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Jim Chester

Foreign nationals charged in multi-million dollar counterfeiting scheme

By Import, International Business

A federal indictment unsealed this week, charges three foreign nationals in a sophisticated counterfeiting operation uncovered through a 17-month undercover operation, spanning two continents. The charges are the results of an extensive investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and the U.S. Secret Service.

Alonso Moises Zambrano Herrera, 46, a Peruvian national operating out of the Dominican Republic was arraigned today on charges of counterfeiting and smuggling, and will be in custody pending trial. Zambrano Herrera has been charged along with Karin Gixet Sanchez Fajardo, aka Karucha, 28, a Peruvian national operating out of Lima, Peru; and Ernesto Perez Ferrera, 48, a Dominican national operating out of the Dominican Republic, in a 25-count felony indictment arising from a series of related sales of counterfeit U.S. currency in Peru and the Dominican Republic.

“This extended undercover operation, which targeted one of the most significant sources of high-quality counterfeit U.S. currency in the world, is a compelling example of the fight against international crime,” said U.S. Attorney Carmen M. Ortiz, District of Massachusetts. “In partnership with the Peruvian National Police and the Dominican police, we are seeking to shut down the elusive counterfeiting organizations in those countries.”

“This case illustrates the merging of traditional crimes such as counterfeiting with advanced technologies that criminals so often use to commit financial crimes today,” said Bruce M. Foucart, special agent in charge of HSI Boston. “No matter how creative counterfeiters think they are, they will get caught, and they will get prosecuted. In conjunction with the U.S. Secret Service, HSI will continue to aggressively pursue those who internationally manufacture, smuggle and try to pass counterfeit currency in the U.S. to the fullest extent of the law.”

“Thanks to our strong partnership with Homeland Security Investigations, we were able to uncover and disrupt a counterfeiting scheme that spanned two continents,” said Steven D. Ricciardi, special agent in charge of the U.S. Secret Service. “I want to thank our partners at HSI and the U.S. attorney’s Office for their tireless efforts and collaboration in this investigation.”

At a detention hearing on Monday before U.S. Magistrate Judge Jennifer Boal, the government presented evidence that Zambrano Herrera was expelled from the Dominican Republic and arrested upon his arrival in Boston June 1, 2012. Dominican authorities expelled Zambrano Herrera from that country after he coordinated the delivery of $100,000 in counterfeit U.S. currency to an undercover federal agent posing as an American cocaine dealer in search of cheap cash.

In a coordinated law enforcement effort in Peru, the Peruvian National Police, at the request of U.S. authorities, arrested Fajardo in Lima, Peru late on June 8. The U.S. attorney’s office, in coordination with the U.S. Department of Justice Office of International Affairs, has formally sought Fajardo’s extradition from Peru to face charges brought by the federal grand jury in Boston. Fajardo is being held in custody in Peru. A federal arrest warrant is outstanding for Perez; he remains at large.

The 45-page indictment, which was unsealed on Monday, alleges that the three defendants were engaged in related conspiracies and transactions involving more than $2 million in high-quality counterfeit currency being produced in Peru and the Dominican Republic. Samples of the counterfeit currency revealed that it had many of the sophisticated security features of genuine U.S. currency.

It is alleged that during the course of the investigation, one or more of the defendants shipped counterfeit U.S. currency into the United States concealed in the bindings of books; sent a courier into the United States carrying nearly $60,000 in counterfeit currency concealed in a photo album; and hand-delivered more than $100,000 in counterfeit currency to a cooperating witness in Peru and the Dominican Republic. At a hearing on Monday, the government presented evidence that Zambrano Herrera arranged for the delivery of an additional $100,000 to an undercover agent in Santo Domingo May 31, 2012, just prior to his arrest by Dominican authorities.

The indictment also alleges that Fajardo’s co-conspirators in Peru agreed to sell the cooperating witness and undercover agent $2 million in counterfeit currency.

