MASSIVE SEIZURE OF NEW AUTOMATIC WEAPONS ILLEGALLY SMUGGLED BY PRC WEAPONS PRODUCERS
SAN FRANCISCO - Michael J. Yamaguchi, United States Attorney for the Northern District of California; Rollin B. Klink, Special Agent in Charge, United States Customs Service, San Francisco; and Paul Snabel, Special Agent in Charge, Bureau of Alcohol, Tobacco, and Firearms, announced today the largest seizure of fully operational automatic weapons in the history of U. S. law enforcement. The weapons were illegally smuggled into the United States from the People's Republic of China (PRC) during the course of a federal investigation of an alleged arms trafficking conspiracy involving Chinese nationals, Chinese resident aliens, and U. S. citizens, a number of whom represented PRC owned and controlled munitions manufacturing facilities. The illegal importation of the weapons into the United States is in violation of the Presidential Embargo on the importation of weapons and munitions designated on the United States Munitions List, and U. S. law regarding the importation, possession, and sale of illegal weapons.
On March 18, 1996, agents of the United States Customs Service and Bureau of Alcohol, Tobacco, and Firearms seized 2000 AK-47 type fully automatic 7.62mm machine guns. These are military assault weapons commonly used by the military around the world. The weapons, which had both Chinese (Norinco) and Korean markings, had been smuggled into the United States in a container on board the COSCO ship, Empress Phoenix. Included with the weapons were approximately 4000 30-40 round ammunition magazines. It is estimated that the weapons had a street value of more than four million dollars.
The seizure of the weapons was the culmination of a sixteen month investigation of high ranking officials, based in both the United States and the PRC, of POLYTECH and NORINCO, PRC controlled munitions manufacturing corporations. Hammond KU, age 49, a Taiwanese resident alien, residing in Soquel, California, first came under suspicion when information was developed that he had several thousand Chinese manufactured weapons, in crate. labelled POLYTECH and NORINCO, stored in his warehouse in Soquel, California. KU paid federal agent-, acting in an undercover capacity, to illegally import into the United States, more than 20,000 AK 47 rifle bipods.
During the course of the investigation, KU served as a middleman in extensive negotiations concerning illegal arms trafficking between the undercover agents (posing as arms traffickers seeing assault weapons for illegal purposes) and two American based representatives of PRC munitions companies. Bao Ping (Robert) MA, a resident alien, age 44, of Los Altos, California, has been identified as the President of Dynasty Holding Company of Atlanta, Georgia, and the U. S. representative of the Chinese weapons manufacturing company POLYTECH. Richard CHEN, age 65, of Aptos, California, has been identified as the U.S. representative of the Chinese weapons manufacturing company, NORINCO. Through lengthy negotiations with undercover agents MA, CHEN, KU eventually facilitated the sale and importation of the 2000 fully automatic weapons from NORINCO. The shipment of the weapons from the Dalian plant of NORINCO involved the active participation of that firm's PRC based vice president, export manager, and other officials.
On May 22, 1996, Customs and ATF agents arrested seven individuals and executed search warrants at eight locations throughout Northern California. Arrested were: Hammond H. KU, age 49, of San Jose, CA; Richard CHEN, 65, of Aptos, CA; Ching Hua CHEN, 68, of Aptos, CA; Susan Hong LIN, 39, of San Jose, CA; Kenneth Frank TAYLOR, 40, of Carmichael, CA; Linda Wei Lin HUANG, 55, of Atherton, CA.; and Kai Wan (Kevin) WONG, 36, of Hayward, CA. Arrest warrants have been issued for Bao Ping (Robert) MA, 44 of Los Altos, CA.; and six Chinese nationals including several high ranking officials of NORINCO.
A sealed Criminal Complaint was filed in San Francisco charging the aforementioned individuals with Conspiracy, 18 U.S.C. 371; Smuggling, 18 U.S.C. 545; Firearm. Importation Without License, 18 U.S.C. 922(a)(1); Importation and Sale of Firearms With Obliterated Serial Numbers, 18 U.S.C. 922(k); Importation of Firearms, 18 U.S.C. 922 (l); Transfer and Possession of Machine Guns, 18 U.S.C. 922 (o)(1), Receipt of an Illegally Imported Firearms, 26 U.S.C. 5861(k); and Control of Arms Exports and Imports, 22 U.S.C. 2778 (b) (2). The Control of Arms Exports and Imports Act prohibits, except under strict regulations, the importation of weapons designated by the President of the United States through the United States Munitions List.
United States Attorney Michael J. Yamaguchi, noting that the smuggling of the automatic weapons constituted not only a violation of federal law but also a direct challenge to the sovereignty of the United States, praised the efforts of the United States Customs Service in protecting the nation's borders from such intrusions.
The criminal penalties are as follows:
PENALTY SHEET
18 U.S.C. Section 371:..............Five years incarceration ----................................$250,000 fine ----................................3 years supervised release
18 U.S.C. Section 545...............Five years incarceration ----................................$250,000 fine ----................................3 years supervised release
18 U.S.C. Section 922(a)(1):........Five years incarceration ----................................$250,000 fine ----................................3 years supervised release
18 U.S.C. Section 922(k):...........Five years incarceration ----................................$250,000 fine ----................................3 years supervised release
18 U.S.C. Section 922(1):...........Five years incarceration ----................................$250,000 fine ----................................3 years supervised release
18 U.S.C. Section 922(o):...........Ten years incarceration ----................................$250,000 fine ----................................5 years supervised release
26 U.S.C. Section 5681(k):..........Ten years incarceration ----................................$250,000 fine ----................................5 years supervised release
22 U.S.C. Section 2778(b)(2):.......Ten years incarceration ----................................$250,000 fine ----................................5 years supervised release
For further information, please contact Michael J. Yamaguchi, United States Attorney, Northern District of California, at (415) 436-6968; William P. Schaefer, Assistant United States Attorney, Organized Crime Strike Force at (415) 436-6830; or Geoffrey A. Anderson, Assistant United States Attorney, Chief of the Organized
Crime Strike Force at (415) 436-6829.
CITY AND COUNTY OF SAN FRANCISCO
NORTHERN JUDICIAL DISTRICT OF CALIFORNIA
AFFIDAVIT IN SUPPORT OF CRIMINAL COMPLAINT
I, Matthew H. King, being duly sworn, state as follows:
1. I am a Special Agent with the United States Customs Service (U.S. Customs) in San Francisco, California. I have been so employed since November 1992. I am a graduate of the Columbia University Law School. I am also a graduate of the Federal Law Enforcement Training Center, Criminal Investigator School and U.S. Customs Basic Enforcement School. I have received training on methods used by individuals used to smuggle drugs and other merchandise. I am aware of the following information through direct participation and conversations with U.S. Customs Special Agents and Inspectors and Bureau of Alcohol Tobacco and Firearms Agents.
2. I am aware of the following federal statutes concerning firearms and munitions importation and trafficking:
(a) Conspiracy. 18 U.S.C. Section 371
If two or more persons conspire...to commit any offense against the United States...and one or more persons do any act to effect the object of the conspiracy...
(b) Smuggling, 18 U.S.C. 6 545
Whoever fraudulently or knowingly imports or brings into the United States, any merchandise contrary to law, or receives, conceals, buys, sells, or in any manner facilitates the transportation, concealment, or sale of such merchandise after importation, knowing the same to have been imported or brought into the United States... (c) Firearms Importation Without License, 18 U.S.C. Section 922(a)(1)
It shall be unlawful for any person except a licensed importer, licensed manufacturer, or licensed dealer, to engage in the business of importing, manufacturing, or dealing in firearms, or in the course of such business to ship, transport, or receive any firearm in interstate or foreign commerce... (d) Importation and Sale of Firearms With Obliterated Serial Numbers. 18 U.S.C. Section 922(k)
It shall be unlawful for any person knowingly to transport, ship, or receive, in interstate or foreign commerce, any firearm which has had the importers or manufacturer's serial number removed, obliterated, or altered or to possess or receive any firearm which has had the importer's or manufacturer's serial number removed, obliterated, or altered and has, at any time, been shipped or transported in interstate or foreign commerce.
(e) Importation of Firearms. 18 U.S.C. Section 922(1)
Except as provided in section 925(d) of this chapter, it shall be unlawful for any person knowingly to import or bring into the United States or any possession thereof any firearm or ammunition... (f) Transfer and Possession of Machine Gun 18 U.S.C. Section 922(o)(1)
Except as provided in paragraph (2), it shall be unlawful for any person to transfer or possess a machinegun.
(f) Receipt of an Illegally Imported Firearm 26 U.S.C. Section 5861(k)
It shall be unlawful for any person to receive or possess a firearm which has been imported or brought into the United States in violation of section 5844...
(g) Control of Arms Exports and Imports 22 U.S.C. Section 2778(b)(2)
Except as otherwise specifically provided in regulations issued under subsection (a)(1) of this section, no defense articles or defense services designated by the President under subsection (a)(1) of this section may be exported or imported without a license for such export or import, issued in accordance with this chapter and regulations issued under this chapter.
22 U.S.C. Section 2278(a)(1) provides for the designation of a United states Munitions List, to wit, the defense articles and defense services designated by the President of the United States. The 22 CFR Section 121.1 sets forth the United States Munitions List. Category I of that List, designated as Firearms, includes, pursuant to 22 CFR Section 121.9(g), submachine guns and machine guns, defined as "a firearm originally designed to fire, or capable of being fired, fully automatically by a single pull of the trigger."
3. Over approximately the last 16 months, the San Francisco Divisions of the United States Customs Service ("USCS") and the Bureau of Alcohol, Tobacco and Firearms ("ATF") have conducted an investigation into the illegal importation and sale of machine guns and other munitions into the U.S. from the People's Republic of China (PRC) by individuals in the San Francisco Bay Area with direct ties to major military and civilian arms manufacturers in the PRC. During the sixteen month period, the following individuals were identified as allegedly involved in the importation and sale of machine guns and other munitions:
A. Hammond KU: KU is the U.S.based individual who brokered and received the illegal importation of 20,000 Chinese AK-47 bipods through UC-1. He subsequently introduced the idea of smuggling containers of weapons from the PRC to both UC-1 and UC- 2. KU negotiated the separate smuggling conspiracies with the UCs through first MA, then CHEN, and ultimately QI FENG (MA's contact), as well as the PRC-based co-conspirators, which resulted in the seizure of the 2000 AK-47s from China on March 18, 1996.
B. Robert MA: MA was KU's first source for weapons in the first 2500 AK-47 conspiracy. KU received calls from MA concerning disposition of the UC's funds for the first conspiracy. After MA refused to meet the UCs face to face, KU turned to CHEN as a an alternative source. A Beijing bank account for MA's company, DYNASTY HOLDING CO of ATLANTA Inc, was used to receive the 38% down payment for the 2000 gun smuggling venture (approximately $266,500), and received a portion of the final payment after the guns arrived in the U.S.
