Criminal Charges Continue
Chan Hung Le
Chan Hung Le was arrested on April 16, 2019 by federal law enforcement on charges that he allegedly managed a counterfeit ring that imported fake Apple and Samsung cell phone components from China into the United States. Le has been charged with conspiracy to traffic in counterfeit goods, money laundering conspiracy, conspiracy to commit mail fraud and wire fraud and aggravated identity theft.
The government alleges that Le and his wife operated EZ Elektronix in Irvine, California to serve as a front for importing counterfeit electronic products starting in June 2010. The products were then advertised as authentic and were sold through various online stores. In order to evade detection by the authorities, Le used various company names and addresses, virtual offices and post office boxes throughout California, Texas, and Oklahoma. The company names used by Le are: EZ Elektronix Corporation; Fix2Save, Inc.; Gadget Fix Corp; Gadget Parts Direct; Gadgetfix Corporation; JV Trading Solutions; JVU Unlock; Pac Depot Inc; Pac-Depot; US Mobile Parts and Wholesale Gadgetfix.
Government authorities began looking into Le’s activities in October 2011 and February 2013 when search warrants were executed at EZ Elektronix resulting in the seizure of 7,200 counterfeit iPhone components and 11,700 other counterfeit mobile telephone components valued in excess of $1.7 million. After the raids, Le began routing the illegal shipments to Texas and Oklahoma and allegedly only had authentic good shipped directly to EZ Elektronix in hopes of evading customs authorities. To disassociate himself from the transactions, he also received assistance from family members and employees. It is estimated that between January 2012 and December 2018, EZ Elektronix paid in excess of $72 million to three companies who helped him import counterfeit parts from Hong Kong and China into the United States.
In 2016, one of Le’s suppliers, Hongwei “Nick” Du, pleaded guilty in California to conspiring to traffic in counterfeit goods and related money laundering charges. Du acknowledged providing Le with nearly $19 million worth of cellular telephone and other electronic components and stated that approximately half of the goods bore counterfeit Nokia, Samsung and Apple trademarks, among others.
If convicted of all charges, Le faces up to 45 years’ imprisonment plus a two-year consecutive sentence for aggravated identity theft.
Yi-Chi Shih
Yi-Chi-Shih, an adjunct professor of electrical engineering at the University of California Los Angeles (UCLA), has been convicted on all 18 counts brought against him including conspiracy to violate the International Emergency Economic Powers Act (IEEPA), mail fraud, wire fraud, subscribing to a false tax return, making false statements to a government agency and conspiracy to gain unauthorized access to a protected computer to obtain information.
The government’s charges outlined a scheme between Shih and codefendant Kiet Ahn Mai, both of whom previously worked together at a US defense contractor, to defraud a company that manufactured monolithic microwave integrated circuits (MMICs) of its proprietary technology. MMICs have military applications and can be used in electronic warfare, missiles, fighter jets, electronic warfare countermeasures, missile guidance systems and radars. Shih allegedly gained access to the victim company’s computer systems through their web portal by pretending to be a US customer interested in custom MMICs for domestic use. The true intent was to transfer the company’s technology and product to China.
The government alleged a conspiracy between Shih, Mai, and Shih’s brother, Ishiang Shih. Yi-Chi Shih, a naturalized US citizen from Taiwan, was the president since 2011 of Chengdu GaStone Technology Company (CGTC) aka Chengdu Jiashi Technology Company Ltd, a China-based semiconductor manufacturer who also produces MMICs. In 2014, the US Government placed CGTC on the Entity List with a presumption of denial meaning, a license is required, but would probably be denied, to export any items subject to the Export Administration Regulations (EAR) to CGTC from the United States. Shih also was listed in the state of California as the registered agent and member of Pullman Lane Productions, LLC. Mai registered a consulting and engineering company, MicroEx Engineer dba L2kontemporary, Inc. in California in 2010. Ishiang Shih, a former engineering professor at McGill University in Canada, registered a company in Canada by the name of JYS Technologies and was also listed as the technical director of Chengdu GaStone Technology Company.
