Companies Linked To Chinese Billionaire Convicted Of $1.8 Billion Tariff-Evasion Scheme

A U.S. federal jury has convicted six companies that prosecutors say are linked to Chinese billionaire Liu Zhongtian of conspiring to avoid paying $1.8 billion in duties on imported aluminum products from China, according to a release published by the Justice Department on Monday.

The companies, all based in the U.S., participated in a “wide-ranging” scheme to disguise aluminum extrusions to look like pallets, which weren’t subject to anti-dumping duties imposed in 2011. They were simply spot-welded together so that they would appear in the shape of the latter, and stockpiled at four large warehouses in Southern California, according to the release.

Liu, 57, was also found to have created fake sales of the aluminum to companies controlled by him in Southern California, and falsely claimed in the annual report of his Hong Kong-listed aluminum producer China Zhongwang that there was robust demand for his products in the U.S. The Justice Department said there were in fact “no customers for the 2.2 million pallets imported,” and “no pallets were ever sold.”

“Liu and his co-defendants orchestrated the bogus sales of aluminum to Liu-controlled companies in Southern California to falsely inflate China Zhongwang’s value,” reads the release.

But a China Zhongwang spokesperson later issued a denial. “It has come to the company’s attention that the United States Department of Justice has published a report on the conviction of six South California companies of avoiding payment of customs duties,” the company said in a statement sent to Forbes. “After [a] review of the aforementioned report and communication and confirmation with the company’s controlling shareholder, Mr. Liu Zhongtian, we state that the six companies convicted have no relations to China Zhongwang and Mr. Liu.”

She also reiterated the company’s statement that was issued in 2019 when the charges were first filed, saying that China Zhongwang “strictly” abided by laws and regulations both in China and the U.S. Liu, whose $1.8 billion fortune is based largely on his stake in the company, stepped down as chairman due to “personal health reasons” in 2017.

China Zhongwang had warned in its 2020 annual report published in April that the company could face “monetary penalties” if the allegations were proven in court. The Justice Department said in the release that Liu and other defendants have yet to appear in court in the U.S. to face criminal charges. China does not have an extradition treaty with the U.S.