Zambrano Herrera stands charged with two counts of conspiring to deal in counterfeit currency and smuggling, and five related counterfeiting and smuggling counts. Fajardo has been charged with two counts of conspiring to deal in counterfeit currency and smuggling, three counts of counterfeiting, and eight counts of money laundering. Perez is charged with one count of conspiring to deal in counterfeit currency and smuggling, and six counts of counterfeiting and smuggling.

If convicted, Zambrano Herrera faces up to five years in prison on each conspiracy count and up to 20 years imprisonment on each counterfeiting count, to be followed by three years of supervised release and a total of $1.75 million in fines; Fajardo faces up to five years in prison on each conspiracy count and up to 20 years on each counterfeiting and money laundering count, to be followed by three years of supervised release and up to $3.25 million in fines; and Perez faces up to five years in prison on the conspiracy count and up to 20 years imprisonment on each counterfeiting count, to be followed by three years of supervised release and a total of $1.75 million in fines.

SOURCE: U.S. Immigration and Customs Enforcement (ICE)

Owners of CA Computer Company Sentenced to Prison and Forfeit $2 Million for Illegal Exports to Iran

By Export, International Business

Massoud Habibion, 49, a U.S. citizen, Mohsen Motamedian, 44, a U.S. citizen, and their Costa Mesa, Calif., company, Online Micro LLC, were recently sentenced in the District of Columbia in connection with a scheme to illegally export millions of dollars worth of computer-related goods from the United States to Iran through the United Arab Emirates UAE).

The sentences were announced by Lisa Monaco, Assistant Attorney General for National Security; Ronald C. Machen Jr., U.S. Attorney for the District of Columbia; John Morton, Director of U.S. Immigration and Customs Enforcement (ICE); David W. Mills, Assistant Secretary for Export Enforcement, Department of Commerce; and Adam Szubin, Director of the Office of Foreign Assets Control (OFAC), Department of the Treasury.

U.S. District Judge Ellen S. Huvelle today sentenced Habibion to 13 months in prison for conspiracy to violate the International Emergency Economic Powers Act and to defraud the United States. Judge Huvelle sentenced Motamedian to three years supervised release for obstruction of justice. Habibion and Motamedian pleaded guilty to these charges on Feb. 16, 2012.

Under the terms of their guilty pleas and related civil settlements with the Department of Commerce’s Bureau of Industry and Security (BIS) and OFAC, Habibion and his company have agreed to forfeiture of $1.9 million seized from Online Micro’s bank accounts by ICE’s Homeland Security Investigations (HSI) during the course of the investigation. In addition, Habibion and Online Micro are denied export privileges for 10 years, although the denial order will be suspended provided that neither Habibion nor Online Micro commit any export violations during the 10-year probationary period and comply with the terms of the criminal plea agreements and sentences. Motamedian separately agreed to a $50,000 monetary penalty to settle a civil charge that he solicited a false statement to federal law enforcement agents.

Habibion and Motamedian were arrested on a criminal complaint in California on April 7, 2011. The defendants and their company were later indicted on April 21, 2011.

Habibion and Online Micro willfully conspired with a company operating in Dubai, UAE, and Tehran, Iran, to procure U.S.-origin computers from the United States and export those computers from the United States to Iran through Dubai without first obtaining licenses or authorizations from OFAC.

In or around May 2007, Online Micro purchased 1,000 computer units from Dell Inc. for approximately $500,000. Later that year, Dell began receiving service calls concerning Dell computer units from individuals in Iran, and after conducting an internal investigation, suspended Online Micro from placing further orders with Dell.

Beginning around Nov. 9, 2009, and continuing through December 2010, Habibion and Online Micro conspired with a company operating in Dubai and Tehran, to procure U.S.-origin computer-related goods and export those goods to Iran via the UAE. During the scope of the conspiracy, Online Micro and Habibion sold to that company and exported from the United States numerous shipments of computer-related goods, worth a total of more than $4,904,962, with knowledge that the majority of those goods were destined for Iran.

