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March 13, 2012Buffalo, NY, United StatesCounter Proliferation Investigation Unit

Former company president pleads guilty to conspiring to smuggle magnesium powder into US

Magnesium powder was used to produce countermeasure flares for the Defense Department

BUFFALO, N.Y. – A Pennsylvania man has pleaded guilty to conspiracy to smuggle merchandise into the United States by false and fraudulent invoices. This investigation is being conducted by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI).

Charles Wright, 61, of Pennsylvania, pleaded guilty before Chief U.S. District Judge William M. Skretny. The charge carries a maximum penalty of five years in prison and a $250,000 fine.

Wright was the president of ESM Group Inc., a specialty metal powder supplier. As president, Wright sought to expand ESM's customer base to include the defense industry. In order to do so, the defendant entered into an agreement with Superior Metal Powders Inc., whereby Superior Metal Powders was to obtain and market on behalf ESM Group Inc., a special form of magnesium powder.

At the time, the United States had a 305.56% antidumping duty in place with respect to the type of magnesium powder Superior Metal Powders was importing from the People's Republic of China. After entering into the magnesium agreement, the defendant learned that the magnesium powder was being imported in a manner that avoided the 305.56% antidumping duty. Despite this knowledge, Wright authorized and obtained additional shipments of the magnesium powder knowing it was being imported in violation of the antidumping duty. The total amount of lost duty to the United States from January 2005 through May 2005 was approximately $1,933,999.

The magnesium powder was used to produce countermeasure flares which are used by the Department of Defense in military aircraft to divert heat-seeking missiles.

"Homeland Security Investigations is committed to protecting the security of our homeland and our troops abroad by ensuring that the sale and distribution of products used by our military is done lawfully," said James Spero, special agent in charge of HSI Buffalo. "Enforcing U.S. import and export regulations is one of HSI's top priorities and we will continue to work with our law enforcement and industry partners to ensure that those who put our country at risk face appropriate consequences."

"The enforcement of our nation's laws – particularly when it comes to our war effort – is among the highest priorities of the Department of Justice and this office," said U.S. Attorney William J. Hochul Jr., Western District of New York. "The product at issue here – magnesium used in military countermeasures – literally constituted the last line of defense for our brave men and women serving in our military. This office will continue to prosecute any who would jeopardize our military, evade Defense Department regulations, or defraud the government out of legitimate tariffs and duties designed to protect critical American industries."

Wright was charged in an indictment in April 2010 along with Gregory Magness, Justin Magness, William Nehill, Eldon Bott and Qian Chen. Superior Metal Powders, International Technology Group, Inc. and Innovative Materials & Solutions, Inc. were also named in the indictment. Wright is the first to be convicted in this case.

The plea is the culmination of an investigation on the part of HSI and the Internal Revenue Service, Criminal Investigation Division.

Sentencing is scheduled for June 27, 2012.

This case is being prosecuted by Assistant U.S. Attorney Michael DiGiacomo, Western District of New York.

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