For Immediate Release: April 12, 2005 Contact - BIS Public Affairs 202-482-2721

Three Chinese Nationals Charged in Million-Dollar Fraud Against Employer, a U.S.-Based Multinational Company

NEWARK - Three Chinese nationals appeared on a federal complaint in the District of New Jersey this week, facing charges of bilking their employer in an international fraud estimated at more than $1 million, U.S. Attorney Christopher J. Christie announced.

A 17-page criminal Complaint filed with the arrests on Sunday describes conduct including pushing sales through straw buyers and demanding bribe payments, as well as creating front companies and falsifying corporate records to hide their scheme to defraud the high-technology company.

The three defendants - Zhen Zhang, 35, Shiyi Zhang, 42, and Zhuosen Tan, 31 - worked as sales representatives for a U.S.-based, multi-national corporation, and were based in the Chinese cities of Shanghai, Beijing and Shenzhen, respectively. Their employer (which is not New Jersey-based and is not identified in the Complaint) is a world leader in the design, manufacture and marketing of high-technology products used to generate radio signals and control radio frequencies, which are used in various commercial, military and space applications, according to Assistant U.S. Attorney Judith H. Germano.

The defendants were arrested on Sunday - Zhen Zhang at a residence he maintains in Norwalk, Conn., and Shiyi Zhang and Zhuosen Tan at John F. Kennedy airport in New York upon arrival from separate flights from China. (Zhen Zhang arrived the day before on a flight from China). All appeared before U.S. Magistrate Judge Madeline Cox Arleo on Monday, and were ordered detained pending a bail hearing set for tomorrow, Thursday, June 9, at 3 p.m.

Zhen Zhang had a work visa allowing him to enter the United States and was approved in December to become a legal permanent resident. The other two defendants were admitted to the United States for business purposes.

The Complaint details transactions the defendants entered into with individuals in New Jersey, China, Pakistan and elsewhere. The defendants are charged with using straw buyers in these transactions - including existing companies in the U.S., as well as front companies that the defendants established and operated in China - to conceal the true value and ultimate end-user of the products from their employer. This enabled the defendants to pocket a portion of the proceeds from sales transactions for their own financial benefit, defrauding their employer out of more than $1 million, according to the Complaint.

The defendants are also charged with fabricating purchase orders and end-user certifications to conceal their scheme. (End-user certifications - which set forth the ultimate user and use of a product - are often required to determine whether a license from the U.S. government is required before certain products can be exported from the United States.)

The Complaint details bribe payments the defendants demanded in exchange for providing favored treatment to customers. That favored treatment included offering bribe-paying customers lower prices and faster service, while simultaneously delaying or outright declining bids from non-bribe-paying customers. Pursuant to the scheme, the defendants generated thousands of electronic communications, including emails using their employer's U.S.-based computer server.

The defendants' employer cooperated in the investigation of the three employees immediately upon learning of the scheme from federal authorities.

The defendants are charged with conspiracy to commit wire fraud, which carries a maximum penalty of five years in federal prison and fines of up to $2 million (twice the gross gain to defendants or loss to their victim).

In determining an actual sentence, the judge to whom the case is eventually assigned would, upon a conviction, consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges that take into account the severity and characteristics of the offense, the defendant's criminal history, if any, and other factors. The judge, however, is not bound by those guidelines in determining a sentence.

Parole has been abolished in the federal system. Defendants who are given custodial terms must serve nearly all that time.

Despite the charges, each defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt following a trial at which the defendant has all of the trial rights guaranteed by the U.S. Constitution and federal law.

Christie credited Special Agents of the FBI, under the direction of Special Agent in Charge Leslie Wiser, Jr.; the Department of Homeland Security, Immigration and Customs Enforcement (ICE), under the direction of Special Agent in Charge Kyle Hutchins, and the Department of Commerce, under the direction of Special Agent in Charge Sidney M. Simon.

The Government is represented by Assistant U.S. Attorney Judith H. Germano of the U.S. Attorney's Office in Newark.