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Intellectual Property Rights and Commercial Fraud
05/12/2016

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Chinese national admits selling more than $1 million in counterfeit cell phone parts

SAN DIEGO – A Chinese national faces up to 25 years in prison after pleading guilty to selling more than a million dollars’ worth of counterfeit cell phone parts to a Calexico-based online business in a scheme uncovered during a multiyear probe spearheaded by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and Internal Revenue Service (IRS) Criminal Investigation.

Hongwei “Nick” Du, 33, of Shenzhen, China, admitted Wednesday in U.S. District Court to conspiring with two El Centro residents to traffic counterfeit goods and money laundering. Du further admitted he coordinated the shipments of the Chinese-made counterfeit products in a manner designed to prevent customs officers from detecting them. In addition to prison time, Du faces a maximum fine of up to $750,000. He has also agreed to forfeit the $1.5 million he derived from the scheme.

According to the plea agreement, Du acknowledged selling counterfeit Chinese cell phone parts to supply orders from “Flexqueen.com,” a former business housed in a Calexico residence that sold millions of dollars’ worth of counterfeit Apple and Samsung cell phone components over the Internet.

Du was arrested Feb. 3, 2015, at the Imperial Valley airport along with the two co-conspirators, Octavio Cesar Sana, 42, and Angela Rose Vela, 36, after undercover investigators lured him to the U.S. to coordinate the purchase of counterfeit goods. Du arrived for the meeting with samples of counterfeit iPhone components.

“Trafficking in counterfeit goods threatens consumers and the marketplace,” said U.S. Attorney Laura E. Duffy. “Customers buying trademarked products for their personal devices should be able to have confidence that the products aren’t sophisticated forgeries.” 

U.S. Attorney Duffy noted the counterfeit goods business is booming. In 2014 alone, U.S. Customs and Border Protection intercepted an estimated $1.2 billion worth of counterfeit products in more than 23,000 seizures. 

“This investigation underscores HSI’s commitment to pursuing transnational criminals who are seeking to exploit the U.S. economy,” said Dave Shaw, special agent in charge of ICE HSI San Diego. “I commend HSI and its federal law enforcement partners for their outstanding efforts, which uncovered a counterfeit scheme that threatened the U.S. marketplace and defrauded consumers.”

Over the course of the investigation, HSI executed search warrants in numerous locations nationwide, including Boston; Atlanta; Pittsburgh; Nashville, Tennessee; Tampa, Florida; and Brownsville, Texas; as well as in Orange, San Diego and Imperial counties. The searches resulted in seizure of more than 55,000 counterfeit items and additional criminal charges in several jurisdictions.

According to the plea agreement, since 2007, Sana’s business sold approximately $6.5 million in cell phone parts and accessories to businesses and consumers throughout the U.S. Sana paid approximately $3.1 million to Du, his primary Chinese supplier. Du admitted that roughly half of the parts he supplied Sana were counterfeit. Sana pleaded guilty to similar charges in September 2015.

Du’s sentencing is set for Aug. 15 before U.S. District Judge Lorenz. Sana is expected to be sentenced by Judge Lorenz May 23. 

In addition to HSI and IRS Criminal Investigation, the U.S. Postal Inspection Service also provided substantial assistance with the case.

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Last Reviewed/Updated: 05/13/2016