High-end auto export scam sending NH-titled cars to China smashed
Two naturalized U.S. citizens, Frank Hsiao Chien Ku, 31, of San Gabriel, Calif., and Danny Chin Hao Hsu, 33, of West Covina, Calif., pleaded guilty last year to mail fraud and violation of U.S. Customs laws as the operators of the scam. The charges were unsealed Monday, and the two will be sentenced in U.S. District Court at 10 a.m. Tuesday, said U.S. Attorney John Kacavas at a news conference.
Kacavas said 11 of the 93 illegally exported vehicles were illegally titled in New Hampshire, although, he said, only one was actually purchased in the state, at BMW of Stratham. The scammers unsuccessfully attempted to title three others in the state, he said.
New Hampshire was among the involved states because it has neither a sales tax nor a compulsory auto insurance law, allowing the scammers to increase their profits when they sold the vehicles overseas, said Kacavas.
Under U.S. Customs laws and regulations, the export of new motor vehicles is prohibited. The scammers utilized straw buyers? throughout the country, including two to three?from New Hampshire, who were promised money to help them.
Ku and Hsu, Kacavas said, obtained fraudulent title applications in the name of those straw buyers and other agents in order to then obtain documentation required by U.S. Customs to make it appear that the vehicles were actually used and thus legal for export.
Kacavas said the charges, while felonies, will not warrant incarceration
"Incarceration is not our goal here,"? Kacavas said. ?"Our goal has been to recoup what we can in terms of the cars and those are being forfeited under forfeiture procedures being pursued by U.S. Customs."? He said the probe began in October 2009 and ended in March 2012.
The 93 vehicles had a total value of more than $5.5 million, said Kacavas. He said 14 vehicles seized at the Port of Long Beach, Calif., before being exported had a value of $750,000, he said. The rest of the vehicles, he said, are "gone."?
Kacavas, flanked by federal Homeland Security officials, state Commissioner of Safety John Barthelmes, Col. Robert Quinn of the New Hampshire State Police, and state Division of Motor Vehicles director Richard Bailey, said while the scam was squelched, others like it are under way in New Hampshire and around the nation.
"This is just a fraction of what's going on," said David B. Cushman of the Holloway Motor Cars Mercedes Benz dealership in Manchester.
"It's a way for a quick buck," added Paul Holloway, who owns that dealership and several others in the state and who attended the news conference along with Cushman and other dealers.
"We were very fortunate," Holloway said, hailing the "unbelievable" cooperation among the various law enforcement agencies involved.
Holloway said that while his companies were not directly involved in the Ku-Hsu scam, over the past three years he has lost "in the six figures" in charge-backs from manufacturers and missed commissions as a result of similar scams.
According to Kacavas, dealerships are often subject to financial penalties imposed by the manufacturers if they allow sales of new vehicles for export. But he said the scam announced Monday was broken early enough that "there have been no charge-backs to dealers that we know of."?
Ku and Hsu paid straw buyers to use their addresses to title vehicles or to actually purchase the vehicles, using funds from Ku and Hsu's California firm, CFLA, Ltd., through a New Hampshire bank account.
Kacavas said there were "two to three" straw buyers involved in the Ku-Hsu scheme, who allowed them to establish fraudulent addresses in Farmington and Stratham. He said these buyers could have been subject to criminal charges, "but we elected not to charge" them.
"They cooperated fully with us and helped us uncover the scam,"? said Kacavas, who also credited town clerks and state Division of Motor Vehicle personnel for their "vigilance" in helping to uncover the scheme.
Straw buyers, he said, were approached at "random, no pattern."
He said Ku and Hsu would "scan Craigslist, looking for someone not of means who is looking for a roommate or something like that, and say, 'In lieu of actually moving in, we'll pay your rent, but we need to use your address.'?
"And they'd say, 'We'll pay you so much money to use your address and in fact if you want to make a little more money, you can be a straw buyer for us and we'll send you to dealers in New Hampshire and elsewhere to buy a car in your name, and we'll pay for it,'"? Kacavas explained.
That is how the two scammers were able to use false addresses in Farmington and Stratham, obtain driver's licenses, certificates of title and register the vehicles.
"Town clerks in Farmington, Stratham and other town clerks around New Hampshire were so key in uncovering this," Kacavas said.
The two admitted scammers never lived in the state but visited the state and employed "agents" to come to the state to purchase vehicles, Kacavas said.
Kacavas said that although New Jersey was the site of the higher number of purchases illegally exported vehicles in the Ku-Hsu scam, "This is a far-flung enterprise that was uncovered in the state of New Hampshire."
He said all agencies have pledged cooperation "so that scammers understand that you're going to get caught, your going to be charged and you're going to be sentenced as federal felons."?