fans and legitimate, tax-paying retailers from being victimized by counterfeiters seeking to profit illegally from the public's enthusiasm for the NBA," said Ayala Deutsch, senior vice president and chief intellectual property counsel for the NBA. "We greatly appreciate the tireless efforts of HSI, the Orlando Police Department and the Orange County Sheriff's Office throughout All-Star Weekend and are pleased to have their support in working to address this important issue."

SOURCE: I.C.E.

SWEET SMELL OF SUCCESS - CBP Seizes $51 Million in Knock-off Perfume in 2011

U.S. Customs and Border Protection (CBP) seized imports of counterfeit perfume valued at nearly $51 million during fiscal year 2011.

Counterfeit perfumes are a form of theft from the brand owner, and protecting American intellectual property is a priority for CBP. In addition to the economic harm, counterfeit perfumes are also often contaminated with unknown chemicals that can cause serious injury.

The fake perfume that CBP most frequently intercepted was labeled "Sex in the City" perfume, which is related to the highly popular HBO movie and television series. CBP has been working with the right holder to crack down on these illegal imports.

In fiscal year 2011, CBP's Intellectual Property Rights (IPR) National Targeting and Analysis Group (NTAG) in Los Angeles targeted 138 commercial shipments of perfumes for possible trademark infringement. These shipments were examined and 52 were seized for infringing a trademark, including the "Sex and the City" trademark. The domestic value of the seized shipments, which contained more than one million pieces, was nearly $8 million. If the trademark had been genuine, the manufacturer's suggested retail price of the perfume would have been more than $45 million.

The IPR-NTAG provides a national strategic perspective on trade through risk analysis and multi-disciplined trade strategies; develops and applies risk management techniques to support trade security and trade compliance; supports national trade strategies and field enforcement operations; and monitors the effectiveness of trade criteria and the targeting process.

In the past year, the IPR-NTAG uncovered more than 30 entities involved in the importation of counterfeit perfume,

U.S. ports of entry and the IPR-NTAG continue to target for counterfeit perfumes and to work with Immigration and Customs Enforcement investigators to assist in enforcement actions and develop criminal cases. CBP also works closely with right holders in intellectual property rights enforcement.

In fiscal year 2011, 24,792 seizures of counterfeit and pirated goods with a total domestic value of $178.9 million and a manufacturer's suggested retail price of $1.1 billion were intercepted before entering the United States.

Wonder if they have WiFi in Federal Prison

A North Texas man was sentenced on Tuesday to nearly five years in federal prison, and ordered to pay $402,417 in restitution, following his June 2011 guilty plea on copyright infringement, announced U.S. Attorney Sarah R. Saldaña of the Northern District of Texas.

U.S. District Judge Reed C. O'Connor sentenced James Clayton Baxter, 28, of Wichita Falls, Texas, to 57 months in prison. Baxter must surrender to the Bureau of Prisons by March 29.

According to documents filed in the case, from June 8, 2006 through April 9, 2007, Baxter infringed upon the copyrighted works of Adobe Systems Inc. by reproducing copies of its computer software for his financial gain. The investigation into Baxter's activities began in May 2007 when U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI) was notified by investigators working for Adobe that they had purchased infringing computer software from TechKappa.com, a website that sold copies of software titles via download from the Internet. The investigation led investigators to Baxter's residence on Lou Lane in Wichita Falls.

Also in 2007, the FBI received a separate lead from the Wichita Falls Police Department (WFPD) regarding Baxter's involvement in selling pirated software. WFPD encountered Baxter selling infringing software in 2004 while investigating him for credit card abuse; he was warned that he could not sell pirated software on his websites. WFPD executed a search warrant at Baxter's residence in October 2007, and seized computers and external storage media.

The investigation revealed that Baxter owned and operated various websites, including Amerisoftware.com, Costfriendlysoftware.net, TechKappa.com, Ultrabackup.net, Superbuysoftware.net and Go-E-Soft.com. These sites, which he advertised online, offered "backup" copies of software, owned by Adobe, Microsoft and Autodesk Inc., for sale at about one-fifth of the manufacturer's retail value. Baxter also provided counterfeit product registration codes (serial numbers) that were distributed with the software so that the customer could install the software.

