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Indictment: Scheme to avoid taxes on paper imports

Associated Press Modified: October 22, 2012 at 5:45 pm •  Published: October 22, 2012

ATLANTA (AP) — A company in suburban Atlanta schemed to avoid paying millions of dollars in import taxes on cheap notebooks and loose-leaf paper from China by falsifying records and bribing customs officials in Taiwan, federal prosecutors said in an indictment.

Jennifer Chen, chief financial officer of Apego, Inc., entered a not guilty plea on Monday in federal court in Atlanta. The indictment handed down by a grand jury last week also charges her ex-husband, company CEO Chi Cheng "Curtis" Gung, and Apego with conspiracy and 12 counts of importing notebooks and filler paper from China using false documents.

A judge granted Chen $25,000 cash bond on the condition that she surrender her passport and agree to electronic monitoring. A lawyer for Gung told prosecutors that his client traveled to Taiwan last week to be treated for a grave medical condition and plans to surrender voluntarily next month.

Three Chinese paper manufacturers, a Taiwanese company, and their CEOs are also named in the indictment and face conspiracy and fraudulent importation charges. They are: Forth Wu, 69, a Taiwanese citizen who owns and operates Fromus Psyche International, Inc.; and Zuoru He, 66, a Chinese citizen who controls and partly owns three companies that make up The Watanabe Group.

Wu and He are believed to be in Taiwan and China, respectively, prosecutors said. The U.S. does not have extradition treaties with either nation.

"They are accused of avoiding over 20 million dollars in 'anti-dumping' duties by shipping stationery made in China through Taiwan, bribing Taiwanese customs officials, and exporting the goods from there into the United States, falsely relabeled 'Made in Taiwan,'" U.S. Attorney Sally Quillian Yates said.

In 2005, the U.S. Department of Commerce began investigating whether Chinese companies that make notebooks, loose-leaf paper and other lined paper products were selling their goods at an artificially low price, sometimes even below cost. Foreign companies sometimes engage in the practice, known as dumping, with the aim of doing so long enough to put competitors out of business. Once the competition is eliminated, a foreign firm can then raise prices to recover the temporary cost of the scheme. Dumping is a prohibited and unfair trade practice under U.S. law.

The Department of Commerce and U.S. International Trade Commission determined in 2006 that Chinese manufacturers had been dumping certain lined paper products in the U.S. To offset the artificially low prices in the U.S. market, Chinese paper manufacturers were ordered to pay anti-dumping import tariffs of between 76 and 258 percent.

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