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Justice News

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

FOR IMMEDIATE RELEASE
Tuesday, August 25, 2020

Five Charged In Multi-Million Dollar International Customs Fraud Scheme

Defendants Accused of Dumping Used Tires In Asia In Scheme to Submit Fraudulent Tariff “Drawback” Claims

SAN FRANCISCO - A federal grand jury in San Francisco indicted Dale Behm; Yong Heng Liang, also known as Colin Liang; Joshua Stanka; Joshua Clark; and Michael Choy with conspiracy, wire fraud, and related charges related to an alleged scheme to submit fraudulent claims for refunds on import duties, announced United States Attorney David L. Anderson, Homeland Security Investigations (HSI) Special Agent in Charge Tatum King, and Internal Revenue Service Criminal Investigations (IRS-CI) Special Agent in Charge Kareem Carter.

The indictment, filed August 12, 2020, and unsealed today, alleges Liang, 34, of Daly City, Calif.; Behm, 75, of Shell Knob, Missouri.; Stanka, 41, of Katy, Texas; Clark, 38, of Fair Oaks Ranch, Texas; and Choy, 47, of Etibicoke, Ontario, Canada, conspired to defraud the United States of as much as $40 million by submitting multiple claims for refunds to recover tariffs that were properly owed on imports.  Pursuant to the refund scheme, defendants allegedly used a tire recycling company in Hayward and a shell company, both controlled by Liang.  The recycling company had no recycling equipment and shipped containers of thousands of used tires to countries in Asia, often using the name of the shell company. In addition, the defendants forged the shipping documents to support false claims to the government that the exported tires were actually high-quality plastics, allowing defendants to seek refunds paid for other imports.     

“We allege that the defendants, using Bay Area Tire Recycling, engaged in a massive environmental fraud. Used tires don’t belong in landfills, either here in California or overseas.  Used tires can be recycled, retreaded and reused.  By dumping used tires in Korea, India, and Vietnam, and using those exports to support false claims, the defendants cheated consumers, American taxpayers, the shipping companies, and everyone who cares about the environment.“

“Working in partnership with IRS Criminal Investigations and U.S. Customs and Border Protection, HSI will vigorously pursue U.S. based violators who seek to trash our planet and ruin the ecosystem for future generations,” said Special Agent in Charge King.

“This was an extremely well organized network,” said Special Agent in Charge Carter. “They manipulated the system to their advantage, submitted millions in false claims and laundered their ill-gotten gains.  IRS CI will continue to work with our law enforcement partners to ensure that anyone involved in these types of schemes will be held accountable for their crimes.”

According to the indictment, at the heart of the scheme were bonded companies such as San Francisco-based raw plastics importer The Pacific Rim Traders, LLC.  The indictment alleges that beginning as early as 2014 and continuing through September 2019, the defendants filed fraudulent claims for refunds of customs duties that Pacific Rim and other companies had paid to CBP.  In the case of Pacific Rim, the company imported large amounts of plastic resin from its parent company in China and used the resin to manufacture food-grade bottles and other materials.  Pacific Rim paid tariffs, or “customs duties,” on the imported plastics. The company also maintained a customs bond with CBP and therefore was entitled to accelerated refund checks, or “drawbacks,” from the U.S. Treasury when it exported qualifying goods. 

The indictment describes how the defendants submitted documents allowing Pacific Rim to receive drawbacks by submitting documents that made it appear shipping containers filled with used tires and scrap plastic were loaded with drawback-eligible virgin plastic material.  Specifically, Liang, who controlled a company that purported to recycle tires, allegedly arranged for shipping containers loaded with used tires to be shipped to ports in countries in Asia, including the Republic of Korea, India, and Vietnam. Liang then allegedly provided documents, including export bills of lading, to Choy who, at the direction of Stanka, Clark, and others, modified Liang’s and other exporters’ documents to provide to Behm with false invoices.  The invoices made it appear that Pacific Rim was selling large amounts of virgin plastic material to companies in Asia, when, in reality, Liang was exporting tires and other material.  Behm and others then allegedly directed a San Francisco-based customs broker to use the false documents to prepare customs drawback claims with CBP.  The claims sought drawbacks for as much as $655,000 at a time. 

