Recyclers contest Home Security probe of worn coins
Lawyers for a group of China-based scrap-metal recyclers have asked a federal court in New Jersey to return $5.5 million in cash, a Porsche Cayman Coupe, and a Texas warehouse, all seized last winter during a Homeland Security probe of worn coins sold to the U.S. Mint in Philadelphia.
/arc-anglerfish-arc2-prod-pmn.s3.amazonaws.com/public/K4EQ6HU4VNF2PPSRBVQQDITMDQ.jpg)
Lawyers for a group of China-based scrap-metal recyclers have asked a federal court in New Jersey to return $5.5 million in cash, a Porsche Cayman Coupe, and a Texas warehouse, all seized last winter during a Homeland Security probe of worn coins sold to the U.S. Mint in Philadelphia.
Federal border control agents acted illegally when they decided the worn coins were fakes and seized the mint's payments to Wealthy Max Ltd., America Naha Inc., and XRacer Sports Co. Ltd., along with the car and warehouse, their lawyer, Bradford L. Geyer wrote in a filing asking a federal judge in Newark to dismiss the case.
Geyer says his clients' business has been wrongly interrupted, causing scrapped U.S. coins to pile up in China for the benefit of local bargain-hunters, instead of serving as cheap recycling material for one of America's oldest industries.
In an amended civil complaint last August, Homeland Security special agent Anthony Lanzillotti charged that Wealthy Max owners Wong Kwok Fai and Chan Kai Yan, American Naha owner Kei Yi Loung, and XRacer owner Chang Kyi had defrauded the mint "by submitting for redemption containers of counterfeit mutilated coins," which the companies said were change collected from wrecked American cars, furniture and other goods ending up in the vast scrap yards of southern China over the last decade.
Since 1911, the Philadelphia mint has bought back coins "mutilated" by melting, chipping and other wear that makes them unusable in coin machines.
Often, such coins were mailed to the mint in small batches. But as China's recycling industry grew rapidly in the 1990s, scrappers there started sending entire shipping containers identified as damaged quarters, dimes and other U.S. coins. The mint paid the scrappers. It also directed the large loads to commercial plants in Iowa and Illinois to be melted, and used the recycled ingots in new coins.
According to the complaint, Customs and Border Protection agents noted the rise in mutilated-coin shipments from China in 2009. They talked to mint officials, visited U.S. scrap yards, and decided that the volume of U.S. coins from China was suspiciously high.
The border service analyzed a sample of coins the mint bought from China in 2014 and found they "contained elements, such as aluminum and silicon, which are not found in genuine U.S. coins." They also lacked expected levels of nickel or copper, and showed "uniform" damage, as if aged on purpose. They determined the loads were counterfeit and seized the mint's payments and other property traced to the alleged fraudsters.
But in an expert opinion paid for by some of the accused, materials engineer Richard P. Baron of Dallas wrote that silicon is abundant in common dirt, aluminum is common in industrial recycling centers, discoloration is normal for corroded copper, and the government's scientific case, by failing to detail methods or findings, failed to support its allegations.
In their memo Tuesday, the companies also allege Homeland Security failed to give proper notice of seizure, and that mint and U.S. Treasury officials, more familiar with coinage, had found the coins acceptable.
Will Skaggs, spokesman for the U.S. Attorney's Office in Newark, declined comment on the filing. A spokesman for Homeland Security said it does not comment on pending litigation.
(215)854-5194@PhillyJoeD