Chinese billionaire indicted in US$1.8 billion tariff evasion scheme

A US dollar banknote and a Chinese yuan banknote are seen among US and Chinese flags in this illustration picture.
A US dollar banknote and a Chinese yuan banknote are seen among US and Chinese flags in this illustration picture.PHOTO: REUTERS

LOS ANGELES (AFP) - The Chinese billionaire founder of metals giant Zhongwang has been indicted in the United States for his alleged role in an elaborate scheme to avoid paying US$1.8 billion (S$2.4 billion) in tariffs on aluminium shipped to the US.

Liu Zhongtian, the former chairman of China Zhongwang Holdings, is accused of exporting huge amounts of aluminium disguised as pallets to avoid paying customs duties of up to 400 per cent.

Also named in the indictment, filed in Los Angeles federal court, is the company as well as several individuals and shell companies.

"This indictment outlines the unscrupulous and anti-competitive practices of a corrupt businessman who defrauded the United States out of US$1.8 billion in tariffs due on Chinese imports," said prosecutor Nick Hanna.

"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."

Authorities say the scheme, started in 2008 and still operating, consisted of Zhongwang selling the purported aluminum pallets to US-based companies controlled by Liu.

The metal was simply aluminum extrusions that were spot-welded together to make them appear to be functional pallets which would be considered finished goods not subject to 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," authorities said.

The bogus sales that transited through the ports of Los Angeles and Long Beach were intended to inflate the value of the Chinese metals giant, the complaint says.

It said demand for the pallets was such that "defendants Liu and China Zhongwang would direct that aluminium melting facilities be built and acquired to be used to reconfigure the aluminium imported as pallets into a form with commercial value."

The indictment came as the United States on Wednesday resumed trade talks with China that had collapsed in May.

Washington and Beijing have so far hit each other with punitive tariffs covering more than US$360 billion in two-way trade in a row focused on demands for China to curb the alleged theft of American technology and provide a level playing field to US companies.

Liu and the company could not immediately be reached for comment.

The indictment charges Liu and his co-defendants with conspiracy, nine counts of wire fraud and seven counts of passing false and fraudulent papers through customs.

All of the defendants, apart from warehouse entities, also face money laundering charges.

Liu, 55, who goes by the nickname "Big Boss" and "Uncle Liu," according to the indictment, is believe to be in China, US media reports said.