A federal grand jury in California on Tuesday, July 30, revealed the indictment of a Chinese billionaire for tariff fraud, money laundering, and other serious irregularities.
The Central District of California Attorney’s Office explained in a statement that it has discovered a complex scheme of financial fraud involving a Chinese aluminum company, China Zhongwang Holdings Limited and its President Zhongtian Liu.
According to the 53-page indictment, China’s largest aluminum company is said to have circumvented U.S. government tariffs on aluminum sold as a manufacturing material by passing it as pallets.
The aluminum, sold to U.S.-based companies controlled by Liu, came in the form of sheets welded at some points to look like functional pallets, which would be considered finished products not subject to tariffs, according to the indictment.
With this method he defrauded some $1.8 billion.
In addition, Liu and his accomplices, are also accused of allegedly organizing fake aluminum sales to companies controlled by Liu in Southern California to falsely inflate the value of China Zhongwang.
In addition to Liu, two of his collaborators, Zhaohua Chen and Xiang Chun Shao, and seven companies, including the Chinese giant Zhongwang Holdings Limited, have been indicted.
Liu is a major shareholder in China Zhongwang, which has been listed on the Stock Exchange of Hong Kong since a 2009 initial public offering that raised $1.26 billion, the statement said.
This falsely inflated sales volume facilitated a massive money laundering structure that was used by the defendants to channel hundreds of millions of dollars through shell companies to U.S.-based aluminum companies controlled by Liu.
The funds were then transferred to China Zhongwang and the other shell companies as payments for the aluminum.
“This indictment outlines the unscrupulous and anti-competitive practices of a corrupt businessman who defrauded the United States out of $1.8 billion in tariffs due on Chinese imports,” U.S. Attorney Nick Hanna said, according to the statement.
“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. The rampant criminality described in this case also posed a threat to American industry, livelihoods and investments,” he added.
“The charges filed against these defendants are extremely serious,” said Joseph Macias, special agent in charge for Homeland Security Investigations (HSI) Los Angeles.
“Organized assistance and subsidies by foreign nations such as China have a detrimental effect on U.S. production and employment. Of greater concern, our national security is jeopardized when domestic industry loses its ability to develop and supply products for U.S. defense and critical infrastructure applications, forcing us to become dependent on unreliable imports from other countries. HSI will continue to work closely with our law enforcement partners in the U.S. and overseas to aggressively target threats to our national interest,” he added.
At this time, none of the subjects named in the indictment, Liu, Chen, or Shao, are believed to be in the United States, the statement noted.
President Donald Trump has a very strong opinion about trade relations between China and the United States over the past 30 years.
On Tuesday this week, a meeting of two delegations from the United States and China ended abruptly 40 minutes ahead of schedule.
On the same day President Trump said that China had to give up a lot in negotiations with the United States: “I think China is willing to give up a lot. But I—that doesn’t mean I’m willing to accept it. I think if China had their wish, they’d wait until after the election, they’ll pray that Trump loses, and then they’ll make a deal with a stiff—somebody that doesn’t know what they’re doing—like Obama and Biden, like all of the presidents before.”
“Because what they’ve done is they’ve just picked our pockets as a nation. That’s not happening with Trump,” the president said.