It is the contention of the government that Yi-Chi Shih received funds from entities in China through his company, Pullman Lane, which were then used to finance the manufacture of custom MMICs by the victim company while posing as MicroEx Engineering. Funds were also allegedly sent by JYS Technologies to MicroEx Engineering.
In order to gain access to the victim company’s web portal, MicroEx fraudulently stated that the MMICs they were ordering would be used solely for domestic purposes and signed corresponding export compliance questionnaires provided by the victim company. After the MMICs were manufactured and delivered within the US, Yi-Chi Shih arranged for their export without a license to China. Samples of the shipments were also delivered to JYS Technologies.
Shih faces a maximum sentence of 219 years’ imprisonment and a sentencing date has not yet been set. Codefendant Mai, a naturalized US citizen from Vietnam, pleaded guilty to federal charges of smuggling and faces up to 10 years’ imprisonment. Mai’s sentencing is scheduled for September 19. According to a report in the Canadian press, the US government is seeking the extradition of Ishiang Shih from Canada.
Xiaoqing Zheng and Zhaoxi Zhang
On April 23, the US Department of Justice announced the indictment of Xiaoqin Zheng of New York and Zhaoxi Zhang of Liaoning Province, China. The former General Electric engineer and Chinese businessman were charged with economic espionage and conspiring to steal General Electric’s trade secrets regarding turbine technologies for the benefit of the People’s Republic of China.
The indictment alleges that Zheng, while employed in New York by GE as an engineer specializing in sealing technology, accessed electronic files containing proprietary design models, drawings, configuration files and material specifications relative to General Electric gas and steam turbines and their components and testing systems. The files were emailed to Zhang in China who subsequently used the trade secrets to advance Zhang and Zheng’s personal interests in two Chinese companies that develop parts for turbines: Liaoning Tianyi Aviation Technology Co., Ltd (LTAT) and Nanjing Tianyi Avi Tech Co. Ltd. (NTAT). Notably, the defendants are alleged to have received financial and other support from the Chinese government and entered into research agreements to develop turbine technologies. The defendants have not been charged with being Chinese agents.
Zheng’s activities were discovered after GE installed monitoring software on Zheng’s computers in an effort to determine what information he was encrypting. Zheng employed “steganography” to conceal stolen material in otherwise ordinary files, for example a digital photograph of a sunset. When interviewed by the FBI, Zheng denied emailing GE’s proprietary information to his Chinese contacts. A search of Zheng’s home revealed he had visited China five times over the course of two years’ time and a handbook that described benefits the Chinese government offered to individuals with technical knowledge.
Zheng has pleaded not guilty. He faces a maximum of 15 years’ imprisonment for economic espionage, 10 years’ imprisonment for trade secrets theft, and 5 years’ imprisonment for making false statements to the FBI, along with fines and supervised release. Zheng has been released on bond pending a trial. Zhaoxi Zhang is believed to be in China.
James Smalley
Charges were announced on May 22 against James Smalley, a former employee of PMI Industries, LLC. Smalley was charged with falsifying inspection reports for aerospace parts. Smalley began his employment in March 2017 as a Quality Assurance Engineer at PMI, an aerospace precision machining company. PMI specialized in high-tolerance machining for aerospace parts used by SpaceX and Department of Defense aerospace contractors used to build space vehicles.
In January 2018, during an internal audit performed at the direction of SpaceX by SQA Services, Inc, falsified source inspection reports and falsified non-destructive testing certifications from PMI for Falcon 9 and Falcon Heavy critical parts were discovered. The signed source inspection report had a forged inspector’s signature that appeared to have been photocopied and digitally cut and pasted into the source inspection report. NASA’s Office of Inspector General (OIG) was notified in February of 2018 who found the falsely certified components were to be used for an upcoming satellite mission launching on a SpaceX Falcon 9 rocket.
During his employment at PMI, Smalley had falsified at least 38 source inspection reports for components procured by SpaceX for the Falcon program and 76 individual parts that were rejected during inspection or were never inspected and subsequently shipped to SpaceX. The parts are not specifically listed in the court complaint. A total of seven NASA space missions, two US Air Force space flight missions and one National Oceanic and Atmospheric Administration (NOAA) space flight missions were affected by the parts. It is not clear whether any of the parts were actually flown on the vehicles.