C. Richard CHEN: On March 29, 1995 KU told the UCs that a separate source for weapons (other than MA) was a Norinco representative in the U.S., Richard CHEN. CHEN was introduced to the UCs on April 11, 1995. He negotiated the sale of 2500 AK-47s through his contacts in Cambodia and China. The UCs sent CHEN $100,000 in June 1995, to his joint company (with GUO, aka KOK KY). At CHEN's direction the funds were subsequently returned to CHEN's bank account in San Jose, CA, and then to the UCs. CHEN ultimately negotiated the transhipment of weapons through the Philippines. CHEN resurfaced on May 15, 1996, after hearing of KU's success in the 2000 gun smuggling venture, and commenced negotiating a deal.
D. Linda HUANG: KU's sister, involved in the importation of the bipods (she put samples on the aircraft for KU). HUANG admitted to UC-1 she was responsible for the sample bipods. Huang used her travel agency to arrange for tickets for KU and CHEN to travel to PRC for negotiations and to receive and send faxes to PRC co-conspirators for KU. HUANG received a part of the 38% down payment at an account used by her travel agency in Hong Kong and wired that portion to Dynasty Holding CO of Atlanta Inc account in Beijing.
E. Susan LIN: LIN assisted KU in communications with the UCs while KU was in the PRC. LIN received shipping documents for the 2000 guns and passed them to UC-1. KU called LIN for assistance in drafting a contract for the CHEN conspiracy (2500 guns), which he subsequently delivered to the UCs.
F. Kevin WONG: WONG is an associate of Hammond KU who assisted in the conversion of weapons to full automatic prior to KU selling them to the UCs. WONG stores automatic weapons at his house for Hammond KU.
G. Kenneth TAYLOR: TAYLOR is an associate of Hammond KU who assisted in the conversion of weapons to fully automatic prior to KU selling them to the UCs. KU asked WONG if he had conversion kits for the AK 47s; to which TAYLOR responded that he had "full auto replacement parts."
H. CHING HUA CHEN, the wife of Richard CHEN, received numerous faxes from Richard CHEN while he was in Cambodia and the PRC negotiating the 2500 gun deal for the UCs, which she would resend to KU. She called KU and received calls from KU in furtherance of the CHEN 2500 gun conspiracy.
I. QI FENG: QI FENG was a PRC-based co-conspirator who brokered the deal between the UCs (through KU) and the PRC NORINCO representatives for the 2000 guns. Originally a MA contact in the PRC in the first conspiracy for 2500 guns, QI FENG resurfaced substantively in negotiations with KU and the UCs for the 2000 guns. QI FENG sent numerous faxes to KU (which were addressed to the UCs) concerning the 2000 gun deal. QI FENG received a portion of the final payment for the 2000 guns at an account in his name.
J. LU YI LUN is next in command at Norinco Dalian with the official title, Assistant President. The President of Norinco Dalian, Mr. (FNU) ZHANG agreed to send LU Yi Lun to negotiate the second deal with the UCs. He requested an invitation letter from the UCs through QI FENG and KU which was sent (and addressed to him).
K. GUO CHENG KUN is an assistant VP at Norinco Dalian. KU identified GUO CHENG KUN as having authorized QIN to deal with QI FENG. An invitation was requested by the PRC co-conspirators for GUO CHENG KUN to negotiate a second deal with the UCs, which was sent and addressed to him. KU gave GUO CHENG KUN's business card to UC-2 at the end of January 1996 (before the weapons arrived). KU met GUO CHENG KUN and described him as the key man who could make the 2000 gun deal occur.
L. QIN QI XIU is the export manager for Norinco Dalian, and allegedly negotiated the exportation of the 2000 guns with QI FENG and KU. KU states she received payment for her participation in the 2000 gun deal. QIN participated in a meeting with the UCs and KU on March 21, 1996, during which the container seal for the weapons was returned to KU and QIN, and during which KU was paid $70,000 in cash. QIN assisted KU in demonstrating how the weapons should be assembled.
M. ZHANG YI: KU stated he met ZHANG YI on May 11, 1995, in a hotel in Beijing. He was CHEN's contact in the PRC for the 2500 gun conspiracy. KU stated ZHANG YI was in charge of exporting weapons from China (no company named). ZHANG YI Facilitated negotiations-between CHEN and KU and the UCs to tranship the weapons through Cambodia or the Philippines. He sent faxes to CHEN with details on completing the deal with the UCs and set the terms of the final offer by the CHEN co-conspirators to smuggle the 2500 weapons to the U.S. through the Philippines.
N. GUO aka KOK KY: alleged PRC government official with ties to the Thai and Cambodian governments. GUO aka KOK KY is CHEN's contact in Cambodia who wired the UC's $100,000 back to CHEN at CHEN's request (to show "good faith" to the UCs). Numerous faxes intercepted from GUO aka KOK KY to CHEN on the mechanics of the 2500 gun conspiracy. Recently met KU and CHEN in Cambodia to negotiate the use of Cambodian End User Certificates to smuggle a second shipment of heavy munitions to the U.S. for the UCs.
4. The Bureau of Alcohol, Tobacco and Firearms have confirmed that none of the following individuals were, during the relevant periods discussed herein, licensed importer, licensed manufacturer, or licensed dealer of firearms, as defined in 18 U.S.C. Sections 921(a)(9)-(11): Hammond KU; Robert MA; Richard CHEN; Ching Hua CHEN; QI FENG; LU YI LUN; GUO CHENG KUN; QIN QI XIU; ZHANG YI; GUO (aka KOK KY). In addition, the Bureau of Alcohol, Tobacco and Firearms, as well as the United States Customs Service have confirmed that the following firearms are included in the United States Munitions List: Norinco 7.62mm sub-machine guns, Type 56; and Norinco 7.62mm sub-machine guns, Type 56-1 (the weapons that were, on March 18, 1996, imported into the United States).
5. In June 1994, a confidential informant ("CI") called a USCS undercover agent ("UC-1") concerning several thousand suspected firearms being stored at a warehouse owned by Hammond KU in Soquel, CA. The CI stated that Hammond KU was using the Federal Firearms License ("FFL") of Gerry GOODMAN. The CI showed UC-1 crates, allegedly used in the transport and storage of the weapons, marked POLYTECH and NORINCO. POLYTECH and NORINCO are state-controlled companies in the Peoples Republic of China (PRC) which manufacture munitions. The CI informed Hammond Ku that UC1 was able to import items into the United States in a manner that bypassed United States Customs.
6. On December 1, 1994, Hammond KU, the CI, and UC-1 met. In that consensually recorded meeting, Hammond Ku asked UC-1 about surreptitiously importing a small sample shipment of embargoed firearm parts from China via commercial air. KU requested that the sample avoid scrutiny by U.S. Customs, because of a Presidential Arms Embargo. KU agreed to pay $500.
7. On December 14, 1994, an unaccompanied suitcase with AK47 bipods from the PRC arrived at SFIA on United Airlines. The suitcase was marked with red tape as had been arranged by Hammond KU. The baggage tag indicated the name Linda HUANG. HUANG has since been identified as the sister of Hammond KU. HUANG was taken off the flight in the PRC but her bags were allowed to continue unaccompanied to the United States. As had been prearranged with KU, the suitcase was placed in a locker at the airport. KU picked up the suitcase and left $500 as payment for UC-1 under a potted tree.
8. On February 2, 1995, Hammond KU met UC-1 in Burlingame, CA to discuss a $20,000 fee for UC-1 facilitating the entry of a containerized shipment of 20,000 AK-47 bipods into the U.S. from the PRC. On February 13, 1995, UC-1 met KU in San Francisco, CA. KU paid UC-1 $13,500 for the UC's services in arranging the entry of the 20,000 bipods.
9. On February 14, 1995, a COSCO container (COSCO seal # 001246) arrived in Oakland and was X-rayed at the USCS in San Leandro, CA. The x-ray and search revealed 400 boxes each containing 50 new bipods, marked "Made in China". The shipping documents and invoices reflected "fishing rod racks." On February 15, 1995, UC-1 delivered the 20,000 bipods to KU's warehouse in Soquel. KU paid UC-1 an additional $15,000 cash for his services. Gerry GOODMAN helped unload the truck.
10. On February 22, 1995, Hammond KU met UC-1 in Sunnyvale, CA and furnished UC-1 with one (1) AK-47S, 7.62x39mm machine gun, serial # 9992289. The weapon was manufactured by "B" West, Tucson, AZ. KU stated that the price would be $1000.
11. On February 23, 1995, the CI met with KU in Soquel, CA. In this recorded meeting, KU told the CI that he wanted to meet the CI's "contact" in Florida in connection with the sale of two hundred machine guns. The "contact" was an ATF undercover agent ("UC-2 ").
12. On February 24, 1995, UC-1 and KU discussed obtaining additional (domestic) automatic weapons. At KU's request, UC-1 faxed Susie LIN a sheet containing the code words to be used in future orders of weapons (e.g. Apples = automatic weapons; Alpha King = AK-47s; Michael Gunn = Machine guns; Poppers = grenades).
13. On March 1, 1995, UC-2 met KU who told UC-2 that he had access to 200-300 machine guns. KU said his source could provide 20-30 at a time, but that the real way to make money was to bring in a cargo container of AK-47 machine guns from China. KU stated that a container would hold 1200 guns. UC-2 asked if KU had contacts for smuggling the container into the U.S. and KU replied that he had smuggling contacts (referring to UC-1).
14. During this meeting, KU showed UC-2 an SKS 7.62x39mm semi-automatic rifle and explained in detail how to convert the firearm to full automatic. KU stated that he could obtain a fully automatic weapon for UC-2. Later that evening, KU sold UC-2 a Polytech, model AKS-762, 7.62x39mm Machine gun, serial # PW85- 762-06977 for $1,000. The weapon was tested by ATF firearms technology branch and found to be fully automatic.
15. On March 7, 1995, KU met with UC-1 in Sunnyvale, CA. During this meeting KU sold UC-1 one SWD, Inc., model M-11, 9mm machine gun, serial # 89-0004970 for $1000. The weapon was tested by ATF firearms technology branch and found to be fully automatic. KU stated to UC-1 that he had a buyer in Florida (referring to UC-2) interested in purchasing a container of 1200 machine guns from China. KU told UC-1 that he too should consider purchasing a container of 1200 guns, because moving multi- container loads of weapons was the only way to make serious money. Later that night, UC-1 again met KU who sold UC-1 one (1) Sterling, 9mm machine gun, serial number KR26684, for $1000. The weapon was tested by ATF firearms technology branch and found to be fully automatic.
16. On March 16, 1995, UC-2 met KU in South San Francisco. KU stated he had access to 300,000 AK-47s. UC-2 stated that his people were interested in purchasing one container (1200) AK-47s. UC-2 stated he could arrange to put 20-25% in escrow in a U.S. bank, but that the price could not be more that $500 per gun. KU said he would deliver these terms to his associates in China.
17. Later the same day, KU met UC-2 and sold him one MK Arms, Inc., Model 760, 9mm machine gun, serial # R532 from a black canvas bag. That weapon field tested as fully automatic. KU and UC-2 then discussed the container of 1200 AK-47s for sale. KU told UC-2 that KU wanted to introduce him to UC-1 so they could mutually smuggle two containers of guns into the U.S.
