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| Prosecutors Ease Crackdown on Buyers of China-Bound Luxury Cars | Prosecutors Ease Crackdown on Buyers of China-Bound Luxury Cars |
| (about 7 hours later) | |
| A luxury car exporter’s nearly two-year legal battle to recover a Porsche Cayenne and $120,786 seized by United States authorities has ended with federal prosecutors in South Carolina agreeing to return the property and drop a civil forfeiture lawsuit. | A luxury car exporter’s nearly two-year legal battle to recover a Porsche Cayenne and $120,786 seized by United States authorities has ended with federal prosecutors in South Carolina agreeing to return the property and drop a civil forfeiture lawsuit. |
| The deal with the exporter, Alibek Turkayev, follows at least a dozen other similar settlements. In nine states, federal prosecutors have reached agreements with other small companies involved in buying luxury cars in the United States and reselling them overseas, mainly in China, for a big profit. | The deal with the exporter, Alibek Turkayev, follows at least a dozen other similar settlements. In nine states, federal prosecutors have reached agreements with other small companies involved in buying luxury cars in the United States and reselling them overseas, mainly in China, for a big profit. |
| In many of those cases, federal authorities in South Carolina, Florida, Georgia and Ohio settled the disputes by returning all of the seized cars. In one of the bigger settlements, federal prosecutors in South Carolina agreed in January to return 57 luxury cars and hundreds of thousands of dollars to Hong Chen and his Mayrock Group, which is based in Virginia. | In many of those cases, federal authorities in South Carolina, Florida, Georgia and Ohio settled the disputes by returning all of the seized cars. In one of the bigger settlements, federal prosecutors in South Carolina agreed in January to return 57 luxury cars and hundreds of thousands of dollars to Hong Chen and his Mayrock Group, which is based in Virginia. |
| The wave of settlements signals a retreat by federal prosecutors in a campaign against a niche business that seeks to exploit the demand for high-end vehicles in China, where cars that typically retail for $55,000 in the United States can be resold for as much as three times that price. | The wave of settlements signals a retreat by federal prosecutors in a campaign against a niche business that seeks to exploit the demand for high-end vehicles in China, where cars that typically retail for $55,000 in the United States can be resold for as much as three times that price. |
| American export companies were reselling tens of thousands of luxury cars a year to buyers in China and other countries before federal authorities began filing the civil forfeiture lawsuits in 2013 that brought much of the activity to a halt. | American export companies were reselling tens of thousands of luxury cars a year to buyers in China and other countries before federal authorities began filing the civil forfeiture lawsuits in 2013 that brought much of the activity to a halt. |
| The crackdown was driven largely by agents with the Secret Service and the Department of Homeland Security, who questioned whether these small export companies were violating federal law by usingstraw buyers — people paid small sums to buy cars — to conceal that the vehicles were being bought by people who had no intention of keeping them and were using cash from other people to make the acquisitions. Federal authorities have argued that using straw buyers is a deceptive practice that potentially deprives American consumers of a chance to buy the luxury cars and limits the ability of automakers to keep tight control over sales to domestic dealers and to foreign countries. | |
| But the Justice Department recently advised its prosecutors to be more judicious in pursuing civil forfeiture actions — and even criminal cases — against car export companies and their owners. | But the Justice Department recently advised its prosecutors to be more judicious in pursuing civil forfeiture actions — and even criminal cases — against car export companies and their owners. |
| “Over the past year, we have been engaged in a comprehensive review of the asset forfeiture program, including straw-buyer luxury export cases and other aspects of the program,” said Peter Carr, a Justice Department spokesman, in an emailed statement. “As a result of this ongoing review, the department is encouraging prosecutors to pursue civil and criminal sanctions for straw-buyer fraud cases that lead to other criminal violations.” | |
| In practice, that means using a straw buyer alone to buy a car may not be enough evidence for government agents to seize a vehicle from an export company, said people briefed on the matter who spoke on the condition of anonymity. | In practice, that means using a straw buyer alone to buy a car may not be enough evidence for government agents to seize a vehicle from an export company, said people briefed on the matter who spoke on the condition of anonymity. |
| Since 2013, raids by the Secret Service have resulted in hundreds of Mercedes-Benzes, Land Rovers, BMWs and Porsches being seized, many of them just as they were waiting to be loaded onto cargo ships. The Porsche bought by Mr. Turkayev’s company was among 14 luxury cars seized by the Secret Service in South Carolina and in Kearny, N.J. Also frozen by the federal government were millions of dollars in proceeds from the sale of cars to overseas buyers. | Since 2013, raids by the Secret Service have resulted in hundreds of Mercedes-Benzes, Land Rovers, BMWs and Porsches being seized, many of them just as they were waiting to be loaded onto cargo ships. The Porsche bought by Mr. Turkayev’s company was among 14 luxury cars seized by the Secret Service in South Carolina and in Kearny, N.J. Also frozen by the federal government were millions of dollars in proceeds from the sale of cars to overseas buyers. |
| Brian Leary, a Secret Service spokesman, declined to comment and referred inquiries to the Justice Department. | Brian Leary, a Secret Service spokesman, declined to comment and referred inquiries to the Justice Department. |
| The policy change stems from a broad review of the federal government’s asset forfeiture procedures by the Justice Department. In January, Eric H. Holder Jr., the United States attorney general, said his office was taking steps to make sure that civil forfeiture cases were brought in such a manner “to take the profit out of crime and return assets to victims, while safeguarding civil liberties.” | The policy change stems from a broad review of the federal government’s asset forfeiture procedures by the Justice Department. In January, Eric H. Holder Jr., the United States attorney general, said his office was taking steps to make sure that civil forfeiture cases were brought in such a manner “to take the profit out of crime and return assets to victims, while safeguarding civil liberties.” |