SpaceX terminated its $200,000 a month relationship with PMI, resulting in PMI’s subsequent termination of operations and 35 people losing employment. When asked why he forged the documents, Smalley replied that, “he wanted to ship more product for the company.”
“According to the criminal complaint, James Smalley took the act of forgery to a new level,” said FBI Buffalo Special Agent-in-Charge Gary Loeffert. “A potentially catastrophic level with the potential to not only cost millions of dollars, but also jeopardize years of irreplicable work.”
Smalley faces a maximum 10 years’ imprisonment and a $250,000 fine.
Joyce Eliabachus, Peyman Amiri Larijani and Kral Aviation
On June 11, Joyce Marie Eliabachus aka Joyce Marie Gundran Manangan, principal of Edsun Equipments LLC, an aviation parts trading company, pleaded guilty to conspiracy to violate the Iranian Transactions and Sanctions Regulations (ITSR).
In tandem to the guilty plea, a related complaint was unsealed in New Jersey against Peyman Amiri Larijani, a citizen of Iran and former resident of Istanbul, Turkey, charging him with conspiracy to violate the ITSR, conspiracy to commit money laundering, and conspiracy to smuggle goods from the United States. In the US District Court for the District of Columbia, Larijani was charged in two separate indictments on June 4 with conspiracy to acquire US origin aircraft parts and goods to supply to entities and end-users in Iran, to conceal from the US government that the goods were destined for Iranian aviation end users, to financially profit along with other conspirators, and to evade the International Emergency Economic Powers Act (IEEPA), the ITSR and the Export Administration Regulations (EAR).
The US Government contends that Eliabachus, Larijani and others formed, “part of an illicit, international procurement network that is designed to surreptitiously acquire large quantities of aircraft components from United States manufacturers and vendors, and to unlawfully export those parts to entities in Iran…[the] network has obtained and exported over $2 million worth of aircraft components from the United States to Iranian business entities in violation of export control laws.” Joyce Eliabachus, a naturalized U.S. citizen born in the Philippines, allegedly operated Edsun Equipments, LLC aka Edsun Equipments LTD out of her New Jersey home. Peyman Amiri Larijani owned an Iranian procurement company and was the operations and sales manager of Kral Havacilik IC VE DIS Ticaret Sirketi (Kral Aviation), a Turkey-based company.
According to the criminal complaint, from May 2015 through October 2017 Eliabachus provided Larijani and other Iranian conspirators with access to Edsun’s account to an online aircraft parts database through which purchases were made, concealing the identity of the true end user(s). These end users included: Mahan Air Co, Ukranian-Mediterranean Airlines, Caspian Airlines, Kish Air, Atrak Air, Iran Air Tours, ATA Airlines and Karun Airlines. Among the parts purchased were aircraft brake assemblies, rotor assembly parts, and a series of other unspecified aircraft parts.
The parts were then sent to Edsun in New Jersey where Eliabachus used freight forwarding services to send the parts to Turkey and the United Arab Emirates to organizations such as Parthia Cargo and Reibel Tasimacilik Ve Tic A.S., while falsifying the true value of the cost of goods, the destination, and/or the end user of the components, without obtaining the necessary export licenses. Upon arrival, Larijani and other Iranian co-conspirators then transported the parts on to the end users in Iran. In turn, Eliabachus profited financially through millions of dollars which were funneled through various Turkish bank accounts held in the name of shell companies controlled by the Iranian conspirators.
In total, the government estimates that Eliabachus, Larijani, and other conspirators were responsible for at least 49 shipments containing 23,554 license-controlled aircraft parts being exported from the United States to Iran without required licenses.
Eliabachus faces a maximum of 5 years’ imprisonment and a $25,000 fine for conspiracy to violate the IEEPA. Sentencing is scheduled for September 24, 2019.
If convicted, Larijani faces: for conspiracy to violate the ITSR, a maximum of 20 years’ imprisonment and a $1 million fine; for conspiracy to commit money laundering, a maximum of 20 years’ imprisonment and a $500,000 fine; and for conspiracy to smuggle goods, a maximum of 5 years’ imprisonment and a $250,000 fine.