Liang is also charged with defrauding a shipping company that had to pay for destruction of containers of tires shipped to Busan, South Korea.  According to the indictment, Liang listed a then-dissolved company as the recipient, or consignee, of the tires.  The indictment alleges that in 2017, 128 containers shipped by Liang were found abandoned in Busan, a discovery that lead to the initiation of an investigation by federal authorities.  A comparison of the export documents to the refund claims suggests the coconspirators altered the paperwork so that “scrap rubber” appeared as “PFTE Resin” and “EFTE Resin.”  The indictment alleges that if the actual contents of the containers – scrap rubber tires – had been reported to CBP, Pacific Rim’s drawback claims would not have been granted.

In total, the indictment alleges Pacific Rim received at least $6,400,000 in fraudulent drawbacks, while other clients of Stanka, Clark, Choy, and Liang obtained as much as an additional $34,000,000 in total refunds. 

In addition, the indictment alleges the parties laundered the proceeds of the fraud scheme. Pacific Rim allegedly received a percentage of the fraudulent refund claims and paid the remainder to a company owned by Stanka and Clark.  Further, Stanka and Choy allegedly transferred hundreds of thousands of dollars to themselves and made frequent payments to Choy for altered documents.  Choy, in turn, allegedly paid Liang for copies of bills of lading for his exports of waste tires to South Korea, Hong Kong, Vietnam, and elsewhere. 

In sum, the defendants are charged with the following crimes: 

               

Count

Violation

Description

Defendant(s) Charged

1

18 U.S.C. § 286

Conspiracy To Defraud the Government With Respect To Claims

All Defendants

2-16

18 U.S.C. § 287

False, Fictitious, Or Fraudulent Claims

All Defendants

17-28

18 U.S.C. § 1343

Wire Fraud

All Defendants

29-30

18 U.S.C. § 1341

Mail Fraud

Yong Heng Liang

31

18 U.S.C. § 1957

Engaging In Monetary Transactions In Property Derived From Specified Unlawful Activity

Joshua Stanka

32

Joshua Clark

33

Joshua Stanka

34

Joshua Stanka

35

Joshua Clark

36

Joshua Stanka; Joshua Clark

37

Joshua Clark; Michael Choy

38

Joshua Clark

39

18 U.S.C. § 1956(a)(2)(A)

Laundering Of Monetary Instruments

Yong Heng Liang; Michael Choy

40

Yong Heng Liang; Michael Choy

41

Joshua Clark; Michael Choy

42

Yong Heng Liang; Michael Choy

43

18 U.S.C. § 1519

Destruction, Alteration, Or Falsification Of Records In Federal Investigations And Bankruptcy

Yong Heng Liang

Defendant Liang was arrested in Daly City, Calif., and is scheduled to make his initial appearance tomorrow morning, August 26, 2020, in San Francisco.  Defendants Stanka and Clark were also arrested in Texas this morning and are scheduled made their initial appearances in federal court in Houston, Texas, and San Antonio, Texas, respectively.  Defendant Dale Behm was arrested in Missouri and will make his initial appearance in federal court in Springfield, Missouri.           

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the defendants face maximum sentences as follows: 

Violation

Description

Maximum Penalties

18 U.S.C. § 286

Conspiracy To Defraud The Government With Respect To Claims

10 Years;

$250,000 fine;

3 Years Supervised Release

18 U.S.C. § 287

False, Fictitious, or Fraudulent Claims

10 Years;

$250,000 fine;

3 Years Supervised Release

18 U.S.C. § 1343

Wire Fraud

20 Years;

$250,000 fine;

3 Years Supervised Release

18 U.S.C. § 1341

Mail Fraud

20 Years;

$250,000 fine;

3 Years Supervised Release

18 U.S.C. § 1957

Engaging In Monetary Transactions In Property Derived From Specified Unlawful Activity

10 Years;

$250,000 fine;

3 Years Supervised Release

18 U.S.C. § 1956(a)(1)(A)

Laundering Of Monetary Instruments

20 Years;

$500,000 fine, or twice the value of property involved in the transaction;

3 Years Supervised Release

18 U.S.C. § 1519

Destruction, Alteration, Or Falsification Of Records In Federal Investigations And Bankruptcy

20 Years;

$250,000 fine;

3 Years 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. 

The case is being prosecuted by the Special Prosecutions section of the United States Attorney’s Office with the assistance of Beth Margen and Lance Libatique.  The prosecution is the result of an investigation by HSI and IRS-CI.

 

 

Updated August 25, 2020