The founder and former chief executive officer of a California-based international logistics and freight forwarding company with offices in Grapevine, Texas, pleaded guilty to conspiring to violate export laws by shipping goods to Chinese companies on the U.S. Department of Commerce’s Entity List.
According to court documents, Richard Shih’s U.S. company had a business relationship with Chinese freight forwarder Seajet Company Limited as of September 2018. In September 2018, Seajet and its Chinese co-owner were both added to the Entity List for engaging in activities that were contrary to the United States’ national security and foreign policy interests, including unlawfully procuring and diverting U.S.-origin items to North Korea.
In addition, in June 2021, Hisiang Logistics Company Limited was added to the Entity List as an alias for Seajet. Hisiang is the Chinese transliteration of Seajet. As a result of being added to the Entity List, a specific license was required to export goods from the United States to Seajet, its co-owner, and Hisiang. Nonetheless, between September 2018 and May 2022, Shih and others at his company continued transacting with and exporting items to Seajet and its affiliates.
Specifically, between September 2018 and May 2022, Shih’s company conducted more than 1,000 shipments of items from the United States to Seajet and its alter-ego Hisiang. During that time period, Seajet’s co-owner and his affiliated businesses, including Hisiang, transmitted 34 international wire transfers to accounts held by Shih’s company. The company used the funds to pay various expenses on the transactions, such as air carriers and trucking companies, while retaining a portion of the funds as profit.
Shih and his company knew that Seajet and its co-owner were on the Entity List and that Hisiang was established as an alias for Seajet. For example, Seajet’s co-owner emailed Shih to notify him that Seajet had changed its name to Hisiang for purposes of its international business but that “[t]here is nothing else changed, such as company address, structure and policy, etc.” Shih then forwarded the email to ten of his employees, copying Seajet’s co-owner and several Seajet employees.
In addition, federal officials repeatedly educated Shih’s company about the Entity List and related laws. In December 2018, after Seajet and its co-owner were added to the Entity List, a BIS official visited Shih’s company to discuss the prohibition against exporting items to Seajet, because it was on the Entity List. Yet, company records from the time revealed that it had used an account code assigned to Seajet for a shipment to Hisiang. In November 2020, another BIS official contacted Shih’s company and received a list of foreign persons and companies with which Shih’s company would not do business. Yet, the company’s list did not include Seajet, its co-owner, or Hisiang.
Shih, 77, pleaded guilty to conspiring to violate the Export Control Reform Act, violating 18 U.S.C. § 371, which carries a maximum sentence of up to five years in federal prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division, Assistant Secretary for Export Enforcement Matthew S. Axelrod of the Department of Commerce Bureau of Industry and Security, U.S. Attorney Leigha Simonton for the Northern District of Texas, and Executive Assistant Director Robert Wells of the FBI’s National Security Branch announced the case.
The FBI and BIS are investigating the case.
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