Between June 8, 2006, through April 9, 2007, Baxter caused more than 90 infringed copies of copyrighted software to be reproduced and distributed, for which he received more than $66,000. These included copies of the following copyrighted computer software: Adobe's Photoshop CS2, Adobe Illustrator CS2 and Adobe Photoshop 7.

Baxter admits that he knew the "backup" copies of Adobe software were illegal reproductions and that he willfully infringed on their works for his personal financial gain. Baxter and the government agree that the government can prove an actual loss of between $400,000 and $1 million.

Between 2004 and 2007, Baxter established at least 17 assumed business names with accompanying merchant bank accounts to process credit card payments for software orders. For example, during the brief time period between Aug. 7 and Aug. 18, 2006, Baxter received $18,036 in his PayPal account. Records further show that these merchant bank accounts processed 3,089 approved software orders that totaled $384,380.

The conviction and sentencing of James Clayton Baxter is the latest in a series of investigations initiated by the National IPR Coordination Center involving defendants from Wichita Falls, Texas. Six other men have also been convicted of operating websites used to sell pirated Adobe software:

Thomas C. Rushing III, William Lance Partridge and Brian C. Rue all pleaded guilty to criminal copyright infringement in U.S. District Court in Austin, Texas, on Aug. 22, 2008.
Timothy K. Dunaway pleaded guilty to criminal copyright infringement in U.S. District Court in Wichita Falls, Texas, on Oct. 20, 2008.
Robert and Todd Cook pleaded guilty to criminal copyright infringement in Alexandria, Va., on March 11, 2010.
Sentences for the seven defendants ranged from 12 months and a day to 57 months imprisonment with restitution totaling more than $2 million ordered to be paid to Adobe Systems Inc., a U.S. corporation based in San Jose, Calif. Combined, the counterfeit Adobe software sold by these individuals had a retail value of more than $15 million.

BLOWOUT - CBP Seizes $2.5mill worth of unsafe Hair Dryers

U.S. Customs and Border Protection (CBP) seized thousands of hair dryers recently that were determined to constitute a "substantial product hazard" under U.S. law for failing to have adequate immersion protection. The potentially dangerous hair dryers were identified through a nationwide targeting operation by the CBP Import Safety Commercial Targeting and Analysis Center (CTAC). CBP Stops Thousands of Unsafe Hair Dryers

 click for hi-res
Hair dryer seized by CBP
Hair dryer seized by CBP
As a result of the targeting operation, CBP officers in the port of Los Angeles seized an entire shipment of 9,768 hair dryers that lacked shock protection for consumers. Lack of proper shock protection could lead to an electrocution if contact is made with a water source. The port of Miami had a notable seizure of 3,614 hair dryers that also lacked proper shock protection for consumers. These two shipments, containing a total of 13,382 hair dryers, had an estimated domestic value of approximately $229,998 with a manufacturer's suggested retail price of $2,506,517.

"Ensuring the safety of imported merchandise is a top priority for CBP," said Allen Gina, CBP's assistant commissioner for international trade. "The concerted targeting efforts of CTAC and the vigilance of CBP officers at our ports of entry will help ensure that products like hair dryers are safe for consumers and that substandard product from overseas does not reach store shelves."

Hair dryers seized by CBP
Hair dryers seized by CBP
The joint targeting operation with the U.S. Consumer Product Safety Commission (CPSC) concentrated on identifying and stopping the importation of unsafe hair dryers intended for consumer use. CPSC reports that since adoption of industry voluntary standards for immersion protection in its regulations, there has been a significant decline in electrocutions or electrical shock incidents.

"This is another example of how U.S. consumers benefit from the close collaboration between CPSC investigators and CBP officers at some of the largest U.S. ports of entry," said Carol Cave, CPSC's Director of the Office of Import Surveillance. "Using data provided by CBP, CPSC is able to target and interdict dangerous and violative consumer goods before they enter the stream of commerce."

To ensure the safety of imported electrical products, CPSC is working closely with CBP to identify potentially unsafe shipments for CBP to check at ports of entry. CPSC has established permanent staffing at the CTAC in Washington, DC, and is working with CBP at ports to stop unsafe imports from entering the commerce of the U.S.

The CTAC combines resources and personnel from various government agencies to protect the American public from harm caused by unsafe imported products. The center accomplishes this through better communication, information-sharing, and by reducing redundant inspection activities.