18. On March 23, 1995, KU and UC-1 met in San Jose, CA. and discussed concerns over the importation of automatic weapons from China. KU agreed to cut the price to $500 per weapon and said the PRC government knew what was going on. KU said Robert MA was his partner in this deal. UC-1 told KU that he had renewed his UC company (Dynasty Import and Export) expressly to import the weapons at KU's request. This is the same company used to facilitate the smuggling of the 20,000 bipods.
19. On March 29, 1995, KU met with UC-1 in Burlingame, CA. The purpose of the meeting was for KU to introduce UC-1, a facilitator in "smuggling" weapons into the U.S., with UC-2, a purported investor in illegal arms from Florida. During the meeting, KU stated that it was his partner, Robert MA's, plan to smuggle containers of automatic weapons into the U.S. KU explained that MA was the president of Polytech, USA and had access to these new Chinese guns. Records checks with the California Secretary of State confirm that MA is the President of Poly USA, also dba Dynasty Holding Co. of Atlanta. KU explained that the weapons were controlled by the Chinese government. KU stated that the guns would be valued at $525 apiece, 1250 guns to a container, for two containers. UC-2 then wrote on a napkin several questions as to the mechanics of the smuggle which KU agreed to ask MA. KU engaged in a telephone conversation with an individual named "Richard" (later identified as Richard CHEN), the Norinco representative. KU stated that CHEN advised that he could assist in importing the guns if MA backed out of this deal.
20. On April 11, 1995, KU and the UCs met in South San Francisco, CA. KU introduced Richard CHEN but called him "Lee." KU said CHEN represented Norinco in the PRC. During the meeting, KU produced catalogs of various weapons from small arms to heavy weapons and stated that these were the type of weapons available through CHEN. KU said the weapons could be transhipped through Cambodia where the paperwork would be changed to reflect "tools". KU said CHEN had a contact named GUO (aka KOK KY) with important contacts in Cambodia. CHEN and KU said they wanted to work out an agreement to import two containers (2400-2500 weapons).
21. On May 16, 1995, a Title III interception of wire and electronic communications was authorized for phones and faxes associated with KU, MA, CHEN and other targets.
22. On May 17, 1995, the UCs met KU who related information about two meetings he had attended in Beijing with various co- conspirators concerning smuggling two containers of automatic weapons from China to the U.S. KU stated he had met GUO (aka KOK KY) (identified by KU as a government official with ties to the Cambodian and Thai governments), and ZHANG YI. KU stated that ZHANG YI was in charge of exporting the weapons. KU stated that because of the Oklahoma City bombing and the resulting increased security, the PRC co-conspirators wanted to tranship the weapons through Bangkok, as they had connections with officials in Thailand. KU stated that the Chinese government knew exactly what was going on.
23. During the meeting, UC-2 showed KU a wire transfer of $400,000 to a bank account in Hong Kong. That "flashroll" was deposited into an undercover account in anticipation of the meeting. Later, KU called a male in China, QI FENG, and told him that the money had been wired to Hong Kong (referring to the "flashroll"). KU told QI FENG that "he" must know that they are very serious in that the money had arrived. KU added that HA said that QI FENG needed to give KU an account number. QI FENG agreed to fax the information to a facsimile number belonging to Linda HUANG.
24. On May 18, 1995, the UCs met KU in South San Francisco. During the meeting KU stated that his co-conspirators in China would fax KU a contract with Chinese signatories to the smuggling venture. Later that day, KU left a message for MA, in which he asked that MA call him at his convenience, as it concerned the "Lao Hei" matter. The Lao Hei is a Chinese expression for "Black Guy", or organized crime figure, used by the targets as a name for UC-2.
25. On May 21, 1995, KU called Kevin WONG and said he was on his way to see him and that he had the cash right now. WONG told KU to come to his mother's house in Mountain View, California, the next morning. WONG then gave KU his home phone and pager number. Subscriber checks for that number reflect an address located at 23039 Klamath Rd., Hayward, CA. The pager number is identical to pages KU made in front of the UC's concerning obtaining automatic weapons from his source. A check of California DMV records reflect that Kevin WONG lives at 23039 Klamath Rd., Hayward, CA, the same address as the subscriber for the phone number WONG gave KU. KU has told the UCs that "KEVIN" was his source for automatic weapons.
26. On May 22, 1995, surveillance agents observed KU arrive at 864 Hope Street, Mountain View CA. A few minutes later KU was observed departing the Hope street address, and then arrive at and enter 340 El Camino, Atherton, California, the address for Linda HUANG dba as Air and Sea Travel. Surveillance agents followed KU to Burlingame, South San Francisco, where KU met an asian male, driving a truck registered to Kevin WONG. Kevin WONG took a black box from his car, gave it to KU, who placed it in his trunk. During the meeting between KU and WONG, UC-2 called KU and asked how the "toy" (a machine gun that KU had agreed to provide UC-2) for today looked; to which KU responded, "very good." The following day, on May 23, 1995, KU told UC-2 that Kevin was doing the conversion for the automatic weapons because he was very good at it. In response to the question of whether Kevin WONG had done the conversions on the other weapons delivered by KU, KU answered yes. KU also offered to take UC-2 to the machine shop where another KU associate converts some of the weapons to fully automatic weapons. On May 31, 1995, KU met UC-2 in South San Francisco and sold him, for $800.00, one MAK 90 machine gun, Sporter AK 47 type, serial number 9308155. KU stated that WONG had done the conversion from semi-automatic to fully automatic.
27. On May 23, 1995, UC-1 called KU who said that he was persuading MA to the table to meet the UCs. KU added that they should not refer to the weapons by name, rather as "toys". KU concluded by saying that China was ready and that the money was in Hong Kong (referring to a UC account with $400,000) so that nothing was standing in their way. KU added that CHEN was not totally out of the picture, and that if they agreed on another port (outside of the U.S. through which to tranship the weapons) it might work, but that MA was ready. KU said he has not told CHEN it was off, as they did not know KU was playing one off the other.
28. On May 24, 1995, Hammond KU spoke with Kenneth TAYLOR and asked if he had the AK conversions kits (kits to convert AK 47s from semi-automatic to fully automatic). TAYLOR stated that he did not have the conversion kits but that he had full auto replacement parts. TAYLOR also said that he had "bolt carriers" and agreed to provide a copule of sets to KU. TAYLOR provided KU with both his home telephone number (which Pacific Bell confirmed was subsrcibed[sic] to by Kenneth TAYLOR, 5521 Loucst Avenue, Carmichael, California)) and directions on how to get to his house which was located "on Locust" in the Sacramento area (as was the telephone number). Approximately one-half hour after the conversation between KU and TAYLOR, KU told UC-2 that he was on his way to "Sacramento" to finish the A's (believed to be referring to AK-47s) with KEN. Previously, KU had told the UCs that "KEN" was a contact for the conversion of weapons to fully automatic. On May 25, 1996, KU and UC-2 spoke about the two "items" (machine guns that were to be delivered by KU to the UCs). UC-2 asked KU if KEN could supply grenades, to which KU stated that he would call KEN and ask. On May 30, 1995, KU spoke with Kevin WONG about the pickup of a weapon from WONG's house. KU said that he had gone to KEN's house and picked up the "thing" (a weapon part) and asked WONG if he would show KU how it worked. KU stated that he had the complete set (believed to be the parts necessary to convert semi-automatic weapons to full automatic weapons) and that he needed instructions.
29. On May 30, 1995, KU sent a fax to UC-1. That fax detailed a Bank of China address and account number for CHINA NORTH INDUSTRIES, and included "The price for per unit" (sic) was $125. KU wrote that he was working with "them" (Chinese coconspirators) and that he was trying to get the lowest price. KU said he would talk to MA today to nail down the details of a Letter of Credit necessary for the importation of weapons.
30. On May 31, 1995, KU received a call from MA. KU said that he had a deal with UC-2 to write "tools" (on the Letter of Credit versus actually listing "weapons" on the Letter of Credit). In an immediate second call with MA, KU told MA he was meeting UC-2 that afternoon, and that he would call MA after the meeting was over. KU met the UCs who showed KU a proposed Letter of Intent between the buyers, (DYNASTY IMPORT/EXPORT - the UC company) and the sellers (CHINA NORTH INDUSTRIES - the apparent seller of the weapons). The Letter of Intent set forth that CHINA NORTH INDUSTRIES agreed to sell the UCs 2400 AK-47 full automatic rifles at the price of $125 per unit. The letter stated that to preserve confidentiality, all future correspondence would substitute the word "SLEDGEHAMMERS" for the word "AK-47s". Upon acceptance of the Letter of Intent by the sellers, and receipt of all shipping documents by the buyer, $50,000 would be released to CHINA NORTH INDUSTRIES, and the balance of $250,000 (balance due on the actual price of the guns) would be transferred to the seller by a Letter of Credit. KU agreed to the Letter of Intent and said he would fax it to China after the meeting. KU stated he was leaving for China on or about June 20, 1995, and would personally inspect the loading of the weapons. KU provided UC-1 a catalog from POLYTECH which listed various Chinese weapons and munitions for sale, including surface to air missiles, tanks, anti-personnel mines, aircraft and other munitions.
31. Later that day, KU spoke with CHBN and said the UCs deposited money in Hong Kong. KU said he would meet CHEN and show him the line of credit and discuss it with him.
32. On June 1, 1995, KU called UC-2 and told him that CHEN wanted to meet him that evening. KU related that CHEN said he had talked with his people who wanted to do the same arms importation as MA. KU stated that CHEN now said he would send the weapons direct from China to the U.S. for the same price. KU said he had shown CHEN the Letter of Intent. KU said he would rather go through CHEN than MA. CHEN told KU that ZHANG YI contacted CHEN and said that they could do the deal. That evening, the UCs met KU and CHEN. CHEN laid out his plan to put weapons on the water in the next ten days, indicating that a company in Cambodia would be used to facilitate the shipment.
33. On June 2, 1995, UC-2 called KU and asked if the company in Cambodia could protect the funds. KU said the funds would be safe because he and CHEN would travel to Cambodia in the next week and set up a shell corporation. KU told UC-2 that on May 11, 1995, he met ZHANG YI and GUO (aka KOK KY) in Beijing concerning this deal. KU also told the UC-2 that Green Land Co. was a shell corporation which the Chinese co-conspirators have used before to ship weapons. KU then called CHEN and discussed starting a company in Cambodia. KU said it would be better if they could use Green Land Co. CHEN replied that Green Land Co. was not old enough to establish a credit line with the Cambodian bank, and told KU to tell UC-2 that they might need two letters of credit.
34. On June 4, 1995, CHEN called KU and said he had just spoken with GUO (aka KOK KY). CHEN stated that GUO (aka KOK KY) said he would not release the goods (weapons) unless he sees the money; and that GUO (aka KOK KY) would not trust the Letter of Credit.
35. On June 5, 1995, UC-2 called KU who said he and CHEN sent a fax to China and were not happy with the reply from China. KU said they were not ready, that the factory needed to be paid before the weapons could be shipped. KU said he told CHEN that he needed to call GUO (aka KOK KY) to clarify the matter.
