Chinese Aluminum Tycoon Liu Zhongtian has been accused of $1.8 billion tariff evasion in the US.
Liu Zhongtian may have made his fortune off the aluminum manufacturing business ever since 1993, but after he was charged with evading a whopping $1.8 billion of US tariffs, one of China’s biggest moguls and his business may be in some pretty hot waters.
Conspiracy, Wire Fraud, And Fake Pallets
In a nine-day trial, six affiliated South California companies were caught in an elaborate wire and customs scheme. All six were charged with producing aluminum extrusions that were passed off as pallets in America. These illegitimate products were exported in an effort to avoiding paying the billion-dollar custom duties. According to the Department of Justice release of the indictment, “the large amounts of aluminum from Liu’s manufacturing company, China Zhongwang Holdings Ltd, were exported to the United States and were ‘sold’ to fraudulently inflate a China-based company’s revenues and deceive investors worldwide.”
The companies and warehouses involved with the scheme were hit with a number of charges ranging from conspiracy to wire fraud. The release also reveals that fraudulent paperwork had been bandied about through an undisclosed custom house. The aluminum extrusions sold to the US were ‘spot-welded together’, which gave the products their pallet-like façades. They were then stored in four separate warehouses across southern California – all of which were owned by Liu.
The sneaky reasoning for these fraudulently modified exports being made was due to the anti-dumping duties put in place back in 2011 – which would have cost the business tycoon almost $2 million in tariffs.
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The Creation Of Liu’s Lie
Years ago, Liu made claims that his pallets were in strong demand. However, the Department of Justice begged to differ. Their release debunked these boasts, stating that it was actually the complete opposite, and there was virtually no demand for the pallets.
“There were no customers for the 2.2 million pallets imported by the Liu-controlled companies between 2011 and 2014,” the statement reads, “and no pallets were ever sold. “In lieu of the lack in demand, Liu set forth to build aluminum melting companies to produce goods that would better acclimate commercial value.
The lies didn’t stop there. A statement was provided to Forbes by a spokesperson from China Zhongwang, denying any involvement in the matter.
“After review of the aforementioned [Department of Justice] 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.” The case’s sentence hearing is set to be on December 13.
The Billionaire’s Sketchy Past
All these controversies have certainly taken a toll on Liu’s net worth. In the year which followed the stockpile incident, his fortune stood at a modest $3.2 billion. However, with each passing year, it seems to have depleted, with his net worth plummeting to $2.1 billion earlier this year. Currently, Forbes states that his fortune sits at $1.8 billion – a significant decrease for the owner of the world’s second-largest aluminum manufacturing company.
Like most self-made billionaires, Liu entered the world of business at a very young age. At only fourteen, he began making fire-resistant paint and sold them to surrounding factories. During the ’80s, the billionaire was busy setting up a number of factories and other manufacturing ventures – a notably one being a resin plant called Futian Chemical. He struck gold in 1993 when he founded China Zhongwang Holdings. When his company went public in 2009, it was listed as Hong Kong’s most valuable IPO. He held the title of president and chairman for two decades until his resignation in 2017. While the company was making huge waves in Hong Kong stocks during its heyday, CNN cites that its shares plummeted a whopping 14% two years after Liu’s resignation.
Unfortunately, the charges from the pallet debacle aren’t the aluminum tycoon’s first instance of tariff scandal. In 2016, allegations of the China Zhongwang Holdings founder arose of his company hiding a stockpile of aluminum in a Mexican dessert. Large doesn’t begin to describe just the magnitude of how much was reportedly funneled into the country – there was allegedly 6% of the world’s aluminum worth $2 billion was discovered. The Wall Street Journal, the first to break the story, estimated that the humongous stockpile was enough to produce 77 billion cans of beer!
When questioned about the stockpile from the publication, Liu gave an answer that sounded all too familiar – “These things have nothing to do with me.”
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Source: Department of Justice, Forbes, Success Story, Daily Mail, The Wall Street Journal
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