Funny - I thought "ROLEX" only had one "L" in the Name. . . .

Top Story: HSI special agents seize $825,570 worth of counterfeit goods

You never know what you'll find at a flea market - antiques, toys or even a deal of a lifetime. But special agents with U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI) warn that those deals of a lifetime may be too good to be true.

Across the country, flea markets have become notorious hot spots for selling counterfeit goods. That was the case Feb. 13, when HSI special agents identified vendors peddling counterfeit purses, shoes and jewelry items at a flea market just outside Tampa, Fla.

"We had received tips that individuals were fraudulently selling trademarked items here," said Sue McCormick, special agent in charge of HSI Tampa.

That day, special agents seized more than 6,200 items with a manufacturer's suggested retail price of $825,570. The items falsely exhibited trademarks of Hello Kitty, Gucci, Rolex, Coach, Louis Vuitton, Nike and Perry Ellis.

"A good rule of thumb is for buyers to beware. When you purchase these items you're not getting a quality product from the trademark-holder. You're getting a substandard one," said McCormick. "You're also contributing to the loss of American jobs."

This seizure follows on the heels of an operation that took place earlier this month. On Feb. 1, HSI Tampa special agents seized nearly $1.2 million worth of fake designer purses, perfume, scarves and sunglasses from an individual already awaiting sentencing for trafficking in counterfeit goods.

ICE is the lead agency investigating intellectual property theft. The International Anti-Counterfeiting Coalition estimates that counterfeiting costs U.S. businesses between $200 and $500 billion each year and more than 750,000 American jobs.

Learn more about intellectual property theft at www.iprcenter.gov.

IP Infringement Can Kill - The Threat to Our Soldiers

California business owner sentenced for conspiring to sell counterfeit microelectronics to the US military

A business owner from Newport Coast, Calif., was sentenced yesterday to 30 months in prison for conspiring to sell counterfeit integrated circuits to the U.S. military, defense contractors and others.

The case was investigated by U.S. Immigration and Customs Enforcement's Homeland Security Investigations and the Naval Criminal Investigative Service.

Mustafa Abdul Aljaff, 32, pleaded guilty in January 2010 to federal charges of conspiracy to traffic in counterfeit goods and defraud the United States, and trafficking in counterfeit goods.

Upon completion of his prison term, Aljaff will be placed on three years of supervised release and be required to perform 250 hours of community service.

"Counterfeit electrical components destined for use by our military service members put those troops, and our national security, at great risk," said John P. Torres, special agent in charge, HSI Washington. "That is why HSI will continue to prioritize the investigation of companies and individuals who attempt to engage in this type of criminal act."

As part of the plea agreement, Aljaff agreed to forfeit industrial machinery which is designed to be used in the examination, testing, packaging, de-marking and marking of integrated circuits; computers and computer network servers; and his integrated circuit inventory. These items were seized from his business in connection with the execution of a search warrant on Oct. 8, 2009.

Aljaff also must pay $177,862 in restitution to the semiconductor companies whose trademarks were infringed as a result of his criminal conduct.

Co-defendant Neil Felahy, 34, the operations manager for Aljaff's company and his brother-in-law, is awaiting sentencing on Feb. 22 after pleading guilty to charges in the case.

"Today's prison sentence sends a message to the unscrupulous counterfeiters who put us all at risk by selling phony integrated circuits that end up in our military systems, medical devices and consumer products," said U.S. Attorney Ronald C. Machen, Jr., for the District of Columbia. "We will continue to prosecute, convict and seek prison sentences for the criminals who threaten our health, safety and national security with their greed."

"Counterfeit parts pose a grave threat to both the operational readiness and safety of our military forces," said John F. Wagner, special agent in charge of the Washington, D.C. office of NCIS. "These prosecution results embody the effectiveness of interagency law enforcement cooperation."

Aljaff pleaded guilty soon after his arrest and cooperated with authorities as the investigation continued. He owned MVP Micro and a host of other companies operating from the same location in Irvine, Calif. According to the government's evidence, he was the mastermind and leader of the highly sophisticated fraud scheme to import, sell, manufacture and distribute, in interstate and international commerce, counterfeit integrated circuits. The conspiracy took place between September 2007 and August 2009.

