Two Men Arrested in Connection with the Illegal Export of Sensitive Technology to China Without a License, and Conspiracy to Purchase Counterfeit Electronic Components

Men from Rancho Cucamonga and Foothill Ranch, California, were arrested Tuesday morning in connection with separate schemes involving the illegal export of controlled items to the People’s Republic of China - a violation of the International Emergency Economic Powers Act - and the illegal purchase of counterfeit electronic components, announced Salvador Hernandez, Assistant Director of the FBI in Los Angeles; Anthony Levey, Special Agent in Charge of the Department of Commerce - Office of Export Enforcement in Los Angeles; and Thomas P. O’Brien, United States Attorney in Los Angeles. Today’s announcement was made on behalf of the below-listed agencies which were part of the joint investigation.

Michael Ming Zhang, 49, of Rancho Cucamonga, California, and Policarpo Coronado Gamboa, 40, of Foothill Ranch, California, were charged in two separate indictments last week and arrested without incident early Tuesday morning at their respective residences. Participating in the arrests were agents with the FBI; U.S. Department of Commerce’s Bureau of Industry and Security - Office of Export Enforcement; U.S. Defense Criminal Investigative Service - Office of Inspector General; U.S. Postal Inspection Service; U.S. Immigration and Customs Enforcement (ICE); and officers with the Orange County Sheriff’s Department.

Zhang is the president of “J.J. Electronics,” a company he operates out of his home in Rancho Cucamonga, California, and Coronado Gamboa owns and operates Sereton Technology Inc., located in Foothill Ranch, California.

According to an indictment returned by a federal grand jury in Los Angeles on January 13 th, 2009, Michael Ming Zhang allegedly exported U.S. Department of Commerce (DOC) controlled electronic components to his company’s Shenzhen branch office in the People’s Republic of China (PRC), and to a transshipment point company, Fangyuan Electronics Ltd. (Fangyuan), in the PRC and Hong Kong.

It is illegal to export Department of Commerce-controlled electronic items to the PRC without an export license for specified end-users. The items, known as dual-use technology, are controlled by the Department of Commerce for export to the PRC for national security reasons since they have civilian and military applications. Among the illegal exports were components manufactured by Vetronix Research Corporation in the U.S, whose technology is currently used in the U.S. Army’s battle tanks.

Zhang allegedly obtained the restricted technology from various U.S. suppliers and exported the components to the PRC without obtaining the required export license. The indictment alleges that Zhang refrained from purchasing the technology from the supplier after he was made aware that a particular component was export-controlled. Zhang then allegedly obtained technology from a different supplier and exported it to the PRC.

The indictment further alleges that Zhang knowingly and intentionally trafficked in counterfeit Cisco electronic components bearing counterfeit marks from the PRC for distribution in the United States. The indictment alleges that Zhang imported and trafficked a total of at least 4,300 counterfeit Cisco computer networking components in at least 25 separate transactions with an estimated retail market value of more than $3.3 million.

The second indictment alleges that Zhang and co-defendant, Coronado Gamboa, conspired to import Sony electronic components bearing counterfeit marks from the PRC for distribution in the United States. Coronado Gamboa allegedly conspired with Zhang to purchase the counterfeit Sony electronic components in at least 10 separate transactions. The components were then sold in the U.S. and around the world.

The indictments collectively charge Zhang and Coronado Gamboa with the following violations, specifically:

Zhang is charged with five counts of exporting controlled items to the People’s Republic of China (“PRC”) without a license, in violation of 50 U.S.C. §§ 1705(a), (c) (International Emergency Economic Powers Act) and 15 C.F.R. §§ 736.2, 764.2, 774, and 742.4 (Export Administration Regulations); and two counts of trafficking in counterfeit goods, in violation of Title 18, United States Code, Section 2320. Zhang and Coronado Gamboa are charged with conspiracy to traffic in counterfeit goods, in violation of 18 U.S.C. § 371.

In connection with the investigation, federal search warrants were executed at Zhang’s home in Rancho Cucamonga, where he operates J.J. Electronics, and at Coronado Gamboa’s company, Sereton Technology, in Foothill Ranch, California.

Zhang and Coronado Gamboa made their initial appearance before a federal magistrate in U.S. District Court in Los Angeles Tuesday afternoon. If convicted on all counts, Zhang faces a statutory maximum sentence of 125 years in prison, and Coronado Gamboa faces a statutory maximum sentence of five years in prison.

The cases against Zhang and Coronado Gamboa are the result of a joint investigation by the Department of Commerce, the FBI, the Defense Criminal Investigative Service (DCIS), the U.S. Postal Inspection Service, U.S. Immigration and Customs Enforcement, and the Orange County Sheriff’s Department. Zhang and Coronado Gamboa will be prosecuted by the United States Attorney’s Office in Los Angeles.

This case was worked in cooperation with the recently created Export and Anti-proliferation Global Law Enforcement (EAGLE) Task Force. The counter-proliferation task force was recently created by the United States Attorney's Office for the Central District of California in conjunction with federal law enforcement agencies to jointly investigate and combat the illegal exports of arms and sensitive technologies. Members of the EAGLE Task Force include the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export and Enforcement; the FBI; the Defense Criminal Investigative Service - Office of Inspector General; U.S. Customs and Border Protection; ICE; the Diplomatic Security Service and the Transportation Security Administration.