36. On June 6, 1995, UC-2 called KU who said CHEN told him he had spoken with GUO (aka KOK KY) in detail. KU said they were dealing with NORINCO in China, and that the factory wanted a guarantee before shipping the weapons.
37. On June 11, 1995, CHEN called KU to discuss their planned trip to the PRC. KU asked if they had to go to Cambodia first, and CHEN said they needed both their names to set up the shell company. CHEN said they should set up a joint account for the company and GUO (aka KOK KY) could join in. CHEN said they would go to Beijing after Cambodia and then call UC-2 to give him the account number to have his money wired over. CHEN told KU that once KU decided on the dates, CHEN would fax the information to GUO (aka KOK KY) so GUO (aka KOK KY) could meet them in Cambodia. Then they could fly to Beijing together. CHEN said they would wire the UCs' money to ZHANG YI from Cambodia. Once in the port of Tientsin with ZHANG YI they would give the money to him once they see the "goods" (weapons) loaded on board the ship. KU said he would have his sister (Linda HUANG) arrange the itinerary.
38. On June 13, 1995, UC-2 called KU and agreed to the "new" arrangement to front the total cost ($100,000 representing the actual cost of the guns and profits for the co-conspirators) of the 300 gun deal. KU agreed that the next deal would be much larger, and could include heavy weapons and "shoulder fired things" (rocket launchers.) UC-2 stated they would require a contract, and KU said there was a standard contract that the Chinese co-conspirators had. KU agreed to send a video (of the weapons being loaded on the ship in the Chinese port (as previously discussed in prior negotiations) and other shipping documents. KU said the money should be sent to the Cambodian account.
39. On June 21, 1995, CHEN and KU met the UCs in Sunnyvale, CA. During the meeting KU and CHEN told the UCs that the deal was confirmed for 300 fully automatic AK-47s. KU said that he and CHEN would fly to Cambodia by June 30, 1995, where they would obtain assumed Cambodian names and Cambodian passports. In Cambodia they would open their account to receive the $100,000 from the UCs, and in return would send the UCs shipping documents, videotape of the weapons being loaded in China and photos. They agreed that a larger shipment would be accomplished in the future, at which time the Cambodian account would be closed, as would the UC company in the U.S. Immediately after leaving the meeting with the UCs, KU called HUANG and asked her to book two tickets leaving in about one week.
40. On June 21, 1995, KU called QI FENG in China. QI FENG has been identified as MA's contact in China, who was an export manager for BLT (Bao Li Technologies, or POLYTECH).
41. On June 21, 1995, KU called Susie LIN and asked for help in drafting a contract to fax to China that night. Later that night, KU called the UCs and said he would be at the hotel before midnight to deliver the contract. On June 22, 1995, shortly after midnight, KU provided the UCs with a proposed contract which set forth the actual terms of the deal which had been previously agreed. The contract set forth that the "sample" order was for 300 AK-47 full auto rifles at $500 a piece, for a total of $150,000. A second order will be for $350 per "unit" (weapon), and the difference between the first order and the second will be refunded to the buyer, DYNASTY IMPORT & EXPORT, (the UC company). The contract also set forth that the seller will guarantee delivery of the weapons from the port in China, for delivery within 21 days.
42. On June 22, 1995, QI FENG called KU who asked QI FENG to fax "it". KU said he was coming at the end of the month, and that the money would be in the account tomorrow. KU asked if QI FENG had the shoulder fired 62 mm rocket launchers (which the UCs asked if KU could provide). QI FENG said in China they called it the "Type 40" for attacking tanks, and said he had it. KU said he had a 20' container but that only half would be filled, and asked if QI FENG needed something shipped over from Tientsin to San Francisco. QI FENG said he would see if something could be shipped, and that there was something for MA. KU told QI FENG to fill up the empty space and KU would separate the UCs' weapons from the other items. QI FENG said MA definitely had items in Beijing for shipment. Later that day, QI FENG called KU who said that QI FENG should use Linda HUANG's fax. A short time later, Linda HUANG called KU and said someone tried to fax something but that the paper was out. Later, HUANG called KU at and said there was a fax from NORINCO with a lot of details related to a contract.
43. On June 28, 1995, KU called CHEN who said that he sent a fax to KU concerning information CHEN received from GUO (aka KOK KY) regarding his account in Cambodia. They also discussed that ZHANG YI promised to get the deal done. Later, KU met the UCs near San Jose, and provided the UCs with bank account information, as follows: Bangkok Bank Public Co., Phnom Penh Branch, 26 Norodom Boulevard, Kingdom of Cambodia, Mr. Tan MENG, Acct # 0819-142794-402. Based upon wire interceptions, MENG is CHEN's Chinese name. KU also provided the UCs with a contract, signed by KU and CHEN which set forth that the buyer, DYNASTY Import & Export (the UC company) agreed with the seller, GREENLAND Corp. (a front company used in the past by the Chinese co-conspirators to smuggle weapons) to purchase a "sample" order of 300 AK-47 fully automatic rifles for $500 each. The shipping documents were to be given to the UCs on or about July 7, 1995, by Linda HUANG on her return from Beijing. During the meeting, KU showed two faxes to the UCs. KU said the faxes were between CHEN and GUO (aka KOK KY). KU read the faxes to the UCs which stated that the weapons should be shipped immediately upon receipt of the weapons, and that a second order for approximately 8-10 containers could be accomplished in mid-August. The money would be delivered to ZHANG YI in China. GUO (aka KOK KY) stated in the fax that one hand would take the money and the other would take the merchandise. KU added that the GREENLAND Co. account in Cambodia was for CHEN and GUO (aka KOK KY).
44. On June 30, 1995, KU sent UC-1 a fax which was a translation of a fax KU received from CHEN. That fax had originally been sent by ZHANG YI to GUO (aka KOK KY) and set forth the procedures to ship the weapons. It stated that it would take approximately 30 days to approve the paperwork. If the UCs could accept that, the shipping date would be arranged with COSCO and the merchandise (weapons) would be loaded on the ship.
45. On July 5, 1995, UC-1 received a fax from KU in China which stated that he was in Beijing and that he was going to the warehouse to take photos of the weapons. The same day, UC-2 called KU in Beijing, China. KU stated he had been escorted to the arsenal an hour from Beijing, where he had been escorted by an unidentified individual who was responsible for exporting arms all over the world with the Chinese government. KU attempted to video the warehouse but was prevented from doing so. He was allowed to video the "merchandise" (weapons) which KU did. KU said the video would be delivered to HUANG. KU told UC-2 to contact her at her home. During the conversation KU said he spoke with CHEN in Thailand who told KU that the $100,000 (Purchase of Evidence [POE] funds) had arrived in Cambodia.
46. On July 6, 1995, UC-2 called KU in Beijing. KU told UC-2 that the merchandise (weapons) would be shipped from China to the "C" country (Cambodia). KU said the corporation in Cambodia would handle the transaction and would create paperwork to have the weapons transhipped to the U.S. and that the guns should arrive in 45 days.
47. On July 10, 1995, KU met UC-1 and UC-2 in Sunnyvale. Lili JI arrived with KU and sat in his van during the meeting. KU stated that China had full knowledge of this deal but that they were trying to insulate themselves. They were however assisting in the paperwork for this deal. KU said the weapons would be transhipped through Cambodia, or possibly Thailand. KU added that his first choice for transhipment was Bangkok because GUO (aka KOK KY) had strong contacts there. KU added that ZHANG YI had changed the original contract to reflect "machine gun parts" versus fully automatic machineguns. KU said that a second, larger order for heavy weapons was no problem. KU said ZHANG YI used to be with the Chinese government with responsibility for all exports. ZHANG YI now runs a company with close government ties. In that capacity ZHANG YI takes the guns from the munitions warehouse to the ship.
48. On July 12, 1995, a fax addressed to GUO (aka KOK KY) was intercepted over CHEN's fax sent from Cambodia. That fax confirmed a call from July 11, 1995, listing specifications, packaging dimensions and prices for what your affiant believes are weapons previously ordered by UC-1 through KU. The fax also discussed a face to face meeting in China or Hong Kong to resolve issues. An identical fax was sent from CHEN's fax to a fax subscribed to by Lili JI.
49. On July 13, 1995, CHEN received a fax addressed to GUO (aka KOK KY) from ZHANG YI. The identifier at the head of the fax reflected "Green Land Co". ZHANG YI wrote that the price for "item 1" (not specified) was incorrect and the seller wants to include "item 2" in the deal, otherwise they are not interested in doing business. It is believed that the fax pertains to the proposal of the subjects to ship 2400 guns, instead of 300. The identical fax was sent to Lili JI's fax. An outgoing fax was sent to the KU fax from CHEN's fax addressed to GUO (aka KOK KY) and ZHANG YI. The fax urged GUO (aka KOK KY) and ZHANG YI to do the 300 weapon "sample" and that the future big orders would come.
50. On July 14, 1995, KU called UC-2 and said he had received a fax from ZHANG YI. ZHANG YI stated that the guns were on the water, due in Cambodia or Thailand within three to four days. KU relayed that the Chinese co-conspirators knew the UCs had funding for 2400 weapons and had therefore sent 2400 guns to Cambodia versus 300 guns. ZHANG YI said the risk for 300 was the same for 2400 guns. ZHANG YI therefore made the following proposal: (1) The UC(s) to go to Cambodia or Thailand to view the 2400 guns; (2) If the UCs were satisfied, the 2400 weapons would be loaded onto shipping for the U.S.; (3) at the departure of the weapons from the foreign port to the U.S., the remainder of the balance from the UCs would be due. UC-2 made the following counter proposal: the Chinese could therefore send 300 of the weapons to the U.S. and warehouse the 2100 remaining weapons. Upon receipt of the 300 guns in the U.S. the UCs would immediately fly to Cambodia (or Thailand) and negotiate payment for the remaining 2100 guns. KU said he would fax ZHANG YI immediately.
51. On July 16, 1995, UC-2 called KU who said he was trying to convince ZHANG YI and CHEN that they should front the money for the extra 2100 guns, and send the entire 2400 weapons (in two containers).
52. On July 29, 1995, at approximately 6:18 p.m., UC-2 called KU and said he was trying to fax some paperwork (related to questions the UCs had concerning the shipment of the 2500 weapons). KU told UC-2 to send the fax to one of two fax machines subscribed to by HUANG.
53. On August 1, 1995, the UCs met KU and CHEN in Sunnyvale, CA. During that meeting, CHEN and KU called China and spoke with ZHANG YI. KU related that ZHANG YI stated that the factory price for the weapons, minus profits to co-conspirators, was approximately $400,000. In that the UCs had already paid $100,000, another $300,000 would be required to ship the weapons to the U.S. Once the weapons arrived in the U.S. the remainder of the funds due (for profits) would be approximately $475,000, to be split four ways between GUO (aka KOK KY), ZHANG YI, KU and CHEN.