An integrated circuit is a high-tech device, incorporated into a computer board, which acts as a switch. Integrated circuits control the flow of electricity in the goods or systems into which they are incorporated. They are used in a variety of applications, including industrial, consumer electronics, transportation, infrastructure, medical devices and systems, spacecraft, and military.

Counterfeit integrated circuits can result in product or system failure or malfunction, and can lead to costly system repairs, property damage and serious bodily injury, including death. They also raise national security concerns because their history is unknown, including who has handled them and what has been done to them. In addition, the devices can be altered and certain devices can be preprogrammed. Counterfeits can contain malicious code or hidden "back doors" enabling systems disablement, communications interception and computer network intrusion.

Markings on integrated circuits indicate a part is "commercial-grade,""industrial-grade," or "military-grade." Military-grade markings signify that the part has been specially tested to withstand extreme temperature ranges and high rates of vibration.

According to the government's evidence, Aljaff and others sold the counterfeit devices, which included military-grade parts, through a cleverly designed web of corporations to unsuspecting customers in the United States and abroad. MVP and related companies sold and distributed counterfeit integrated circuits to approximately 420 buyers in the United States and abroad, including the U.S. Department of the Navy, defense contractors, other broker/distributors and numerous industry sectors, including transportation, medical services and aerospace.

During his guilty plea, Aljaff agreed that on more than 20 separate occasions, he and others imported into the United States from China and Hong Kong, approximately 13,073 integrated circuits bearing counterfeit trademarks, including military-grade markings, valued at about $140,835. Those counterfeit integrated circuits bore the purported trademarks of a number of legitimate semiconductor manufacturers.

One of the two counts to which Aljaff pleaded guilty involved a counterfeit, military-grade integrated circuit that he had purchased from a Florida-based company, Vision Tech Components, LLC. The owner of Vision Tech, Shannon Wren, was indicted in the U.S. District Court for the District of Columbia on conspiracy and other charges related to the firm's own sales of counterfeit integrated circuits. Also indicted in that case was Stephanie McCloskey, Vision Tech's administrative manager. Wren died pending trial. McCloskey pled guilty in November 2010 to charges of conspiracy to traffic in counterfeit goods and to commit mail fraud and was sentenced in October 2011 to a prison term of 38 months.

SOURCE:  ICE / CBP

Remember to Check the "Bad Guy" Lists - or Find Yourself on Them

A former manager of a Netherlands-based freight-forwarding company pleaded guilty for conspiring to defraud the United States by facilitating the illegal export of goods to Iran, New Jersey U.S. Attorney Paul J. Fishman announced.

Ulrich Davis, 50, a Dutch citizen of Pumerend, The Netherlands, pleaded guilty to an Information charging him with conspiracy to defraud the United States through the violation of a U.S. Department of Commerce Temporary Denial Order ("TDO"). Davis entered his guilty plea before U.S. District Judge Claire C. Cecchi in Newark federal court.

According to the Information to which Davis pleaded guilty, other documents filed in this case and statements made in court:

Davis was the sales and business development manager for a company described in the Information as the "Netherlands Freight Forwarding Company" in 2007 and 2008. The Netherlands Freight Forwarding company was affiliated with a New York-based freight-forwarding company.

During that time, Davis facilitated shipments to be made to Iran without the necessary authorization from the United States government and in violation of the law.

In October 2007, an assistant secretary of commerce for export enforcement - at the behest of the U.S. Department of Commerce, Bureau of Industry and Security ("BIS") through its Office of Export Enforcement - issued a Temporary Denial Order (TDO) denying export privileges to the company of Davis' coconspirator under the Export Administration Regulations ("EAR"). The TDO prohibited any person, which included Davis, from directly or indirectly exporting or reexporting to or on behalf of the coconspirator, among others.

The coconspirator, who was located in another country, purchased U.S. origin goods from a New Jersey company, among other companies, for businesses and governmental agencies of Iran. The New Jersey company was in the business of reselling chemicals, lubricants, sealants and other products used in the aircraft industry.

As part of the conspiracy, Davis and his coconspirator directed the New York Freight Forwarding company to arrange for a trucking company to pick up commodities from the New Jersey company and transport them to New York on behalf of the coconspirator's company.

Davis admitted that in November 2007, he completed an air waybill that represented certain acrylic adhesives and spray paint coatings obtained from a New Jersey company were to be forwarded on behalf of the co-conspirator's company to a company in Iran after issuance of the TDO.