Online Micro also caused Shipper’s Export Declarations to be filed with U.S. Customs and Border Protection falsely identifying the ultimate destination of the goods as the UAE. During the course of the investigation, Habibion and Motamedian told a government cooperator to lie to U.S. law enforcement officials about the transactions. Specifically, the defendants told the cooperator to lie about Iran being the true ultimate destination for the goods and counseled him to tell U.S. law enforcement agents that the computer-related goods remained in Dubai.

SEC Charges Former Morgan Stanley Executive with FCPA Violations

By FCPA, International Business

The U.S. Securities and Exchange Commission recently charged a former executive at Morgan Stanley with violating the Foreign Corrupt Practices Act (FCPA) as well as securities laws for investment advisers by secretly acquiring millions of dollars worth of real estate investments for himself and an influential Chinese official who in turn steered business to Morgan Stanley’s funds.

The SEC alleges that Garth R. Peterson, who was a managing director in Morgan Stanley’s real estate investment and fund advisory business, had a personal friendship and secret business relationship with the former Chairman of Yongye Enterprise (Group) Co. – a Chinese state-owned entity with influence over the success of Morgan Stanley’s real estate business in Shanghai. Peterson secretly arranged to have at least $1.8 million paid to himself and the Chinese official that he disguised as finder’s fees that Morgan Stanley’s funds owed to third parties. Peterson also secretly arranged for him, the Chinese official, and an attorney to acquire a valuable Shanghai real estate interest from a Morgan Stanley fund. Peterson was acquiring an interest from the fund but negotiated both sides of the transaction. In exchange for offers and payments from Peterson, the Chinese official helped Peterson and Morgan Stanley obtain business while personally benefitting from some of these same investments. Peterson’s deception, self-dealing, and misappropriation breached the fiduciary duties he owed to Morgan Stanley’s funds as their representative.

Peterson agreed to a settlement of the SEC’s charges in which he will be permanently barred from the securities industry, pay more than $250,000 in disgorgement, and relinquish his interest in the valuable Shanghai real estate (currently valued at approximately $3.4 million) that he secretly acquired through his misconduct. The U.S. Department of Justice has filed a related criminal case against Peterson.

“Peterson crossed the line not once, but twice. He secretly bribed a government official to illegally win business for his employer and enriched himself in violation of his fiduciary duty to Morgan Stanley’s clients,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “This case illustrates the SEC’s commitment to holding individuals accountable for FCPA violations, particularly employees who intentionally circumvent their company’s internal controls.”

Kara Novaco Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit, added, “As a rogue employee who took advantage of his firm and its investment advisory clients, Peterson orchestrated a scheme to illegally win business while lining his own pockets and those of an influential Chinese official.”

According to the SEC’s complaint filed in U.S. District Court for the Eastern District of New York, Peterson’s violations occurred from at least 2004 to 2007. His principal responsibility at Morgan Stanley was to evaluate, negotiate, acquire, manage and sell real estate investments on behalf of Morgan Stanley’s advisers and funds. He was terminated in 2008 due to his FCPA misconduct.

The SEC alleges that Peterson led Morgan Stanley’s effort to build a Chinese real estate investment portfolio for its real estate funds by cultivating a relationship with the Chinese official and taking advantage of his ability to steer opportunities to Morgan Stanley and his influence in helping with needed governmental approvals. Morgan Stanley thus partnered with Yongye on a number of significant Chinese real estate investments. At the same time, Peterson and the Chinese official expanded their personal business dealings both in a real estate interest secretly acquired from Morgan Stanley as well as by investing together in Chinese franchises of well-known U.S. fast food restaurants. Peterson failed to disclose these investments in annual disclosures that Morgan Stanley required him to make as part of his employment.