| Civil forfeiture is a powerful tool that prosecutors can use when pursuing cases involving money laundering, terrorism, drug dealing or other illegal activity. But it is a particularly punitive measure because the burden is often on the defendants to prove that any property and cash that are seized were obtained through lawful activities. | Civil forfeiture is a powerful tool that prosecutors can use when pursuing cases involving money laundering, terrorism, drug dealing or other illegal activity. But it is a particularly punitive measure because the burden is often on the defendants to prove that any property and cash that are seized were obtained through lawful activities. |
| Lawyers for Mr. Chen, in court papers, had said the seizures forced Mayrock to “cease operations, depriving Mr. Chen of the assets necessary to support his family, to fund his legal defense and to continue to pursue his livelihood.” Mr. Turkayev said the litigation led him to postpone plans to apply to business school. | Lawyers for Mr. Chen, in court papers, had said the seizures forced Mayrock to “cease operations, depriving Mr. Chen of the assets necessary to support his family, to fund his legal defense and to continue to pursue his livelihood.” Mr. Turkayev said the litigation led him to postpone plans to apply to business school. |
| A year ago, objections were raised by some car exporters that federal authorities were becoming embroiled in a largely commercial dispute. The car exporters had argued that if automakers had a problem with the reselling of luxury cars overseas, then they needed to put more pressure on car dealerships to ensure that a vehicle was being sold to a person for their own personal use. | A year ago, objections were raised by some car exporters that federal authorities were becoming embroiled in a largely commercial dispute. The car exporters had argued that if automakers had a problem with the reselling of luxury cars overseas, then they needed to put more pressure on car dealerships to ensure that a vehicle was being sold to a person for their own personal use. |
| The Justice Department’s shift also coincides with a decision by the New York State attorney general, Eric Schneiderman, and the Department of Homeland Security to put aside a joint criminal investigation into the car export business in the metropolitan area, said several people briefed on that investigation who spoke on the condition of anonymity. | The Justice Department’s shift also coincides with a decision by the New York State attorney general, Eric Schneiderman, and the Department of Homeland Security to put aside a joint criminal investigation into the car export business in the metropolitan area, said several people briefed on that investigation who spoke on the condition of anonymity. |
| But not all car export forfeiture cases are being dropped or settled quickly. | But not all car export forfeiture cases are being dropped or settled quickly. |
| One of the biggest car export forfeiture cases, a lawsuit filed in November 2013 by federal prosecutors in Manhattan that involved the seizure of 48 luxury vehicles, is still active. In January, Judge Katherine Polk Failla of the Federal District Court in Manhattan rejected a motion to dismiss the lawsuit. Judge Failla, in her ruling, said prosecutors had shown sufficient evidence of an “intent to defraud” by the car export company to permit the lawsuit to continue for now. | One of the biggest car export forfeiture cases, a lawsuit filed in November 2013 by federal prosecutors in Manhattan that involved the seizure of 48 luxury vehicles, is still active. In January, Judge Katherine Polk Failla of the Federal District Court in Manhattan rejected a motion to dismiss the lawsuit. Judge Failla, in her ruling, said prosecutors had shown sufficient evidence of an “intent to defraud” by the car export company to permit the lawsuit to continue for now. |
| In some settlements, such as ones reached by federal prosecutors in New Jersey and Brooklyn, only half of the cars seized have been returned to the export companies. | In some settlements, such as ones reached by federal prosecutors in New Jersey and Brooklyn, only half of the cars seized have been returned to the export companies. |
| Even some in the luxury car export business concede that some companies use items like fraudulent driver’s licenses and fake shipping documents to either conceal what they are doing or avoiding paying state taxes. | Even some in the luxury car export business concede that some companies use items like fraudulent driver’s licenses and fake shipping documents to either conceal what they are doing or avoiding paying state taxes. |
| Still, lawyers who have been defending car exporting companies praised the Justice Department’s guidance on bringing new civil forfeiture cases. | Still, lawyers who have been defending car exporting companies praised the Justice Department’s guidance on bringing new civil forfeiture cases. |
| Ely Goldin, a lawyer with Fox Rothschild in Pennsylvania who represents Mr. Turkayev and the car exporter in the New York case before Judge Failla, said many of these actions were cases of “civil forfeiture run amok” and many of the car dealerships were aware that many of the cars would be destined for sale overseas. “The dealerships were not deceived,” he said. | Ely Goldin, a lawyer with Fox Rothschild in Pennsylvania who represents Mr. Turkayev and the car exporter in the New York case before Judge Failla, said many of these actions were cases of “civil forfeiture run amok” and many of the car dealerships were aware that many of the cars would be destined for sale overseas. “The dealerships were not deceived,” he said. |
| Mr. Turkayev, who now lives in Brooklyn and goes by the name Alex, said he did nothing wrong in taking advantage of a pricing arbitrage for luxury cars. Still, he said he was not bitter. | Mr. Turkayev, who now lives in Brooklyn and goes by the name Alex, said he did nothing wrong in taking advantage of a pricing arbitrage for luxury cars. Still, he said he was not bitter. |
| “I can see where they were coming from. They were just doing their jobs,” Mr. Turkayev said of the prosecutors and Secret Service agents involved in his case. “It has been difficult for me, but the justice system worked as it is supposed to.” | “I can see where they were coming from. They were just doing their jobs,” Mr. Turkayev said of the prosecutors and Secret Service agents involved in his case. “It has been difficult for me, but the justice system worked as it is supposed to.” |