In a January 2008 e-mail regarding the shipments, Davis noted that, "99% of these goods were destined to be send [sic] to Teheran [sic]/Iran, which was and still is a very difficult destination due to political reasons. We have handled shipments to Teheran [sic] for various customers who had to shut down their operation because they were doing business with Teheran [sic]/Iran and inspite [sic] of the risk we take we always handled your shipments in a good manner."

Davis acknowledged that at no time was any relief, exception, or other authorization sought from the TDO.

The count to which Davis pleaded guilty carries a maximum penalty of five years in prison and a $250,000 fine. Sentencing is currently scheduled for May 15, 2012.

Mixed Signals: Scientist faces Jail for Illegal Antenna Export Scheme

Rudolf L. Cheung, 57, a resident of Massachusetts, recently pleaded guilty in federal court in the District of Columbia to conspiracy to violate the Arms Export Control Act in connection with the unlawful export of 55 military antennae from the United States to Singapore and Hong Kong.

Cheung serves as the head of the Research & Development Department at a private company that manufactures antennae. Over the past 17 years, he has designed or supervised the development of a full library of antennae made by the firm, many of which have military applications and are used by defense contractors. Some of Cheung's inventions are used in the U.S. space program. 

According to court documents filed in the case, in June 2006, a company in Singapore sent an inquiry to the firm that employs Cheung seeking a quotation for two types of antennae that are classified by the U.S. government as defense articles and may not be exported without a license or approval from the State Department. After receiving the query, the export compliance officer at Cheung's firm advised the firm in Singapore that neither antenna could be exported unless they filled out a U.S. government form attesting that the goods would not be transferred. The firm in Singapore refused and the order was stopped.

After learning that the export compliance officer at his company had blocked the export, Cheung admitted that he discussed with an individual outside his company (co-conspirator C) a plan to bypass the export controls at his company and arrange for the antennae to be exported to Singapore through co-conspirator C. Under the plan, co-conspirator C, who operated his own company in Massachusetts, would purchase these goods from Cheung's company and then export them on his own to the firm in Singapore, with Cheung's knowledge.

Subsequently, co-conspirator C contacted the firm in Singapore and offered to broker the deal with Cheung's company. Co-conspirator C then negotiated the purchase of the antennae with employees of the firm in Singapore and, later, with another company called Corezing International in Singapore. Between July and September 2007, co-conspirator C purchased 55 military antennae from Cheung's company, which he then exported to Corezing addresses in both Singapore and Hong Kong.

According to court documents, Cheung was aware that the purchases by Co-conspirator C were intended for export from the United States and that these exports had previously been blocked by his export compliance manager. Yet Cheung took no action to stop the sale of these antennae from his company or their subsequent export from the United States, even though he knew a license was required for such exports. Cheung neither sought nor obtained any license from the State Department to export these items outside the United States.

At sentencing, Cheung faces a maximum potential sentence of five years in prison, a fine of $250,000 and a 3-year term of supervised release.

Corezing, based in Singapore, has been charged in a separate indictment in the District of Columbia in connection with the export of these particular military antennae to Singapore and Hong Kong. Corezing and its principals have also been charged, and the United States is seeking their extradition, in connection with the export of 6,000 radio frequency modules from the United States to Iran via Singapore, some of which were later found in improvised explosive devices in Iraq.

FCPA to European Telecom Giants: "Can You Hear Me Now?"

Magyar Telekom Plc., a Hungarian telecommunications company, and Deutsche Telekom AG, a German telecommunications company and majority owner of Magyar Telekom, have agreed to pay a combined $63.9 million criminal penalty to resolve a Foreign Corrupt Practices Act (FCPA) investigation into activities by Magyar Telekom and its subsidiaries in Macedonia and Montenegro, announced Assistant Attorney General Lanny A. Breuer of the Justice Department's Criminal Division and U.S. Attorney Neil H. MacBride for the Eastern District of Virginia.


The department filed a criminal information against Magyar Telekom and a two-year deferred prosecution agreement in U.S. District Court for the Eastern District of Virginia today. The three-count information charges Magyar Telekom with one count of violating the anti- bribery provision of the FCPA and two counts of violating the books and records provisions of the FCPA. At the time of the charged conduct, Magyar Telekom's American Depository Receipts (ADRs) traded on the New York Stock Exchange (NYSE). As part of the deferred prosecution agreement, Magyar Telekom agreed to pay a $59.6 million penalty for its illegal activity, implement an enhanced compliance program, and submit annual reports regarding its efforts in implementing the enhanced compliance measures and remediating past problems.