According to the SEC’s complaint, Peterson openly credited the Chinese official with helping obtain approvals required from other Chinese government entities for a deal to close. He wrote to several Morgan Stanley employees in response to an e-mail discussing the terms of one of Yongye’s purported investments, “Everyone pls keep in mind the big picture here. YY gave us this deal. … So we owe them a favor relating to this deal. … This should be very easy and friendly.” In another e-mail a week later, Peterson described “YYI” as “our friends who are coming in because WE OWE THEM A FAVOR.”

The SEC alleges that a Morgan Stanley compliance officer specifically informed Peterson in 2004 that employees of Yongye, a Chinese state-owned entity, were government officials for purposes of the FCPA. Peterson also received at least 35 FCPA compliance reminders from Morgan Stanley, but nonetheless committed the FCPA violations.

The SEC’s complaint charges Peterson with violations of the anti-bribery, books and records and internal control provisions of the FCPA, and with aiding and abetting violations of the anti-fraud provisions of the Investment Advisers Act of 1940. Peterson consented to a court order requiring him to disgorge $254,589 and relinquish to a court-appointed receiver the interest he secretly acquired from Morgan Stanley’s fund in the Jin Lin Tiandi Serviced Apartments. Peterson’s interest has a current estimated value of approximately $3.4 million. The proposed settlement is subject to court approval. Peterson also has consented to permanent industry bars based on the anticipated entry of the injunctions against him and his criminal conviction.

Over $1.5 Million Seized from Online Sale of Counterfeit Sports Apparel manufactured in China

By Customs IP Enforcement, Intellectual Property, International Business, International IP

The Department of Justice seized more than $1.5 million in proceeds from the distribution of counterfeit sports apparel and jerseys, following an investigation into the sale of counterfeit goods on commercial websites conducted by the National Intellectual Property Rights Coordination Center (IPR Center), which is led by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).

The developments are the latest result of Operation In Our Sites, a law enforcement initiative targeting online commercial intellectual property crime announced by HSI in June 2010. Operation In Our Sites targeted online retailers of a diverse array of counterfeit goods, including sports equipment, shoes, handbags, athletic apparel, sunglasses and DVD boxed sets. To date, 761 domain names of websites used in the sale and distribution of counterfeit goods and illegal copyrighted works have been seized as a result of Operation In Our Sites.

“ICE will continue to target those who traffic in counterfeit goods by attacking the financial profits of counterfeiting sites and shutting them down,” said ICE Director Morton. “Operation In Our Sites and the tireless work of the National Intellectual Property Rights Coordination Center protect consumers from fraud on the Internet and combat intellectual property theft which exacts a toll on our economy and industries.”

Last month, more than $896,000 in proceeds from the sale of counterfeit sports apparel on commercial websites was seized as part of Operation In Our Sites. According to court documents, investigation by federal law enforcement officers revealed that subjects whose domain names had been seized in a November 2010 In Our Sites operation continued to sell counterfeit goods using new domain names. In particular, the individuals, based in China, sold counterfeit professional and collegiate sports apparel, primarily counterfeit sports jerseys. Law enforcement officers made numerous undercover purchases from the websites associated with the new domain names. After the goods were confirmed to be counterfeit or infringing, seizure warrants for three domain names used to sell the infringing goods were obtained from a U.S. magistrate judge in U.S. District Court for the District of Columbia.

The individuals conducted sales and processed payments for the counterfeit goods using money service business accounts and then wired their proceeds to bank accounts held at a Chinese bank, the court documents state.

Pursuant to warrants issued by a U.S. district judge, law enforcement officers seized $1,455,438.72 in proceeds that had been transferred from the money service business accounts to various bank accounts in China. The funds were seized from correspondent, or interbank, accounts held by the Chinese bank in the United States. Pursuant to additional seizure warrants issued by a U.S. magistrate judge, law enforcement officers also seized $94,730.12 in funds remaining in six money service business accounts used by the subjects.

