Six firms ordered to pay $2 billion

The companies, all linked to a Chinese aluminum supplier, evaded import duties.

Six Southern California companies — all with ties to a Chinese firm that is one of Asia’s largest manufacturers of aluminum extrusions — were ordered by a U.S. judge to pay nearly $2 billion in restitution after evading import duties and participating in a scheme to artificially inflate the revenue of the Chinese entity, 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 antidumping 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 stored in warehouses around Southern California, and China Zhongwang Holdings stated to investors that high volumes 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 went back to China Zhongwang Holdings to appear as though sales had been made and revenue was up.

The six limited liability companies that were ordered 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 that was formed to oversee companies that received the pallets; Scuderia Development, owner of a warehouse in Riverside; Von KarmanMain Street, owner of a warehouse in Irvine; 1001 Doubleday, owner of a warehouse in Ontario; and 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 with the scheme in May 2019 in Los Angeles federal court 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.