According to court documents, Magyar Telekom's scheme in Macedonia stemmed from potential legal changes being made to the telecommunications market in that country.    In early 2005, the Macedonian government tried to liberalize the Macedonian telecommunications market in a way that Magyar Telekom deemed detrimental to its Macedonian subsidiary, Makedonski Telekommunikacii AD Skopje (MakTel). Throughout the late winter and spring of 2005, Magyar Telekom executives, with the help of Greek intermediaries, lobbied Macedonian government officials to prevent the implementation of the new telecommunications laws and regulations.


Magyar Telekom eventually entered into an agreement with certain high-ranking Macedonian government officials to resolve its concerns about the legal changes. In the secret agreement, a so-called "protocol of cooperation," Macedonian government officials agreed to delay the entrance of a third mobile license into the Macedonian telecommunications market, as well as other regulatory benefits. Magyar Telekom executives signed two copies of the protocol of cooperation, each with high-ranking officials of the different ruling parties of Macedonia. The Magyar Telekom executives then kept the only executed copies outside of Magyar Telekom's company records.

According to court documents, in order to secure the benefits in the protocol of cooperation, the Magyar Telekom executives engaged in a course of conduct with consultants, intermediaries and other third parties, including through sham consultancy contracts with entities owned and controlled by a Greek intermediary, to pay €4.875 (approximately $6 million) under circumstances in which they knew, or were aware of a high probability that circumstances existed in which, all or part of such payment would be passed on to Macedonian officials. The sham contracts were recorded as legitimate on MakTel's books and records, which were consolidated into Magyar Telekom's financials. Deustche Telekom, which owned approximately 60 percent of Magyar Telekom, reported the results of Magyar Telekom's operations in its consolidated financial statements.

Additionally, the criminal information charges Magyar Telekom with falsifying its books and records in regard to its activity in Montenegro. According to the court filing, Magyar Telekom made improper payments in connection with its acquisition of a state-owned telecommunications company in Montenegro. These payments were documented on Magyar Telekom's books and records through the execution of four bogus contracts. For example, two of the contracts were backdated and concealed the true counterparties, and no legitimate services were provided under the contracts even though the contracts were for €4.47 million.

The US DOJ also entered into a two-year non-prosecution agreement with Magyar Telekom's parent company, Deutsche Telekom, for its failure to keep books and records that accurately detailed the activities of Magyar Telekom. Deutsche Telekom, which is headquartered in Germany, agreed to pay a $4.36 million penalty in connection with the inaccurate books and records and to enhance its compliance program. At the time of the conduct, Deutsche Telekom's ADRs traded on the NYSE.

Both agreements acknowledge Magyar Telekom and Deutsche Telekom's voluntary disclosure of the FCPA violations to the department and the leadership of Magyar Telekom's audit committee in pursuing a "thorough global internal investigation concerning bribery and related misconduct." In addition, the agreements highlight that the companies have already undertaken remedial measures and have committed to further remedial steps through the implementation of an enhanced compliance program.


In a related matter, the U.S. Securities and Exchange Commission (SEC) announced civil charges against Magyar Telekom and Deutsche Telekom as well as three former Magyar Telecom executives. Magyar Telekom and Deutsche Telekom consented to the entry of a permanent injunction against FCPA violations. Magyar Telecom agreed to pay $31.2 million in disgorgement and prejudgment interest.


Additional information about the Justice Department's FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

2011 Another Record Year for Counterfeit/Infringing Imported Goods Seizures

According to a recently-released report from U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE), counterfeit and pirated goods seizures during fiscal year (FY) 2011 totaled almost 25,000 - a 24 percent increase over 2010.

Many fake goods seriously threaten the health and safety of American consumers and our national security. With this in mind, CBP and ICE continued to step up enforcement against these dangerous products resulting in a 44 percent increase in the number of seizures of health and safety products that could have harmed Americans. The value of these seizures soared to more than $60 million due to increases in pharmaceutical and perfume seizures.

