Yesterday, the U.S. Attorney’s Office of the Northern District of Illinois filed a plea agreement in federal court with Mr. Jun Yang, who operated and controlled National Commodities Company, “a Houston, Texas-based commodities trading company that brokered the sale of a variety of aquacultural and agricultural products to United States customers . . . .” Mr. Yang was one of several defendants charged in a broad criminal investigation of evasion of antidumping duties and other regulations of imported foods. As part of the agreement, Mr. Yang pled guilty to a criminal charge carrying a maximum sentence of 20 years’ imprisonment and agreed to pay over $2.5 million to the United States in restitution for fraudulent activities.
In the agreement, Mr. Yang “admits that he caused losses to the United States of as much as $37,991,375 as a result of his fraudulent practice.” The nearly $38 million lost by the U.S. Treasury came in the form of antidumping duties evaded by Mr. Yang’s efforts to route Chinese-origin honey through Malaysia and India to hide and misdescribe the country of origin of the product. According to the agreement, Mr. Yang would order honey from Chinese honey suppliers “knowing that the Chinese honey suppliers would send Chinese-origin honey to countries of intermediate destination, including Malaysia and India, where the honey was mislabeled as to country of origin before the honey passed through a United States customhouse as non-Chinese-origin honey.”
Through National Commodities Company, Mr. Yang created at least three shell companies (CCM Foods Inc.; Kota Imports, Inc.; and Madu Jaya Inc.) to import and enter the falsely labeled honey into the U.S. market. He also arranged for the transportation of the falsely labeled honey to the United States. In total, Mr. Yang’s scheme led to the importation of 158 entries of honey declared as Malaysian-origin with a value of approximately $22 million and 9 entries of honey declared as Indian-origin with a value of approximately $1 million.
The agreement observes that Mr. Yang went to great lengths to conceal the true origin of the honey:
YANG obtained and circulated and caused others to obtain and circulate, false and fraudulent bills of lading, invoices, packing lists, country of origin certificates, and other papers, which YANG knew to be false and fraudulent and which records were used to declare Chinese-origin honey as having originated from Malaysia and India. YANG procured and maintained a presentation about Malaysian honey production outputs from a person in Malaysia and sought to obtain and maintain a similar Indian-specific presentation from another person in India, and did so to mislead customers and law enforcement officials (including CBP), as necessary, as to his purported due diligence efforts to avoid importing and selling transshipped Chinese-origin honey, when, in fact, YANG did not conduct due diligence as to the honey’s true origin.
Even more troubling, the plea agreement notes that Mr. Yang took active steps to conceal the fact that honey shipments purportedly from Vietnam were contaminated with chloramphenicol. In a disturbing passage, the agreement recounts the extraordinary efforts by Mr. Yang to introduce an adulterated and dangerous imported food product into the U.S. market:
In addition, purported Vietnamese honey from purchase order 812 that YANG sold to Honey Holding tested positive for the presence of Chloramphenicol, an antibiotic not allowed in honey (hereinafter, “unfavorable test results”). Unbeknownst to YANG, the person with whom he was dealing at Honey Holding regarding the adulterated honey was an undercover law agent. After learning of the unfavorable test results, YANG obtained new test results that purported to show that the honey was not adulterated. Upon receiving the clean test results, YANG instructed the undercover agent to destroy the unfavorable test result that showed the honey from purchase order 812 to be adulterated with Chloramphenicol. Specifically, on February 27, 2012, YANG instructed the undercover agent to destroy the unfavorable test results.
Several months later, on May 23, 2012, YANG met with the undercover agent in Chicago, Illinois. During their meeting, the undercover agent showed YANG copies of the unfavorable test results that were the subject of purchase order 812. YANG offered to destroy the unfavorable test results for the undercover agent and YANG also told the undercover agent that he did not have any copies of the unfavorable test results because he had already shredded his copies. YANG then took the undercover agent’s copies of the unfavorable test results and left the meeting with the reports in order that law enforcement officials would not find them in Honey Holding’s files.
The facts recited in the plea agreement highlight both the sophistication and massive scope of fraud related to imported foods, particularly imported foods subject to trade remedies and/or higher scrutiny from the U.S. Food and Drug Administration. The facts also demonstrate the interconnected nature of commercial fraud – import practices taken to fraudulently evade the payment of antidumping duties are simultaneously employed to evade food safety regulations.
“The plea agreement entered yesterday shows the grave risks importers are taking when they thumb their noses at U.S. laws,” said John Williams, executive director of the Southern Shrimp Alliance. “The federal government’s comprehensive criminal investigation here was swift. It amassed incontrovertible evidence of a designed, intentional scheme to rob a vulnerable industry of trade relief while endangering unwitting American consumers. Importers that continue to skirt the law by fraudulently bringing in low-value food while pocketing the margin do so at their own peril.”
Read the full plea agreement filed in United States District Court for the Northern District of Illinois, Eastern Division: http://www.shrimpalliance.com/wp-content/uploads/2013/03/Jun-Yang-Plea-Agreement.pdf