54. On August 2, 1995, CHEN received a partial fax from ZHANG YI, which stated that when the shipper had the merchandise ready and the export procedures had been completed, the buyer would bring the remaining 50% of the funds (the second $100,000) in a cashier's check to the final port of exportation. Upon completion of the inspection of the merchandise, the buyer would deliver the remaining funds ($200,000) to the seller. The seller would then ensure delivery to the U.S. CHEN called KU and said that ZHANG YI wanted them to go to Beijing to discuss the issue.
55. On August 6, 1995, at approximately 4:26 p.m., CHEN sent a fax to his wife, CHING HUA CHEN, at his residence. CHEN stated he was in Bangkok, and that GUO (aka KOK KY) would be in Thailand on August 8, 1995. The fax said that GUO (aka KOK KY) sent a fax to KU telling him to be in Beijing on August 10, 1995, and to bring the $100,000. CHEN wrote that the transportation fees for the Cambodian government was about $40-$50,000. The fax went on to warn CHING HUA CHEN to be careful of the phone lines at home, and to check around the area.
56. On August 7, 1995, CHING HUA CHEN sent a fax to CHEN from her residence. CHING HUA CHEN stated when CHEN saw GUO (aka KOK KY) he should ask him about the money in Cambodia and to find out the current situation (referring to the weapons deal).
57. On August 8, 1995, UC-2 told KU that he had talked with his superiors who said that an additional $100,000 looked to be no problem, contingent on a video of the weapons at the tranship port. KU said that they would take care of that. On the same day, CHEN sent a fax to CHING HUA CHEN. The fax instructed CHING HUA CHEN to tell KU they have been waiting for him. CHEN added that the Cambodian government had everything ready and that KU could send a reply fax to GUO (aka KOK KY). CHEN sent a second fax to CHING HUA CHEN telling her to tell KU to do everything he could to get to Beijing by August 10, 1995. If KU arrived late, the deal was off, and there are a lot of details to be discussed. CHING HUA CHEN called KU to ask him if the deal was going or not. KU told CHING HUA CHEN to tell CHEN to make a video to give the UCs, so that the UCs would release the money. KU then asked Linda HUANG to reserve a plane ticket to go to China immediately.
58. On August 14, 1995, KU sent a fax to UC-1 which detailed the latest deal as he understood it from information which he allegedly received from China. That fax set forth that the seller (the chinese co-conspirators) were willing to "cooperate" despite the (small) volume of the order (2500 automatic weapons). The fax stated that an additional $150,000 was required to be sent to the same Cambodian account as the $100,000 sent by the UCs in June 1995.
59. On August 15, 1995, at approximately 10:24 a.m., UC-2 called KU and said his people were astounded by the 180 degree turn of events (referring to a fax from KU to UC-1, wherein KU wrote that the Chinese co-conspirators wanted to ship the weapons direct to the U.S., if the UCs went to China to inspect the weapons, or the guns could be transhipped through a port in Africa). UC-2 said that sending $400,000 without even seeing the guns was asking a lot of trust on his part. UC-2 said he wanted to deal directly with CHEN. KU said he would call back with CHEN's number in China. KU called CHING HUA CHEN and said that UC-2 was still demanding a guarantee that the guns would in fact be shipped. KU said he would try to reach CHEN in Tianjin.
60. On August 17, 1995, a fax was sent through an undercover entity in Miami, FL, to CHEN in Beijing. That fax was directed at ZHANG YI through CHEN. As detailed above, the fax addressed concerns the UCs had about the Chinese co-conspirators changing the agreement established in substance during the August 1, 1995, meeting with CHEN and KU.
61. On August 18, 1995, CHEN sent a fax to CHING HUA CHEN, which stated that he discussed the "matter" in Beijing, and a deal was still possible.
62. On September 6, 1995, CHEN and KU met the UCs in Sunnyvale, CA. Before CHEN arrived, KU said that Robert MA needed to smuggle into the U.S. a 20 foot container with assorted scopes, ring mounts, and drum magazines for the AK-47 rifle. KU asked if UC-1 could handle the arrangements to smuggle in the goods. KU added that he desired to smuggle 300 fully automatic AK-47 "kits" in with MA's container. KU said the container was ready to sail and could be here within 28 days. When CHEN arrived at the meeting, he essentially reiterated the same deal as had been proposed before his departure to China. The UCs requested a meeting overseas with the other Chinese conspirators and KU indicated he would attempt to arrange it. During the meeting, CHEN and the UCs called ZHANG YI in China, who allegedly said the deal would remain as it had been expressed.
63. On September 7, 1995, CHEN sent GUO (aka KOK KY) a fax which said, in substance, that pertaining to the meeting in Beijing with ZHANG YI, CHEN met the UCs that day, who disagreed with ZHANG YI's suggestion as to how the deal would be completed. CHEN directed GUO (aka KOK KY) to return the UC's $100,000 (sent in June to Cambodia by the UCs) including interest. This would demonstrate that the Chinese were not "gobbling up" (stealing) the UC's funds. CHEN said he knew that they (the UCs) would not give the deal up because they would make a large profit from this deal. By returning the money, CHEN would show the UCs that this deal did not mean that much to them. CHEN asked GUO (aka KOK KY) to wire the money to Omni bank, 1688 Hostetter Road, San Jose, CA, Branch no. 122237858, CHING HUA CHEN, Acct. no. 877005870.
64. On September 8, 1995, CHEN received a fax from GUO (aka KOK KY) stating that he received CHEN's fax. GUO (aka KOK KY) said he took $100,000 to the bank to do an electronic transfer, but that he could not remit it because CHEN had omitted the bank's name from his fax. GUO (aka KOK KY) concluded by directing CHEN to send a return fax immediately so that he could transfer the money back. The next day, CHEN sent a second fax to GUO (aka KOK KY).
65. On September 10, 1995, a fax was received at a UC fax machine in Miami, FL (which has been represented to KU and CHEN as belonging to UC-2). That fax had a cover sheet addressed to UC-2 from KU. It is identical to the fax resent from CHEN to KU and which was sent originally by ZHANG YI. ZHANG YI said two issues were to be addressed: 1) Open a bank account at either Hong Kong-China bank or the Hong Kong branch of China Banking Group; 2) regarding the "type #47" (AK-47s) there were three additional "modified" models beside the basic model. ZHANG YI concluded that after the contract was signed (the goods) would be in CHEN/KU's hands within 35-45 days.
66. On September 11, 1995, UC-2 and KU discussed the container with the "kits" shared by MA and KU. KU said the container would contain 300 disassembled "units" (AK-47s minus the barrels). The same day, a fax was received at the CHEN fax which was a copy of an application for a wire transfer to CHING HUA CHEN at the Omni Bank, San Jose, CA, acct no. 87705870, for $100,000. A note was handwritten on the corner of the fax from GUO (aka KOK KY) to CHEN which stated that GUO (aka KOK KY) had gone to the bank to get the receipt (for the wire transfer). KU then called UC-2 and stated that CHEN had the UC's $100,000 wired back from Cambodia to an account in San Jose. KU said the $100,000 would be kept in San Jose, and would eventually be wired back to Hong Kong for this deal.
67. On September 13, 1995, KU told UC-1 that the paperwork for MA's container would be ready soon. UC-1 asked if KU had heard about the possible government "shutdown" in the news, and KU exclaimed, "Windows 95!" (referring to a window of opportunity to move the container through U.S. Customs). KU said it was great and he would have to get things moving (referring to moving the MA container).
68. On September 27, 1995, KU met the UCs in Sunnyvale, CA, to discuss the MA container. KU said the container would contain approximately $40,000 of assorted (embargoed) Chinese weapons parts (e.g. scope mounts and drum magazines). KU said that the MA container would also have 100 fully automatic AK-47s on board. He would charge the UCs the going street price for those weapons. KU asked if he could use the phone to call Qi FENG in China. KU spoke with Qi FENG at length. KU then told the UCs that the weapons would be complete except for the barrels, which are controlled in China. Qi FENG told KU that he could put the guns on the water as early as October 1 or 2, 1995, and that it would take approximately 28 days to reach the Bay area. KU said Qi FENG was currently arranging space on COSCO. When CHEN arrived at the meeting, they discussed the 2500 gun deal. CHEN gave the UCs a check for $100,000, and reiterated that he was doing so as a sign of good faith that he was not cheating the UCs. CHEN said ZHANG YI was ready to do the deal within 30-45 days.
69. On October 1, 1995, UC-2 spoke with KU who said he was to receive a call from an unidentified female, subsequently identified as QI XIU QIN (and subsequently confirmed to be the export manager for NORINCO Dalian) who was to give all the shipping documents to KU for the UCs to facilitate the entry of the MA container. As to the ZHANG YI deal, KU said he had spoken with CHEN who said that he had spoken with GUO (aka KOK KY). KU claimed to have sent a fax to ZHANG YI which requested both a bank account for the UCs to send $250,000 and the details of the shipment set out in writing. KU said he received a fax from CHEN with the bank account information for receipt of the $250,000 by the Chinese co-conspirators.
70. On October 6, 1995, UC-2 spoke with KU who said he had spoken with QI FENG who wanted to know if KU had received the paperwork, from QI XIU QIN (hereafter QIN), regarding the smuggling deal. KU confirmed that QIN was also MA's contact for his deal. Later that day, CHEN called UC-2 and said the account for the Chinese co-conspirators was listed as "Cheer Idyll Enterprises, Ltd", Account no. # 01287592125708, Bank of China, Hong Kong Branch. CHEN said the port through which the shipment of arms would move was Luzon, P.I. UC-2 asked CHEN to call ZHANG YI to get a fax confirming the port. CHEN said that ZHANG YI did not want to expose himself in a fax.
71. On October 8, 1995, UC-2 spoke with KU who said he had not heard from the unidentified female, but that he knew she was in the Bay area. UC-2 told KU to call MA, and KU replied that in effect, this was QI FENG's deal. KU said he would get duplicate paperwork directly from QI FENG. During the conversation, KU said he had spoken with CHEN who had spoken with ZHANG YI who would fax the transhipment port to UC-1 in the Bay area, and to UC-2 in Miami.
72. On October 9, 1995, KU told UC-2 that he was going to meet QIN, the contact of QI FENG and Robert MA. KU asked UC-2 if the CHEN deal (for 2500 guns) did not go through, would the MA deal (for 100 guns) be dead? UC-2 said it would not.
73. On October 11, 1995, KU met the UCs in Sunnyvale, CA to meet the UCs. KU said that everything was set with QIN. KU said the 100 AK-47 "kits" would now be complete, including the barrels. KU said QI FENG alone could not get approval for shipment of the barrels, but that QIN controlled exports from China and had arranged it. KU said the guns would be on the water in the next few days, and that QI FENG was to send the paperwork immediately. KU said this deal was as solid as the 20,000 bipods (referring to the 20,000 AK-47 bipods smuggled into the U.S. in February 1995, using the services of UC-1). Ku asked what the guns should be called on the shipping paperwork, and UC-1 said that the designation was up to them.
74. As to the CHEN deal, KU stated that CHEN had told him that the transhipment port was Luzon, P. I. CHEN arrived at the meeting. UC-2 told CHEN that they needed account information and the transhipment port set out in writing. CHEN gave the UCs a fax with Chinese character written at the top. Included in English was the information for the "Cheer Idyll Enterprises" bank account. It said that the inspection and transhipment points for the firearms was still being decided and would be provided upon receipt of the money per the schedule previously discussed.