Despite the significant increase in the number of seizures, the domestic value for seizures in fiscal year 2011 decreased by five percent to $178.9 million and the manufacturer's suggested retail price declined slightly to $1.1 billion. This is primarily due to a shift toward using international mail, express courier, and consolidated shipping services to import counterfeit and pirated goods.

"The growth of websites selling counterfeit goods directly to consumers is one reason why CBP and ICE have seen a significant increase in the number of seizures at mail and express courier facilities," said Acting CBP Commissioner David V. Aguilar. "Although these websites may have low prices, what they do not tell consumers is that the true costs to our nation and consumers include lost jobs, stolen business profits, threats to our national security, and a serious risk of injury to consumers."

"I'm very proud of the unrelenting efforts of the ICE-led National Intellectual Property Rights Coordination Center and our law enforcement partners," said ICE Director John Morton. "IP enforcement is a high priority for ICE and CBP because the trade in counterfeit and pirated goods robs Americans of jobs and puts their safety at risk, costs legitimate businesses billions of dollars in revenue, and fuels criminal activity. In fiscal year 2012, ICE and CBP will continue to focus on keeping these goods off the streets and bring those responsible for producing and distributing them to justice."

China continues to be the number one source country for counterfeit and pirated goods seized, accounting for 62 percent or $124.7 million of the total domestic value of seizures.

For the first time since FY 2005, footwear was not the top commodity seized in fiscal year 2011. Consumer electronics were the top commodity seized, and approximately one-third of this category was represented by IPR infringing cellular phones.

The top 10 categories of IPR-infringing products seized were pharmaceuticals, health/personal care, eyewear/parts, critical technology components, electronic articles, cigarettes, perfumes/colognes, batteries, exercise equipment and transportation/parts.

As the federal agency responsible for the management, control and protection of U.S. borders, CBP is on the frontline of IPR enforcement. The men and women of CBP protect our nation's economy, the safety of its people, and our national security against harm from counterfeit and pirated goods. The continued vigilance of CBP personnel protects United States citizens and businesses every day.

As the largest investigative arm of the Department of Homeland Security, ICE Homeland Security Investigations (HSI) plays a leading role in targeting criminal organizations responsible for producing, smuggling, and distributing counterfeit products. ICE HSI focuses not only on keeping counterfeit products off our streets, but also on dismantling the criminal organizations behind such illicit activity.

The National Intellectual Property Rights Coordination Center (IPR Center) is one of the U.S. government's key weapons in the fight against criminal counterfeiting and piracy. The IPR Center uses the expertise of its 19 member agencies to share information, develop initiatives, coordinate enforcement actions, and conduct investigations related to IP theft. Through this strategic interagency partnership, the IPR Center protects the public's health and safety, the U.S. economy and the war fighters.

To report IP theft or to learn more about the IPR Center, visit www.IPRCenter.gov.

Source:  CBP/ICE

SLAP SHOT: Pennsylvania Man Charged with Copyright Infringement of Hockey Broadcasts

Seven charges of copyright infringement against a Pennsylvania man for allegedly infringing on copyright protected broadcasts of hockey games.  Michael Moore, 44, of Chadds Ford, Penn., allegedly infringed the copyright protected works during seven six-month periods between May 2006 and June 2010.   

 

The indictment alleges that HDHOCKEY.TV was a website that offered for sale DVDs containing recordings of copyrighted television broadcasts of hockey games and other copyrighted works such as team and player profiles, from the National Hockey League (NHL) and other professional hockey leagues.   It also alleges that BROADSTREETBULLY.COM was a website offering for sale monthly subscriptions that enabled subscribers to download an unlimited number of video clips of copyrighted television broadcasts of hockey games, and other copyrighted works such as team and player profiles, from the NHL and other professional hockey leagues.   The indictment alleges that neither site had the permission of the NHL or any other professional hockey league to reproduce or distribute these recordings.  

 

The maximum penalty for each count of copyright infringement is five years in prison.   The indictment also seeks forfeiture.  

 

Source: DOJ

CARGILL GETS STEAMED AND DOW SAYS "OW" Chinese National Guilty of Economic Espionage

Kexue Huang, a Chinese national and a former resident of Carmel, Ind., pleaded guilty to one count of economic espionage to benefit a component of the Chinese government and one count of theft of trade secrets.

 

Since its enactment in 1996, there have been a total of eight trade secret theft cases nationwide under the Economic Espionage Act, where the intended beneficiary was a component of a foreign government. 

