HSI dismantles counterfeit cell phone operation, 3 arrested

NEW YORK — A counterfeit trafficking ring has been dismantled resulting in the seizure of more than 32,000 bogus cell phones and other electronics. Three individuals were arrested by law enforcement Tuesday after an extensive investigation conducted by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI), U.S. Customs and Border Protection (CBP) and the Nassau County Police Department (NCPD).

Arrested as a result of the investigation were Qiang Chen, 44, and Ye Zhang, 43, both of Syosset, N.Y. They were conducting business as AMAX International Group Inc. Robert Eisenberg, 28, of Manhattan was also arrested. He conducted business as Cellular Wholesale USA Inc.

Chen is charged with five counts of trademark counterfeiting in the second degree. Zhang is charged with two counts and Eisenberg with one. Each defendant faces up to four years in prison if convicted. The charges could be upgraded to trademark counterfeiting in the first degree depending on the ultimate number of counterfeit items and their retail value.

"The defendants in this case allegedly sought to profit by providing the public with a substandard product. They also robbed manufacturers of their intellectual property, and robbed consumers of quality they come to expect and demand, said James T. Hayes Jr., special agent in charge of HSI New York. "HSI and its law enforcement partners will remain vigilant against criminal organizations that try to circumvent our customs laws to smuggle cheap knock offs that impact our economy."

"These scam artists knew that these phones were junk, knew that they were illegal and knew that they were duping their customers, and the only thing they cared about was how much cash they could stuff in their pockets," said Kathleen Rice, Nassau County district attorney. "Thanks to the collaborative efforts of the law enforcement agencies involved in this investigation, these three men will be held accountable for the damage they have done."

"'Operation Long Distance Haul' is a great example of how effective law enforcement can be working in collaboration," said Thomas Dale, commissioner of the Nassau County Police Department. "The Nassau County Police Department has a long history of enforcing trademark counterfeiting offenses. It's an economic crime; it hurts the regular cell provider and causes a burden on taxpayers and law enforcement. These counterfeit phones can cause health issues due to products not being manufactured to U.S. standards. I would like to thank the hard work and dedication of the Nassau County District Attorney's Office, HSI and CBP."

"The men and women of CBP protect our nation's economy, the safety of its people, and our national security against harm from counterfeit and pirated goods," said Robert E. Perez, director of CBP Field Operations in New York. "We are very proud to have partnered with HSI and the Nassau County Police Department to detect and seize these counterfeit cell phones, leading to the apprehension of these conspirators."

The investigation began in January 2012 when CBP officers at John F. Kennedy International Airport (JFK) performing a random inspection of a shipment of cellular phones from China grew suspicious that the phones were not authentic due to their appearance and because they were shipped loose in cardboard boxes with no packaging. HSI special agents removed several phones from the shipment and sent them to the respective companies according to their labeling – such as Motorola or HTC – for testing.

Analysis by the real manufacturers revealed that these phones were counterfeit, with numerous inconsistencies in the phones' designs, inferior technology and parts used in their construction.

HSI special agents enlisted the assistance of the Nassau County District Attorney's Office in March, and allowed the shipment to reach its intended recipient, but flagged both the sender and recipient. Eight more pallets of counterfeit cell phones were sent via China Air to the same recipients between January and June 2012.

HSI and NCPD officers tracked the phones from the airport to two warehouses in Plainview, N.Y., and Hicksville, N.Y.

Search warrants were executed yesterday at the warehouses, as well as on a shipment at JFK, resulting in the seizure of more than 32,000 cell phones with a retail value of more than $2 million. Forty counterfeit Apple iPads and various accessories – along with $539,710 in currency – was also seized.

Three individuals were arrested Tuesday. The recipients would re-package and sell the counterfeit phones online or through legitimate cell phone wholesalers who were likely unaware they were receiving counterfeit goods. Business records will be analyzed by law enforcement to determine what companies were duped by the counterfeit phones. Those companies will be contacted and warned to investigate their inventory for potential counterfeit products.

As the largest investigative arm of the Department of Homeland Security, HSI plays a leading role in targeting criminal organizations responsible for producing, smuggling and distributing counterfeit products. HSI focuses not only on keeping counterfeit products off our streets, but also on dismantling the criminal organizations behind such illicit activity.

The HSI-led National Intellectual Property Rights Coordination Center (IPR Center) in Washington is one of the U.S. government's key weapons in the fight against criminal counterfeiting and piracy. As a task force, the IPR Center uses the expertise of its 20 member agencies to share information, develop initiatives, coordinate enforcement actions and conduct investigations related to IP theft. Through this strategic interagency partnership, the IPR Center protects the public's health and safety, the U.S. economy and the war fighters.

To report IP theft or to learn more about the IPR Center, visit www.IPRCenter.gov.