76. On October 18, 1995, a fax in Chinese from GUO (aka KOK KY) was intercepted over the CHEN residential fax, but addressed to UC-2 at his Miami undercover fax machine. (On October 19, 1995, an identical fax, with minor clarifications, was forwarded to UC-1). That fax set forth conditions for the purchase of the 2500 weapons, and identified the transhipment port as Luzon, Philippines (as had been demanded by the UCs at the October 11, 1995, meeting). A translation of the fax revealed details of the proposed 2500 gun deal demanded by the Chinese: (a) The total amount of the "merchandise" (2500 weapons) is $875,000; (b) The UCs are to deposit $200,000 to ZHANG YI's account at the Bank of China, Hong Kong Branch, account number 01287592125708 (the same account KU and CHEN told the UCs that the money should be sent under the name "Cheer Idyll Enterprises" during the October 11, 1995, meeting); (c) An additional $50,000 is to be deposited to the account of Tan Meng (aka CHEN), Bangkok Bank, Phnom Pehn Branch, Cambodia, account number 0819-142794-402 (the same account in Cambodia that the $100,000 originally fronted to the Chinese was sent); (d) The remainder of the money (approximately $625,000) is to be deposited into the UC's account at the Bank of China, Hong Kong Branch; (e) When the shipment arrives in Luzon, Philippine Islands, the UCs must personally inspect the merchandise; (f) Upon acceptance by the UCs, they are to call their Hong Kong bank and transfer $212,500 to ZHANG YI's account at Bank of China; the remaining $412,000 should be transferred to CHEN's account in Cambodia; (g) When ZHANG YI and GUO (aka KOK KY) verify the UC's funds have been transferred, ZHANG YI will notify the captain of the ship, who will deliver the merchandise to the UCs.
77. On October 25, 1995, the UCs met KU in Sunnyvale, California and discussed the details of the 100 gun deal with MA. KU stated that the delay was that QIN wanted to send the barrels for the 100 guns. She and QI FENG were attempting to "squeeze" the barrels on the guns (referring to assembling the "kits" in China before shipment). KU said he guaranteed that the deal was a "go", and that the delay had been over the time required to attach the barrels. KU confirmed that it was MA's container. KU confirmed that he knew that the 100 guns and the 2500 guns were going to the U.S. KU also said he knew that MA recently called ATF to verify that Chinese scope mounts were prohibited (embargoed) if imported from China. During the meeting KU and the UCs also discussed the details of the 2500 gun deal with CHEN. KU translated the fax which had been sent to UC-1. That translation was virtually the same as the intercepted fax of October 18, 1995. In response to certain questions about the deal posed by the UCs, KU said the UCs should fax these questions to ZHANG YI and GUO (aka KOK KY) directly, and he provided fax numbers for both of the co-conspirators in the PRC.
78. On October 26, 1995, UC-1 received a copy of the aforementioned fax from QI FENG, (which KU faxed October 25, 1995). QI FENG said he was to meet QIN to discuss the deal. QI FENG stated that the "customers" (UCs) wanted to know when the "new product" (100 weapons) would be ready. He explained that it was getting toward the end of the year and the factory (weapons plant in the PRC) urgently had to meet quota production. KU referenced a second fax (not received by the UCs) wherein QI FENG confirmed to KU that the paperwork for the 100 guns would arrive any day, and that QIN agreed. Later that day, the UCs sent a fax to ZHANG YI and to GUO (aka KOK KY), stating that the UCs agreed to the terms of the proposed smuggling venture but also requested clarification of certain aspects of the transhipment process. The UCs requested the bank account information for the Chinese co-conspirators. (That information was intercepted in the October 18, 1995, fax to CHEN, but was not received by the UCs in the version of the fax sent to them on October 19, 1995).
79. On November 1, 1995, the UCs sent a second fax to both ZHANG YI in the PRC and GUO (aka KOK KY) in Cambodia reiterating their questions as to the terms and conditions of the weapons inspection and transhipment in the Philippines. The same day, KU spoke with UC-1 and said he had "double good news." KU said the factory in the PRC needed KU to sign a "guarantee paper" which would protect them (concerning the MA shipment of 100 guns). KU said as soon as they received this document, the 100 guns would be on the water in a few days.
80. On November 2, 1995, UC-2 received a fax at an undercover entity in Miami. The fax stated that the "supplier" had received the UC faxes of October 26, and November 1, 1995. The fax stated that GUO (aka KOK KY) and "his friends" were the "mid-men", and that ZHANG YI was working as a representative for the supplier. The fax set forth that their understanding of the deal was that: a) the "mid-men" would provide an official End User Certificate (EUC) by an Asian country for the "relevant product(s)" (referring to the 2500 weapons to be sent using the paperwork of GUO (aka KOK KY) from Cambodia; b) the supplier would be responsible for exporting the product(s) from China and designate an Asian port outside of China for inspection (believed to be the Philippines); c) the unit price F.O.B. that Asian port was $165/unit; d) and that shipment beyond the Asian port was the mid-men's responsibility. The fax stated that 50% of the cost of the guns was a downpayment, 50% balance due at the inspection port. The inspection port and the method of inspection (whether on board shipping or in port) would be told to the mid-men two weeks before actual delivery. The fax also detailed the illegality of moving the product(s) to the U.S. without a U.S. EUC.
81. On November 6, 1995, KU told UC-1 that he sent the "guarantee papers" back to QI FENG and that the 100 guns would be on the water imminently (as soon as they received the paperwork). The PRC supplier would then send the original shipping documents to UC-1.
82. On November 8, 1995, the UCs met KU in Burlingame, CA. KU stated he would call QI FENG that night to tell him to put the guns on the water and to fax copies of the shipping documents. KU said his sister Linda HUANG would travel to China in the next days and would bring back the original shipping documents for UC- 1 (to facilitate the entry of the 100 gun shipment). KU asked if the 100 guns came in to the U.S. would the UCs still want to obtain 2500 guns in a second deal. KU added that the 2500 guns could be easily obtained from QI FENG and QIN (MA's contacts). KU said that he had spoken with QI FENG who said he spoke with QIN and that they had said they could supply the 2500 weapons to the UCs.
83. On November 14, and November 16, 1995, both UC-1 and UC-2 spoke with KU over the phone. During those conversations, KU stated, in substance, that the container in the PRC was loaded and ready.
84. On January 9, 1996, a letter to KU was prepared on UC letterhead stationary (from the undercover entity in Miami). The letter set forth conditions for further negotiations with KU. The letter stated that if KU was not on a plane to China by Friday 1/12/96 (as he had promised earlier), this and all subsequent deals were off. The letter further demanded that KU immediately give the UCs a number for a point of contact in China, and bank account information in Hong Kong for QI FENG. (The purpose of that was to ostensibly wire the advance payment to QI FENG representing the actual factory cost of the weapons, minus all profits).
85. On January 11, 1996, KU traveled to China where he met with the Chinese co-conspirators to obtain 1500-2000 automatic AK-47s for the UCs. The UCs received a contract from KU stating that the Chinese factory (NORINCO) would accept a 38% down payment ($266,000) for 2000 weapons to be shipped to the U.S. On January 19, 1996, the UCs wired $199,500 to a Hong Kong account controlled by Linda HUANG in furtherance of the deal. Wire transmittal documents obtained from HUANG reflect the money was subsequently wired to a Beijing bank account, in the name of Dynasty Holding Co of Atlanta, which the Chinese were to access. (That is the name of a MA controlled entity). The weapons were to have all Chinese markings removed, and North Korean markings stamped on. Further, the Chinese would use a North Korean End User Certificate to further establish plausible deniability for their involvement in the sale of the weapons to the U.S. KU returned to the United States on January 25, 1996. During that time frame, KU told UC-2 that the three PRC representatives of NORINCO Dalian (QI FENG, QIN, and GUO CHENG BUN) wanted to visit the UCs in mid-April for the purpose of negotiating arms deals in the future.
86. On February 4, 1996, KU called UC-2 and stated he was confirmed to depart for the PRC on February 9, 1996, to oversee the loading of the weapons. KU identified GUO CHENG RUN as the Assistant General Manager of NORINCO Dalian. GUO CHENG RUN had requested KU's presence immediately to oversee the loading of the weapons. KU described GUO CHENG RUN as QIN's superior. On February 8, 1996, an additional $67,000 POE was wired direct to the Beijing account. On February 15, 1996, shipping documents were faxed to UC-1 through KU's contact, Susie LIN. The documents received were a bill of lading, invoice, packing list and container number for 112 cases of "hand tools" (previously agreed term for the weapons). The weapons were shipped from Dalian, China (the location of the NORINCO factory) on COSCO shipping on February 15, 1996. A trace of the container reveals that the Chinese ship "Wang Ning He" was then slated to visit ports in Japan and Hong Kong.
87. On February 16, 1996, KU returned from China and handed UC-1 the original shipping documents.
88. On February 18, 1996, UC-2 asked KU about the people coming to visit in April (referring to the three main Chinese co- conspirators in this deal, GUO CHENG KUN, QIN, and QI FENG). KU said they would come after April 12, 1996. UC-2 mentioned that he had another order (for weapons) to include 50-100 of the hand tools "from the shoulder" (referring to rocket launchers). KU said it would be no problem and that he could get bigger stuff with a guidance system. KU added that any markings the UC wanted could be stamped on the weapons (as in the alleged North Korean markings for the 2000 guns in this shipment).
89. On February 26, 1996, a check with COSCO lines reveals that the container was to be transferred to the COSCO ship "Empress Phoenix" and was to arrive in Oakland, CA on or about March 18, 1996.
90. On February 28, 1996, UC-1 met KU in South San Francisco. KU gave UC-1 118 sheets of paper with Chinese markings and serialized numbers. KU explained that QI FENG had just sent him this "packing list" for the weapons in the container. KU explained that each sheet of paper represented a packing case, and the serial numbers of the specific weapons in the case. KU added that some of the weapons were Type 56 (full stock AKs), and some were Type 56-1 (metal folding stock). KU offered to videotape himself assembling four of the weapons after their arrival so that the UCs would have a go-by for assembling the others. KU said he could get more guns stamped any way the UCs wanted, with serial numbers or without. KU said these could be sold to "gang bangers" (gang members). KU also stated that Robert MA had two containers ready for shipping in China, contingent on the success of the KU/UC deal.
91. On March 1, 1996, UC-2 and KU discussed a second weapons shipment. UC-2 said he wanted to know the prices for several items, which they would refer to by line item number in the future. The UC asked about the price and availability of various weapons from a Polytech catalogue previously obtained from KU: Line item 1: (50) type 56, 40-mm "shoulder type" weapons (RPGs); Line item 2: (50) type 70-1, 62-mm anti-tank rockets; Line item 3: (10) type 52, 57-mm recoilless rifles; Line item 4: (25) of the "shoulder fired type" with "a guidance system." KU said UC-2 was asking about a "high performance" item which was fired from the shoulder, capable of shooting down "big birds" (aircraft) from a distance of several miles; Line item 5: (1000) mini machine guns. KU then said all of the above items were available. KU stated that it was up to UC-1 now (referring to UC-1 facilitating the entry of the container of 2000 weapons). KU said his people wanted to know about a second deal, and UC-2 said this was a first step. UC-2 asked about the Chinese co- conspirator's pending visit, and KU said he needed to make them reservations, contingent on the UC's schedule.