 

In July 2010, Huang was charged in an indictment filed in the Southern District of Indiana for misappropriating and transporting trade secrets to the People's Republic of China (PRC) while working as a research scientist at Dow AgroSciences LLC.  A separate indictment charged Huang with stealing a trade secret from a second company, Cargill Inc.

 

From January 2003 until February 2008, Huang was employed as a research scientist at Dow, a leading international agricultural company based in Indianapolis that provides agrochemical and biotechnology products.  In 2005, Huang became a research leader for Dow in strain development related to unique, proprietary organic insecticides marketed worldwide.

 

As a Dow employee, Huang signed an agreement that outlined his obligations in handling confidential information, including trade secrets, and prohibited him from disclosing any confidential information without Dow's consent. Dow employed several layers of security to preserve and maintain confidentiality and to prevent unauthorized use or disclosure of its trade secrets.                                                   

           

Huang admitted that during his employment at Dow, he misappropriated several Dow trade secrets.  From 2007 to 2010, Huang transferred and delivered the stolen Dow trade secrets to individuals in Germany and the PRC.  With the assistance of these individuals, Huang used the stolen materials to conduct unauthorized research with the intent to benefit foreign universities that were instrumentalities of the PRC government.  Huang also admitted that he pursued steps to develop and produce the misappropriated Dow trade secrets in the PRC, including identifying manufacturing facilities in the PRC that would allow him to compete directly with Dow in the established organic pesticide market.

 

After Huang left Dow, he was hired in March 2008 by Cargill, an international producer and marketer of food, agricultural, financial and industrial products and services.  Huang worked as a biotechnologist for Cargill until July 2009 and signed a confidentiality agreement promising never to disclose any trade secrets or other confidential information of Cargill.  Huang admitted that during his employment with Cargill, he stole one of the company's trade secrets - a key component in the manufacture of a new food product, which he later disseminated to another person, specifically a student at Hunan Normal University in the PRC.

 

The aggregated loss from Huang's criminal conduct exceeds $7 million but is less than $20 million. 

  

At sentencing, Huang faces a maximum prison sentence of 15 years on the economic espionage charge and 10 years on the theft of trade secrets charge.

 

SOURCE: DOJ

FCPA: Tenaris S.A. $9 Million in Penalties for FCPA Violations

Tenaris S.A., a publicly traded corporation headquartered in Luxembourg, has agreed to pay a $3.5 million penalty for violations of the Foreign Corrupt Practices Act (FCPA), and has entered into a non-prosecution agreement with the Department of Justice.
 
Tenaris, a global manufacturer and supplier of steel pipe products and related services to the oil and gas industry throughout the world, admitted that its employees and agents offered and made improper payments to officials of OJSC O'ztashqineftgaz (OAO), an Uzbekistan state-controlled oil and gas production company, and failed to record such payments accurately in Tenaris's books and records.  In connection with four public bids to provide oilfield pipe and related services for energy extraction and transportation projects, Tenaris retained an agent to obtain competitors' bid information, which Tenaris then used to secretly submit revised bids to its advantage.  Tenaris agreed to pay the agent 3.5 percent of the value of four separate contracts, while being aware or substantially certain that the agent would pay all or a portion of the money to one or more OAO employees.
 
According to the agreement, Tenaris voluntarily disclosed this conduct to the department in a timely and complete manner, conducted an internal investigation, provided thorough, real-time cooperation to the department and the U.S. Securities and Exchange Commission (SEC), and undertook extensive remediation, including voluntary enhancements to its compliance program. The criminal penalty in this case constitutes a substantially reduced monetary penalty and reflects the department's commitment to providing meaningful credit to Tenaris for its extraordinary cooperation with the department.  As outlined in the agreement, Tenaris has agreed to fully cooperate with investigations by law enforcement authorities of the company's corrupt payments and to adhere to a set of enhanced corporate compliance and reporting obligations.
 
In a related matter, Tenaris reached a settlement with the SEC in which Tenaris entered into a deferred prosecution agreement and agreed to pay $5,428,338 in disgorgement and prejudgment interest.  Tenaris also agreed to comply with certain undertakings regarding its FCPA compliance program.


http://www.kk-llp.com/international-trade.asp

SOURCE: DOJ

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