CHARGES BROUGHT IN COUNTERFEIT PET PRODUCT LABELS CASE

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, August 3, 2015

Four Men Charged with Trafficking in Pet Products with Counterfeit Labels

An indictment was recently unsealed in Houston charging four men with various offenses based on their roles in smuggling pet products with counterfeit labels into the United States.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson of the Southern District of Texas, Special Agent in Charge Catherine A. Hermsen of the Food and Drug Administration – Office of Criminal Investigations (FDA-OCI) Kansas City, Missouri, Field Office and Special Agent in Charge Brian M. Moskowitz of the U.S. Immigration and Customs Enforcement Homeland Security Investigations’ (HSI) Houston Field Office made the announcement.

Iain Nigel MacKellar, 58, of England; Lam Ngoc Tran, aka Mark Tran, 40, of Fountain Valley, California; Allen Smith, 49, of Phoenix; and William Humphreys, 58, of Laguna Hills, California, were indicted on July 9, 2015.  They are charged with conspiracy to commit wire fraud, mail fraud and trafficking in counterfeit labels, and smuggling goods into the United States.  Mackellar and Tran also are charged with additional counts of wire fraud, mail fraud, trafficking in counterfeit labels and smuggling.  The defendants were suspected members of one of the largest known groups of importers of counterfeit packaged pet products.

Smith turned himself in to authorities this morning and made his initial appearance before U.S. Magistrate Judge Mary Milloy.  Humphreys and Tran were taken into custody in Phoenix and in California, respectively.  Tran made his initial appearance in Houston on July 29, while Humphreys is set to appear tomorrow before Judge Milloy.  MacKellar is considered a fugitive and a warrant remains outstanding for his arrest.

The indictment alleges the defendants smuggled veterinary products that were not manufactured for the U.S. market into the United States for distribution under false labels, including Frontline and Frontline Plus pesticides manufactured by Merial Pharmaceutical Company (Merial).  In some cases, the defendants allegedly imported the products into the U.S. under the pretense that the products were destined for use by charitable organizations, but instead distributed the products to large retail outlets for commercial sale, according to the indictment.

Merial did not participate in or authorize the alleged unlawful conduct.  All known counterfeit veterinary products have been removed from store shelves.

The charges contained in an indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

This case is being investigated by the FDA-OCI, HSI and the Environmental Protection Agency.  The case is being prosecuted by Assistant Deputy Chief John H. Zacharia of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Assistant U.S. Attorneys Jennifer Lowery and Kebharu Smith of the Southern District of Texas.  The U.S. Attorney’s Office of the Central District of California and the CCIPS Cybercrime Lab provided significant assistance.

U.S. CITIZEN PLEADS GUILTY TO SMUGGLING ELECTRONIC COMPONENTS TO RUSSIA

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, June 11, 2015

New Jersey, Man Admits Smuggling $65 Million in Sensitive Electronic Components to Russia’s Ministry of Defense, Federal Security Service

A Mountainside, New Jersey, man admitted his role in an international procurement network that obtained and smuggled more than $65 million worth of electronics from the United States to Russia in violation of export control laws, U.S. Attorney Paul J. Fishman of the District of New Jersey announced.

Alexander Brazhnikov Jr., 36, a naturalized U.S. citizen born in Moscow, pleaded guilty before U.S. District Court Judge William J. Martini of the District of New Jersey, to an information charging him with one count of conspiracy to commit money laundering, one count of conspiracy to smuggle electronics from the United States and one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA).

“As he admitted in court, Brazhnikov was responsible for nearly 2,000 illegal shipments of regulated, sensitive electronics components, many of which wound up in the hands of Russian military and security forces,” said U.S. Attorney Fishman.  “He also admitted going to extraordinary lengths to conceal the nature and destination of the shipments, as well to hide the tens of millions of dollars in illegal proceeds generated by the scheme.  Shutting down schemes like this keep all of us safer.”

“Alexander Brazhnikov Jr. significantly undermined the national security of the U.S. by procuring sophisticated, high-tech electronic components and smuggling them into Russia, thereby enhancing the capabilities of the Russian Intelligence Service and contributing to the modernization of both the Russian Military Service and the Russian Nuclear Weapons Program,” said Special Agent in Charge Richard M. Frankel of the FBI’s Newark Division.  “Now, Brazhnikov must face the consequences of his actions and the full power of U.S.  jurisprudence.”