92. On March 18, 1996, at approximately 0200, the COSCO ship Empress Phoenix was met by the San Francisco Harbor Pilot outside the Golden Gate bridge. Agents covertly observed and filmed the vessel arrive and anchor at Anchorage #7. At approximately 0930, KU reentered the U.S. from China at SFIA. Subsequent checks revealed that Robert MA returned at approximately the same time. UC-1 met KU who gave UC-1 a second set of original shipping documents, and told the UC that the third set would not be required, as the Chinese had arranged __ COSCO China, to fax COSCO U.S., with a release. A copy of that release was given to UC-1. Handwritten on the Bill of Lading was "DYNASTY HOLDING CO OF ATLANTA" followed by a signature in Chinese. As set forth above, Robert MA is the president of that company). Container # CBHU0471569 was unloaded from the Empress Phoenix. The container was covertly picked up from the Howard Terminal, and delivered to the U.S. Customs facility in San Leandro, CA for inspection.
93. The container was opened and revealed numerous green boxes recently painted white. (The smell of paint was evident in the container). One crate was opened and revealed numerous parts to weapons wrapped in oil paper and heavily greased. Rich Turner from the Firearms Technology Branch, ATF/Washington, D.C., assembled one weapon and determined that it field tested for both full automatic and semiautomatic functioning. Other weapons were assembled and tested with the same results. Turner noted that there were two types of AK-47-like weapons: a full stock and a folding stock version, as had been negotiated by the UCs (characterized in previous contractual agreements with NORINCO as the "Type 56" and the "Type 56-1"). As of March 25, 1996, the weapons inventory was completed in San Francisco. The inventory revealed that, contained in the 112 containers, were 1001 Norinco 7.62mm sub-machine guns, Type 56; and 999 Norinco 7.62mm sub- machine guns, Type 56-1. Additionally, there were 3961 30-40 round magazines with the weapons. The weapons had both Korean and Chinese (Norinco) markings. The weapons also field tested positive for fully automatic functioning.
94. On March 21, 1996, the UCs met Hammond KU to pay the balance due for the guns, approximately $433,000. UC-1 met KU in the lobby of a hotel in San Francisco and brought him to the UC room. KU had QIN with him (which had not been planned). UC-1 gave KU $70,000 in cash. KU gave the UCs three bank accounts for the wire transfer of the remaining balance from the sale of the guns. Two of the accounts were located at the Bank of China, Beijing Branch, San Li He Office, Yuetan Nanjie, Guiyan Hotel, Beijing Post code 100045: (a) Acct. No. 148250042112, Dynasty Holding Co. of Atlanta, Inc., ($50,900) (the same account used to wire the initial down payment in this deal, and is associated with Robert MA); and (b) Acct. No. 4020500-2014-007377-1, QI FENG, ($60,000). The third account was located at the Hang Seng Bank Ltd., Tsimshatsui Branch, 18 Carnarvon Road, Kowloon, Hong Kong, for $252,150. The name on that account was KUCHIN SU HUI. (KU later explained that this was the name of an unspecified co- conspirator's wife. He also stated that it was used to pay off Chinese Customs personnel. It is believed this is the account for GUO CHENG RUN). The total amount for payment was $433,050.
95. The UCs asked KU to call QI FENG to tell him: (a) that KU had received the container seal and his $70,000; and (b) the UCs had just received the bank information for the wire transfers. KU called QI FENG and then handed the phone to QIN. UC-2 asked if it was safe to talk in front of QIN. KU stated that she was the export manager (for Norinco), and that she helped get the guns to the U.S. KU said she was a "key person", that she was "safe" and that she was "high security." KU went on to say that she was the expert; the number one person for light weapons, and that she got paid also. The UCs brought out two weapons for KU to assemble.
96. KU then produced sheets of mimeographed paper with various weapons depicted. KU spelled out the prices of the various weapons, to include: heavy machine guns, Uzi-type copies, manufactured in China, and M-16s which were "100%" Chinese copies. KU mentioned silenced machine guns, and miniature AK-47 "C" type weapons. KU also offered the UCs "Red Parakeet" missiles, which KU characterized as being like the U.S. Stinger (surface to air). KU said they were very expensive (in the thousands), but that it was very effective. KU said they could take out a 747, that they were hard to get, and that they were very effective. Several times during this evolution, KU spoke with QIN. KU said the next shipment could go from China to Cambodia with no paperwork. UC-1 asked what kind of markings they could obtain, and KU said anything they wanted, from Dynasty (the UC company) to Israel or Iraq. KU said his people in the PRC had a contact who was a Cambodian General who could do anything they requested. KU said that he had spoken with QIN and she had said they would visit the UCs in mid-May.
97. On March 22, 1996, UC-1 wire transferred the funds due to the co-conspirators to the accounts delineated by KU (as described above).
98. On March 26, 1996, UC-2 spoke with KU who stated that the Chinese were "elated" over the meeting with the UCs. They were eager to do another transaction. KU said he would fax UC-2 the prices for the weapons (discussed in the meeting of March 21, 1996) and a proposed itinerary for the Chinese co-conspirators' visit to the United States.
99. On April 1, 1996, UC-2 told KU that when the Chinese visited the U.S. in May, the purpose was to discuss business (referring to subsequent weapons transactions). KU said the purpose of the visit was specifically to discuss future deals.
100. On April 2, 1996, KU asked UC-2 to draft an "invitation" for QI FENG on the UC letterhead stationary. KU explained that the invitation would enable QI FENG to obtain a visa to visit the U.S. in furtherance of negotiations for a second deal. KU stated that GUO KUN and QIN had "official passports", and so did not need to obtain visas. KU asked UC-2 to send the "invitation" directly to QI FENG in China, c/o Dynasty Holding Co. of Atlanta, at fax # 011-861-0-853-2216. That is the name of MA's company in the U.S. The 38% down payment for the 2000 guns (approximately $266,000) was ultimately sent, in parts, to a Beijing bank account in that name, through the services and accounts of Linda HUANG. It should also be noted that a portion of the final payment due for the guns ($50,900) was also sent to that same account. A second portion of the final payment ($60,000) was sent to the same bank in an account listed for QI FENG). KU also asked that a copy of the "invitation" be faxed to (415) 363-1699; fax number subscribed to by Linda HUANG. KU stated that he was departing the U.S. for three Asian countries to negotiate prices for the weapons in a second order.
101. On April 2, 1996, at KU's direction, an invitation was prepared on UC letterhead stationary, which was to be sent to QI FENG in China. That invitation requested that QI FENG and his associates visit the UCs in San Francisco, to include a visit to "corporate headquarters" in Miami, between the dates of May 13, 1996 and May 17, 1996. On April 3, 1996, a copy of the fax was sent from an undercover entity in Miami, FL. to QI FENG in Beijing. A second copy was sent to HUANG's home fax number. KU called UC-2 and stated that he had received HUANG's copy and would hand deliver the same to QIN in L.A. for hand delivery to QI FENG in China.
102. On April 4, 1996, KU told UC-1 that "they" had received the "invitation" letter. KU confirmed that the Chinese were working on their visit in mid-May, and that once they had the letter (of invitation) they would arrange for the trip.
103. On April 25, 1996, UC-2 called KU in Beijing as KU had requested. KU stated he had just been in Cambodia and that he could get anything out of there now, using Cambodian paperwork. UC-2 later received a fax in Miami from KU in which he stated he had obtained price quotes for the "large heavy duty tools" (referring to missiles and rockets). KU wrote that the paperwork would involve a third country (Cambodia). KU stated that "our friend" recommends that if the UCs do want to purchase a second shipment (referring to the 2000 AK-47s) they had to act quickly as there were personnel changes forthcoming. KU wrote that GUO CHENG RUN had been promoted, in part because of his deal with the UCs. KU said GUO CHENG KUN was busy in the next weeks, after which he hoped to "vacation" in the U.S.
104. On April 26, 1996, UC-2 called KU in Beijing. KU said there were miniature machine guns available immediately. KU said that because GUO CHENG RUN and QIN work for the government, they had to obtain permission to visit the U.S. KU said a second order of weapons would go a long way toward ensuring a visit. UC-2 said he had not anticipated the quick turn around, and although he did not want to pass the opportunity to obtain AK-47s, he would rather have the heavy weapons for which he had negotiated (with KU and QIN on March 21, 1996). KU stated that GUO CHENG RUN's boss was in fact behind the authorization to sell the weapons, and his name was (FNU) Zhang. GUO CHENG RUN told KU that (FNU) Zhang would be the appropriate person to meet UC-2's superior. KU identified (FNU) Zhang as the president of NORINCO in Dalian. KU added that he had been in Cambodia with Richard CHEN, who had learned of KU's success in the 2000 weapon deal, and wanted to deal with the UCs immediately.
105. On April 29, 1996, Hammond KU returned from China and Cambodia. UC-2 met KU and discussed several matters, including prices for weapons in a second deal through the NORINCO pipeline, the proposed visit of the PRC co-conspirators in May 1996, and a new pipeline for heavy weapons and missiles using Cambodian End User Certificates. As to the proposed visit by the Chinese, KU told UC-2 that QI FENG was the only individual confirmed to come to the U.S. on May 15, 1996. KU stated that QIN had a reservation, but was undecided. KU indicated that the Chinese wanted to know if the UCs were interested in a second order of weapons, for which they supplied a price sheet on letterhead. KU also provided UC-2 a typed price list from QI FENG, with the company name, DYNASTY HOLDING COMPANY printed at the top. This is the name of the company associated with MA which received the entire 38% down payment, and a portion of the final payment of POE for the 2000 gun deal). The price list set forth: "We are happy work with you. Now we offer price list for you. We hope you like it."
6. Type 82 recoilless rifle...........$5000 ammo..................................$200/piece
7. Type 85 silenced machine gun.......$400
The list was signed, QI FENG.
106. On April 30, 1996, UC-2 called KU and stated that his superior would not commit to future deals with the PRC co- conspirators without at least meeting an equal counterpart with whom to shake hands. UC-2 said he and his organization hoped for a larger meeting, including the higher echelon co-conspirators, to negotiate a mutually beneficial long term relationship. KU later stated that he called the PRC and informed UC-2 that at a minimum, GUO CHENG KUN, QIN, and QI FENG could arrange a visit in four to five weeks. UC-2 stated he had been given the authority to negotiate a "side deal" of more lethal weapons out of his own pocket (versus through his superiors in Miami). UC-2 stated that he would like to do a "small" deal of several hundred thousand dollars, based on the price quotations obtained from KU on April 29, 1996. KU stated that with a phone call, QI FENG was prepared to send heavy weapons in a mixed container, including RPG-9 rockets, miniature grenades, silenced machine guns, and miniature machine guns. KU said that QI FENG would do a "small" order on the side until his superiors and that of the UC struck an accord for a long term relationship.