“The seizures … are another step forward in our efforts to disrupt and disable those engaged in intellectual property crime,” said Assistant Attorney General Lanny A. Breuer. “By seizing the domain names and profits of online counterfeit goods operations, we are protecting consumers and sending a message to criminals that we will use every tool at our disposal to stop them.”

“Within a matter of weeks, this law enforcement operation has seized more than $2.4 million in proceeds from individuals overseas who are preying on the American economy and consumers with their sales of counterfeit goods,” said U.S. Attorney Ronald C. Machen Jr., District of Columbia. “We will continue to work with our law enforcement partners to target these unscrupulous operators where it hurts them the most – at the bank.”

Over $47 million in Counterfeit Goods Seized at Flea Market

By Customs IP Enforcement, Import, Intellectual Property, International IP

A very productive enforcement action at the end of April at the Patapsco Flea Market in Baltimore conducted by special agents with U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) resulted in the agency’s largest counterfeit seizure at a flea market.

On Sunday, April 22, HSI special agents executed a federal search warrant at the Patapsco Flea Market at 1400 W. Patapsco Avenue in Baltimore as part of an ongoing criminal investigation. The enforcement operation was based on specific information developed during a two and a half year long investigation by HSI Baltimore involving violations of intellectual property rights law. Over the course of numerous days, HSI special agents, with assistance from law enforcement and industry partners, seized nearly 220,000 counterfeit items including clothing, shoes, jewelry, handbags, DVDs, CDs, perfume, make-up and other personal care items. If those items were legitimate, the total manufacturer’s suggested retail price would be approximately $47.3 million.

The HSI Baltimore investigation identified numerous vendors selling counterfeit goods with brand names such as M∙A∙C, Louis Vuitton, Gucci, Coach, Kate Spade, NFL, Nike, Dolce & Gabbana, Dooney & Bourke, Ralph Lauren Polo, Lacoste, North Face, Rocawear, Ed Hardy, Chanel, Tiffany, Timberland, Uggs, Sony, Apple, Coogi, Black Label, Under Armour and Affliction, among others. The multi-day operation also netted the seizure of approximately $1.5 million in suspected criminal proceeds.

“The illegal importation and sale of counterfeit goods is a significant problem that affects our economy, impacts American jobs and innovation, puts the public’s health and safety at risk and at times threatens our national security,” said William Winter, special agent in charge for HSI Baltimore. “Consumers should know that if they buy pirated and unlicensed products, they are hurting legitimate businesses and they may also be facilitating criminal activity.”

The following law enforcement and industry partners also participated in the operation: Maryland State Police, Baltimore Police Department, Under Armour, Estee Lauder, the Recording Industry Association of America (RIAA) and the Motion Picture Association of America (MPAA). Blazer Investigations, representing numerous trademarked brand names, was also on site assisting with the identification of counterfeit goods.

Nearly $1 Million Worth of Counterfeit Movies and Music Seized

By Customs IP Enforcement, Intellectual Property, International IP

Two Mexican nationals made their initial appearance in federal court this week on charges of trafficking in counterfeit goods after U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) agents executed a search warrant at a rural Fresno (California)-area home, seizing more than 70,000 pirated copies of music and movies.

Alberto Campos-Limon, 24, and Jose Jeronimo-Jimenez, 32, both of Fresno, were taken into custody by Fresno HSI agents. They are charged in a criminal complaint with conspiracy; copyright infringement; and trafficking in counterfeit labels. The illegal activities allegedly occurred between Feb. 28 and April 24. Each offense carries a maximum penalty of up to five years in prison.

A third suspect, Arnoldo Chavez-Mendoza, 50, a Mexican national who currently resides in Tulare, was arrested on state charges of copyright infringement after agents conducting the enforcement action observed him purchasing several hundred audio CDs from the two defendants.

