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January 19, 2017Springfield, MO, United StatesIntellectual Property Rights and Commercial Fraud

Missouri woman sentenced to 2 years in federal prison for $90 million online counterfeit cellphone scheme

Must also pay $8.66 million in restitution for selling fake cellphone components to hundreds of thousands of consumers

SPRINGFIELD, Mo. — A southwestern Missouri woman was sentenced in federal court Thursday to two years in federal prison for selling more than $90 million worth of counterfeit cellphone components to consumers via the internet.

This sentence resulted from an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), and the Internal Revenue Service’s Criminal Investigations (IRS-CI).

Sherrie Householder, 59, of Nixa, Missouri, was sentenced by U.S. District Judge Beth Phillips to two years in federal prison without parole. The court also ordered Householder to pay $8,866,069 in restitution.

On May 26, 2016, Householder pleaded guilty to one count of mail fraud, one count of money laundering and one count of tax evasion.

Householder managed and operated Flash Technology LLC, aka Flash Tech, a Springfield, Missouri, business that sold cellphone components (such as replacement screens, lithium batteries, weight scales, phone cases and internal circuitry) through numerous internet retail sites. Flash Tech sold hundreds of thousands, and potentially millions of different cellphone parts shipped to consumers throughout the United States. According to court documents, more than $90 million in sales were made to hundreds of thousands of consumers from December 2012 to January 2016.

Householder represented that the cellphone components were manufactured by legitimate companies — including Apple, Samsung, LG, Microsoft, Android, Dell, Blackberry, ASUS, Acer, Kindle, HTC, Motorola, Nokia, Sony, ZTE and others. Each part contained counterfeit trademarks and markings that made it appear the legitimate holder of the trademark had manufactured the parts. Householder also used counterfeit trademarks and logos of these companies on her websites.

Wang “Frank” Luo, a Chinese citizen, owned Flash Tech, while Householder managed the company’s activities in the United States. Lou shipped the cellphone component parts to Householder. Nearly 5,000 international shipments were sent to Flash Tech from China.

According to court documents, Householder’s knowledge that a fraud was being perpetrated occurred during the last six months before law enforcement shut down the operation, when she began receiving seizure letters from U.S. Customs and Border Protection (CBP). Between August and December 2015, more than a dozen shipments from Luo’s factory in China to Householder in Springfield were intercepted and inspected by CBP agents. After seizing each shipment, CBP issued a letter of notification informing Householder of the seizure due to confiscated counterfeit items. Even though she was informed that the items she received from Luo were counterfeit, she continued selling these counterfeit products. Between August 2015 and the execution of federal search warrants on Feb. 2, 2016, Householder sold about $8,860,000, in counterfeit cellphones and component parts.

When federal agents executed search warrants at Householder’s residence and Flash Tech’s business address, they seized over 100,000 cellphone and component parts. The counterfeit items seized by agents had a retail value of about $5.5 million and filled two large moving trucks.

Householder must forfeit to the government $556,938 seized from her various accounts with PayPal, Amazon and banks; numerous desktop and laptop computers, iPads, hard drives, computer and cellphone components; and a money judgment of $8,866,069.

This case was prosecuted by Assistant U.S. Attorney Patrick Carney, Western District of Missouri.