Brazhnikov Jr. was arrested at his home on June 26, 2014, following a joint investigation by the FBI, the U.S. Department of Commerce (DOC) and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI).  From January 2008 through June 2014, he was the owner, chief executive officer and principal operator of four New Jersey microelectronics export companies, each of which were used in the various conspiracies uncovered by the investigation.  Following his arrest, special agents seized $4,075,237 in proceeds related to the charged offenses, as well as real property and other assets valued at more than $600,000.

“Today's plea represents a collaborative effort among law enforcement agencies,” said Special Agent in Charge Sidney Simon of the DOC, Bureau of Industry and Security, Office of Export Enforcement’s New York Field Office.  “I commend our colleagues at the FBI and Homeland Security Investigations for their efforts.  The Office of Export Enforcement will continue to pursue violators of our export control laws by leveraging our unique authorities to protect national security.”

“HSI will use all the resources at its disposal to prevent sensitive and restricted technology from being exported illegally,” said Acting Special Agent in Charge Kevin Kelly of HSI’s Newark Field Office.  “HSI will do all in its power as the principal enforcer of export controls to ensure that sensitive technology doesn’t fall into the wrong hands.”

According to documents filed in this case and statements made in court: Brazhnikov Jr. and his companies are part of a sophisticated procurement network that has surreptitiously acquired large quantities of license-controlled electronic components from American manufacturers and vendors and exported those items to Russia on behalf of Russian business entities that were authorized to supply them to the Ministry of Defense of the Russian Federation, the Federal Security Service of the Russian Federation  (FSB) and Russian entities involved in the design of nuclear warheads, weapons and tactical platforms.

The defendant conspired with his father, Alexander Brazhnikov Sr., owner of a Moscow-based procurement firm whose agents helped initiate the purchase of electronics components from United States vendors and manufacturers on behalf of the conspirators’ clients in Russia.  Brazhnikov Jr. finalized the purchase and acquisition of the requested components from the various distributors, then repackaged and shipped them to Moscow.  He routinely falsified the true identity of the end-user of the components and the true value of the components in order to avoid filling out required export control forms.  Brazhnikov Jr. purposefully concealed the true destination of the parts that were exported by directing that the shipments be sent to various “shell” addresses in Russia – some of which have been identified as vacant storefronts and apartments – which were established and controlled by the Moscow-based network.  All shipments initially directed to the shell addresses were redirected to a central warehouse controlled by the conspirators’ Moscow-based network.

The funds for the network’s illicit transactions were obtained from the various Russian purchases and initially deposited into one of the conspirators’ primary Russia-based accounts.  Disbursements for purchases were made from that primary Russian account through one or more foreign accounts held by shell corporations  in the British Virgin Islands, Latvia, Marshall Islands, Panama, Ireland, England, United Arab Emirates and Belize and ultimately into one of the defendant’s U.S.-based accounts.  The network’s creation and use of dozens of bank accounts and shell companies abroad was intended to conceal the true sources of funds in Russia, as well as the identities of the various Russian defense contracting firms receiving U.S. electronics components.

The money laundering conspiracy charge to which Brazhnikov Jr. pleaded guilty carries a maximum potential penalty of 20 years in prison and a $500,000 fine.  The smuggling and IEEPA conspiracy charges carry a maximum potential penalty, per count, of five years in prison and a $250,000 fine.  Sentencing is scheduled for Sept. 15, 2015.  Brazhnikov Jr. also agreed to the entry of a forfeiture money judgment of $65 million.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Frankel in Newark; the DOC, under the direction of Special Agent in Charge Simon, New York Field Office; special agents of ICE-HSI, under the direction of Acting Special Agent in Charge Kelly.  He also thanked officers from the Union County, New Jersey, Police Department, under the direction of Captain Chris Debbie; and officers of the Mountainside Police Department, under the direction of Police Chief Allan Attanasio, for their important contributions to the investigation.  The U.S. Justice Department’s Office of International Affairs provided assistance with this case.

The government is represented by Assistant U.S. Attorneys Dennis C. Carletta of the U.S. Attorney’s Office National Security Unit, and Peter Gaeta of the office’s Asset Forfeiture and Money Laundering Unit in Newark.