The suspects were taken into custody at a rural Fresno-area residence where investigators discovered the bulk of the counterfeit music and movie disks. During a search of the home, investigators also found a variety of equipment commonly used to mass produce DVDs and CDs.

“Commercial piracy and product counterfeiting undermine the U.S. economy, rob Americans of jobs, stifle American innovation and promote other types of crime,” said Clark Settles, special agent in charge who oversees HSI Fresno. “Intellectual property theft amounts to economic sabotage, which is why HSI will continue to aggressively pursue product counterfeiters and those who sell counterfeit products.”

This enforcement action is the culmination of a probe that began in February. According to the criminal complaint in the case, during the ensuing investigation agents made multiple undercover purchases of counterfeit DVDS, including films such as “Safe House,” “In Time,” “Haywire” and “Red Tails.” Among the titles seized Tuesday at the residence were numerous first run movies, including “Hunger Games” and “American Reunion.” All told, agents have seized more than 70,000 counterfeit DVDs and CDs in connection with the investigation. Authorities estimate the retail value of those disks at more than $900,000.

HSI received substantial assistance with the investigation from the Fresno County Sheriff’s Office, the Motion Picture Association of America and the Recording Industry Association of America (RIAA).

“The United States government has made intellectual property protection a priority,” said Dallas international trade and intellectual property attorney Jim Chester.  “It seems as if every week we see a new seizure of counterfeiting imports.  These efforts are helpful and worthwhile, but U.S. officials and law enforcement can only do so much.  Seizure of trademark and copyright infringing imports will hardly make a dent in the global piracy of intellecual property rights.”


Basics of Intellectual Property

By Intellectual Property

New PPT Presentation

[slideshare id=12674902&doc=ippracticeoverviewpres2012-120424151734-phpapp01]

This presentation described the various types of Intellectual property (trademarks, copyrights, patents, and trade secrets), and explains how IP rights are created, protected, exercised, and enforced.

ICE Seizes $4 Million Worth of Counterfeit Athletic Apparel

By Customs IP Enforcement, Intellectual Property, International IP

A massive cache of counterfeit athletic apparel was recently found in a Sacramento, California warehouse.

Agents with U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) are currently working to inventory the contents of a warehouse on the city’s southeast side that yielded one of the largest single seizures of counterfeit apparel ever made in the area.

HSI agents executed a search warrant at the building on Berry Avenue Tuesday morning as part of a long-term investigation. Inside, investigators found multiple rows of shelving 40 feet high and more than 400 feet long stacked with apparel. Some of the merchandise was packed in boxes, other items were individually wrapped in plastic.

Agents still do not have a final count on the total number of items, but they say it will run into the tens of thousands. The bulk of the clothing was athletic apparel bearing a counterfeit Adidas trademark, including sports jerseys, shorts and shoes. In addition to the apparel, agents also discovered an array of counterfeit sports memorabilia, such as commemorative clocks and soccer balls.

“Commercial piracy and product counterfeiting undermine the U.S. economy, rob Americans of jobs, stifle American innovation and promote other types of crime,” said Dan Lane, assistant special agent in charge for HSI Sacramento. “Intellectual property theft amounts to economic sabotage, which is why HSI will continue to aggressively pursue product counterfeiters and those who sell counterfeit products.”

An investigative consultant who works with Adidas on issues involving intellectual property violations estimates if the seized merchandise had been genuine it would have retailed for more than $4 million.

HSI officials advise the probe is ongoing and no arrests have yet been made. HSI is receiving substantial assistance with the investigation from U.S. Customs and Border Protection (CBP), including CBP personnel with specialized expertise in identifying counterfeit merchandise who were on site for the execution of Tuesday’s search warrant. The Sacramento Police Department also provided support for the enforcement action.

It is believed the seized merchandise was destined for distribution to retail outlets throughout the United States. Once the items are inventoried, they will be transported to a secure facility for storage while the case is ongoing.