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Justice News

Department of Justice
U.S. Attorney’s Office
Northern District of California

Friday, February 17, 2017

East Bay Chemical Company And Owner Indicted For Illegal Transportation And Smuggling Of Hazardous Materials

OAKLAND – A Union City man and the corporation he owns were charged with conspiracy to defraud the United States, smuggling, and multiple violations of the Toxic Substances Control Act and the Hazardous Materials Transportation Act, announced U.S. Attorney Brian J. Stretch; Environmental Protection Agency Criminal Investigation Division Special Agent in Charge Jay Green; U.S. Department of Transportation Office of the Inspector General Regional Special Agent in Charge William Swallow; and U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Special Agent in Charge Ryan Spradlin.  The indictment alleges that Peiwen Zhou and his company, AK Scientific, conspired to defraud the United States, smuggled materials into the United States, and illegally transported chemicals within the United States by mislabeling and improperly packaging hazardous chemicals.

According to the indictment, Zhou, 53, of Palo Alto, was the founder, owner, and chief executive officer of AK Scientific.  Zhou and AK Scientific were in the business of purchasing and then selling research and specialty chemicals to customers that included universities, research laboratories, and other entities.  AK Scientific purchased chemicals from chemical supply companies in, among other places, South Korea, Poland, India, and New Zealand. 

The indictment alleges the defendants defrauded the United States and smuggled hazardous chemicals into the United States by mislabeling the contents of containers.  Further, defendants allegedly transported chemicals in violation of the Toxic Substances Control Act (TSCA) by failing to complete required import certifications and by failing to properly label packages containing hazardous materials.  In addition, according to the indictment, the defendants also arranged to transport hazardous materials on several occasions without labeling the packages as required by the Hazardous Materials Transportation Act (HMTA). 

Defendants are charged with one count of conspiracy to defraud the United States, in violation of 18 U.S.C. § 371; one count of smuggling, in violation of 18 U.S.C. § 545; two counts of violating the TSCA, in violation of 15 U.S.C. § 2611(b) and 40 C.F.R. §§ 721.20 and 721.4880; and seven counts of violating 49 C.F.R. § 172.400 of the HMTA, in violation of 49 U.S.C. § 5124(a) and 18 U.S.C. § 2.  For defendant Zhou, if convicted, the maximum statutory penalties are as follows:

Conspiracy- 5 years in prison term and a $250,000 fine

Smuggling- 20 years in prison and a $250,000 fine

Each count of violating the TSCA- 1 year in prison term and a $50,000 fine

Each count of violating the HMTA- 5 years in prison term and a $250,000 fine

For defendant AK Scientific, if convicted, the corporation faces the following maximum statutory penalties:

Conspiracy- 5 years of probation and a $500,000 fine 

Smuggling- 5 years of probation and a $500,000 fine 

Each count of violating the TSCA- 5 years of probation and a $200,000 fine

Each count of violating the HMTA- 5 years of probation and a $500,000 fine

Further, additional special assessments may be imposed on either defendant and Zhou may be subject to additional terms of supervised release.  However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. 

Zhou and a representative for AK Scientific are scheduled to appear on Tuesday, February 21, 2017, at 9:30 am before United States Magistrate Judge Donna Ryu for an initial appearance.

The case is being prosecuted by the Special Prosecutions and National Security Unit of the United States Attorney’s office in San Francisco.  The prosecution is the result of an investigation by the U.S. Environmental Protection Agency’s Criminal Investigation Division, the U.S. Department of Transportation’s Office of Inspector General, and the U.S. Department of Homeland Security’s Homeland Security Investigations.

Financial Fraud
Updated February 22, 2017