China Zhongwang Holdings Ltd. and its former chairman and president, Liu Zhongtian, were indicted by U.S. federal prosecutors for allegedly smuggling large amounts of extruded aluminum to evade US$1.8 billion in tariffs imposed in 2011, Reuters reported July 31.
The indictment took place May 7 but was not publicly revealed until July 30. The company's shares were down over 15% in late-afternoon trade on the Hong Kong Stock Exchange on Aug. 1.
China Zhongwang said Aug. 1 that it has not received any notice of the proceedings, nor has Liu, who is still a controlling shareholder. It previously denied the smuggling allegations. The company added that it has always "strictly abided" by the laws and regulations of China and the countries it exports to.
The prosecutors said the alleged scheme began as early as 2008, and companies affiliated with Liu used ports in Los Angeles to import aluminum extrusions that were "tack-welded" together, to come off as finished pallets that were not subject to duties.
The prosecutors said Liu stockpiled the aluminum at four Southern California warehouses and staged fake sales to companies under his control to overstate China Zhongwang's financials. Liu was accused of running a "massive" money laundering operation using shell companies to transfer funds to China Zhongwang.
Other charges include wire fraud, passing fraudulent papers through a customhouse and conspiracy.
Reuters also cited The Wall Street Journal as saying that an arrest warrant has been drawn up for Liu, who is believed to be residing in China.