107. On May 1, 1996, KU asked UC-2 to draft an "invitation" letter addressed to (FNU) Zhang, whom KU has identified as GUO CHENG RUN's ultimate boss at the NORINCO plant in Dalian, China. KU reiterated that he was told that the Chinese were willing to come to the U.S. but that May 15, 1996, was too soon to make necessary arrangements. KU stated that after the co-conspirators received the invitation letter, he would contact QI FENG to discuss the types of weapons and the cost for the side deal with UC-2.
108. On May 2, 1996, KU and UC-2 discussed sending an "invitation" to Mr. Zhang (President of Norinco/Dalian) to come visit the U.S. to negotiate with UC-2 and his alleged boss. QI FENG agreed to do a small "side deal" for more lethal munitions (RPG-9s, silenced machine guns, mortars, grenades) with UC-2 (up to approximately $200,000). KU said HUANG would arrange for the tickets for the PRC travel, to be paid by UC-2. The invitation was sent on that date.
109. On May 8, 1996, KU confirmed to UC-2 that the Chinese had received the invitation. They requested that the UCs send the fax direct to Mr. Zhang in Dalian.
110. On May 9, 1996, the invitation fax was sent from Miami addressed to (FNU) Zhang to Norinco in China. KU called UC-2 and said he had faxed UC-2 in Miami. In that fax was a business card from Zhang's Vice President, MR. "LU" (later identified fully as LU YI LUN) and a letter from QI FENG. The fax stated QI FENG had spoken with QIN. The fax requested the UCs resend the same "invitation" fax from the UCs direct to NORINCO. QI FENG wrote that Zhang did not feel that it was proper to show his face in this situation. Zhang was sending his VP, LU YI LUN, to negotiate. QI FENG stated that their company (NORINCO) wanted to work with (UC-2's company) continually in future deal. Attached to the fax was a business card for LU YI LUN, Assistant President, China North Industries Dalian Corporation (NORINCO). On May 10, 1996, KU called UC-2 and said they (PRC) requested the UCs resend the invitation with the name of LU YI LUN and QIN specifically mentioned. KU said it was to get their paperwork, referring to obtaining visas. KU said he would fax CHIN's business card to UC-2 for her correct name.
111. On May 15, 1996, KU, CHEN, and the UCs met in South San Francisco. During the meeting, CHEN provided the UCs with numerous catlagoues from NORINCO, as well as sheets of data on various munitions. CHEN stated that he saw the wire transfer information for the 2000 weapon deal (March 18, 1996) and he was, as a result, anxious to continue negotiations for a deal with the UCs .
112. Based upon the foregoing, your affiant believes that, from on or about December, 1994 to the present, in the Northern District of California, and elsewhere, the following individuals, Hammond KU, Robert MA, Linda HUANG, Susan LIN, QI FENG, GUO Cheng Run, QI Xiu Qin, LU Yi Lun, and others, did commit the following criminal offenses: Conspiracy in violation of 18 U.S.C. Section 371; Smuggling in violation of 18 U.S.C. Section 545; Firearms Dealing and Importation Without a License in violation of 18 U.S.C. Section 922(a)(1); Importation and Sale of Firearms With Obliterated Serial Numbers in violation of 18 U.S.C. Section 922(k); Illegal Importation of Firearms in violation of 18 U.S.C. Section 922(1); Importation of Machine Guns in violation of 26 U.S.C. Section 5861(k); and Imports of Arms on the Munitions List in violation of 22 U.S.C. Section 2778. A brief summary of these offenses, fully described above, is described below:
(i) On March 1, 1995, KU met UC-2 and brought up containers of weapons available through the PRC through KU's contacts in PRC. On March 29, 1995, KU "introduced" UC-1 (smuggling facilitator) to UC-2 (investor) for purposes of purchasing two containers of 2500 weapons. Negotiations ensued with multiple UC meetings, intercepted phone calls and faxes between KU, MA, QI FENG and the UCs. Flashroll funds were deposited in an undercover account in Hong Kong in furtherance of the deal.
(ii) On March 29, 1995, KU discussed with the UCs (and calls) MA, his source for weapons, allegedly from POLYTECH. QI FENG is intercepted obtaining bank account information on behalf of MA for UCs funds, previously "flashed" in an undercover account in Hong Kong. Various methods of payment including letters of credit, sale on consignment and payment in full up front are negotiated with KU on behalf of MA. Negotiations continue through June 1995.
(iii) On March 29, 1995, KU was concurrently negotiating an identical shipment with CHEN as an alternate source for the containers of weapons. During June 1995, KU turned to CHEN as the primary source for the 2500 weapons. See discussion of that conspiracy, below. KU turned again to MA to ultimately complete the 2000 gun deal during September 1995.
(iv) In September 1995, KU directed the UCs back to MA. That deal commenced with importing 300 AK-47 "kits" and ultimately became a deal for first 1500 then 2000 AK-47s.
(v) From Jan 19, 1996, to February 8, 1996, the UCs deposited 38% down for the 2000 weapons into an account in Beijing for MA, QI FENG, and the NORINCO representatives involved in the deal (Ms. QIN, GUO KUN, et al).
(vi) From Feb 2 1996 to March 18, 1996, KU provided the UCs with copies of wire transmittals (from HUANG), shipping documents, invoices and bills of lading for the 2000 guns, (invoiced as 112 cases of HAND TOOLS). The container was to be sent (and was in fact sent) from Dalian, China (location of Norinco plant) to Oakland, CA. Fax header on one set of documents reveal the does were sent from QI FENG to CSTS Travel (HUANG Co in U.S. and China) to LIN to UC-1.
(vii) On March 18, 1996, the Empress Phoenix arrived in San Francisco. The container was opened, revealing numerous green boxes, freshly painted white, with 2000 fully automatic weapons from the PRC, which were covertly seized. The estimated street value of the weapons was $4,000,000.00.
(viii) On March 21, 1996, KU met the UCs in hotel with Ms. QIN. The UCs paid KU $70,000 cash, and received wire transfer account information for the balance due on the guns, which was paid the next day.
113. Based upon the foregoing, your affiant believes that, from on or about December, 1994 to the present, in the Northern District of California, and elsewhere, the following individuals, Hammond KU, Richard CHEN, Ching Hua CHEN, Linda HUANG, Susan LIN, Zhang YI, GUO (aka KOK KY) and others, did commit the following criminal offenses: Conspiracy in violation of 18 U.S.C. Section 371 to commit the following violations of federal law: Smuggling in violation of 18 U.S.C. Section 545; Firearms Dealing and Importation Without a License in violation of 18 U.S.C. Section 922(a)(1); Illegal Importation of Firearms in violation of 18 U.S.C. Section 922(1); Importation of Machine Guns in violation of 26 U.S.C. Section 5861(k); and Imports of Arms on the Munitions List in violation of 22 U.S.C. Section 2778. A brief summary of these offenses, fully described above, is described below:
(i) On March 29, 1995, KU met the UCs to discuss investing in and importing two containers of AK-47s from PRC. KU called MA and CHEN, describing CHEN as an alternate source of weapons if MA did not come through.
(ii) On April 11, 1995, KU, CHEN and the UCs met to negotiate. CHEN and KU brought a NORINCO catalog of small arms and heavy weapons. CHEN and KU stated they had a contact named GUO in Cambodia and that the weapons could be transhipped through that country.
(iii) On May 11, 1995, KU met GUO and ZHANG YI in a hotel in Beijing. KU told the UCs that GUO was a government official with ties to the Thai and Cambodian governments and ZHANG YI was responsible for exporting weapons from the PRC. KU and CHEN subsequently made numerous trips to Cambodia and the PRC in furtherance of the negotiations. Numerous calls and faxes were intercepted between GUO, CHEN, KU and ZHANG YI in this deal. They identified ZHANG YI as the person able to broker the deal.
(iv) On June 28, 1995, the UCs sent $100,000 as a down payment for the 2500 weapons to the Greenland Corp, a company in Cambodia owned by GUO and CHEN, and identified by KU as having been used in the past to smuggle weapons. In Sept. 1995, CHEN was intercepted directing GUO to return the $100,000 as a sign of "good faith". GUO returned the funds to a CHEN bank account in San Jose, CA. The funds were returned to the UCs on Sept. 27, 1995, by CHEN and KU.
(v) On September 29, 1995, a fax was sent from ZHANG YI to CHEN which stated they were still deciding on a tranship port for the weapons and setting forth bank account information in Hong Kong to receive the UCs funds for the weapons.
(vi) Negotiations continued through November 1995. Discussions centered around transhipping the weapons through Cambodia, the Philippines, and Africa, with different scenarios proposed for the UC payment for the guns. KU had LIN draft contracts, which he delivered to the UCs. Faxes were sent by the UCs to ZHANG YI demanding concrete terms. Faxes were received by CHEN and KU from ZHANG YI. The terms were delivered in October and November 1995, requiring the UCs to pay a portion of the total cost of the guns ($800,000) up front, then inspecting the weapons in the Philippines.
(vii) On April 29, 1996 KU returned from Cambodia where he stated he had been with CHEN exploring a Cambodian route for heavy weapons. On May 15, 1996, CHEN and KU met the UCs to negotiate a second deal. CHEN brought numerous catalogs to show the UCs and reiterated that anything was available through his Cambodian connections. CHEN stated several times he desired to do business with the UCs for future deals, after hearing of KU's success with the 2000 guns.
114. Based upon the foregoing, your affiant believes that, from on or about February, 1995 to March, 1995. in the Northern District of California, and elsewhere, the following individuals, Hammond KU, Kevin WONG, Kenneth TAYLOR, and others, did commit the following criminal offenses: Conspiracy in violation of 18 U.S.C. Section 371; Dealing in Firearms Without a License in violation of 18 U.S.C. Section 922(a)(1); and Transfer and Possession of Machineguns in violation of 18 U.S.C. Section 922(o)(1). A brief summary of these offenses, fully described above, is described below:
(a) On February 22, 1995, Hammond KU sold to UC-1 one (1) AK-47S, 7.62x39mm machine gun, serial # 9992289.
(b) On March 1, 1995, KU sold UC-2 a Polytech, model AKS- 762, 7.62x39mm Machine gun, serial # PW85-762-06977.
(c) On March 7, 1995, KU sold UC-1 one SWD, Inc., model M- 11, 9mm machine gun, serial # 89-0004970.
(d) On March 7, 1995, KU sold UC-1 one (1) Sterling, 9mm machine gun, serial number KR26684.
(e) On March 16, 1995, KU sold UC-2 one MK Arms, Inc., Model 760, 9mm machine gun, serial # R532.
(f) On May 31, 1995, KU sold UC-2 one MAK 90 machine gun, Sporter AK 47 type, serial # 9308155.
Further your affiant saith no.
Date: 5/21/96
___________________________
Matthew H. King
Special Agent
United States Customs Service
Subscribed and Sworn before me this___21__ day of __May__, 1996
