Men Admit to Illegally Exporting Local Cars

Two men will be sentenced after pleading guilty to customs violations and felony mail fraud after participating in a three-year luxury car exporting scheme that allowed buyers of luxury vehicles in China to escape paying export taxes.

Frank Ku and Danny Hsu, both of California, will be sentenced in Concord on the charges today.

The case, which has been sealed for months, was a multi-agency effort involving Homeland Security, New Hampshire State Police, auto dealers, and city and town clerks across the state, according to U.S. Attorney John Kacavas.

From October 2009 until March 2012, the two men operated a company in California, CFLA, Ltd., that obtained various vehicles such as BMWs, Lexus SUVs, Mercedes Benz sedans, and other vehicles around the country. They would then register the vehicles – or get “straw buyers,” often people in difficult financial circumstances to register them – and then transport the vehicles to Long Beach, Calif., for export to China. Often, the vehicles wouldn’t even been seen in the state where they were purchased but instead, be sent straight to Long Beach. The two had phony licenses and addresses in Farmington and Stratham, as well as other locations in New Hampshire, to assist them in the scheme.

The pair would alter the titles to make it look as if the vehicles were used, not new, Kacavas said, which allowed them to escape export tariffs and deliver the luxury vehicles to Chinese buyers at cheaper prices than if those buyers purchased the vehicles in China. It's illegal to privately export new vehicles to China, he said.

Only one vehicle was purchased in New Hampshire – a BMW purchased at BMW of Stratham. In total, 11 titles were altered in New Hampshire. The scheme was run out of 16 states, he said.

Kacavas said the two, both naturalized citizens, shipped 79 vehicles overseas during the operation. Law enforcement was able to recoup about $750,000, by stopping 14 vehicles last year. The total value of the vehicles is in the $5.5 million range, Kacavas said.

The two would often target potential “straw buyers” using Craigslist ads for roommate situations or people looking for work. The two would essentially rent access to addresses for registration of the vehicles and in their cases, their own fraudulent licenses in the state.

Neither Kacavas nor investigators would delve too heavily into how they found out about the scheme but they stated that the NH Division of Motor Vehicles and local clerks in cities and towns, noticing multiple luxury vehicle registrations being submitted at town halls across the state, assisted in the investigation.

Ku and Hsu will probably not face jail time for their crimes though, Kacavas said.

“We don’t expect that these will carry incarcerative sentences,” he said. “Incarceration is not the goal … our goal is to recoup the monies and what we can, in terms of the cars.”

Richard Bailey, the director of the NHDMV, said what was so difficult about the investigation was the number of people, with limited means, who got caught up in the scheme by the two illegal exporters.

“Some of our neediest citizens have been duped into participating in this, turning them into illegal straw buyers,” he said. “An offer of $500 or $1,000 seems almost too good to pass up … they’re not aware of the downstream impact.”

None of the “straw buyers,” however, will be prosecuted, since they cooperated with the investigation.