An investigation that exposed a multimillion-dollar international smuggling scheme last weekend began, federal authorities say, with a couple from Gaithersburg.
In 1999, prosecutors say, Chang Shan Liu, 67, and his wife, May Liu, 66, a former World Bank employee, sought help sneaking large shipments of counterfeit cigarettes from China past port authorities in Newark. The supposed helpers were undercover FBI agents.
The couple and May Liu's nephew, Wei Li Gu, 44, also a former World Bank employee from Gaithersburg, are among 59 people across the United States charged in connection with the case. Prosecutors say May Liu and her nephew deposited proceeds from the sales into their World Bank credit union accounts.
The investigation that started with the Lius came to encompass connected criminal organizations, including those bringing drugs, weapons and millions of counterfeit dollar bills into the country, federal authorities said.
A woman at the Liu family home on Esworthy Place who identified herself as their daughter but would not give her name said the family had no comment. Chang Shan Liu's attorney, Lori Koch, said her client would plead not guilty.
Neighbors said they rarely saw the couple, particularly in the past six months. A call to Gu's home, on Lazy Hollow Drive, was not returned.
Court papers describe the Lius as "brokers" who arranged for almost 150 million counterfeit cigarettes to be smuggled from China, including knockoffs of Marlboro, Newport and other name-brand cigarettes.
According to prosecutors, Chinese customs officials were bribed to let the counterfeit items out of the country, and then the Lius were responsible for their importation and sale.
In the years after the couple's initial meeting with undercover agents, court documents say, they met with agents in restaurants and rest stops in the District, Maryland, Delaware, New Jersey, New York, Illinois and California. Chang Shan Liu also met with agents in warehouses in California and New Jersey, the documents say.
According to the indictment, the couple gave the agents bags containing tens of thousands of dollars -- as much as $117,000, in one case -- as payment for getting the shipments through port. Ultimately, prosecutors say, they brought 15 large shipments of counterfeit cigarettes and other items through ports in California and New Jersey.
May Liu and Gu used their accounts at the World Bank's credit union to hold $36,500 in illegal payments that they received, according to an indictment unsealed in federal court.
World Bank spokesman Damian Milverton said May Liu had worked in the technology department from 1976 to 1998 and Gu in the economics department from 1995 to 1997. World Bank policy prevented him from commenting further on former employees, he said.
Authorities said the money, which went through the Bank-Fund Staff Federal Credit Union after Liu and Gu had left the World Bank, was only a small part of an operation referred to as the "Hsu Enterprise," which took in several million dollars a year.
The indictment accuses the organization of cigarette smuggling and money laundering in New Jersey, New York, Illinois, California and other states. The group also operated in Canada, the indictment alleges.
The Lius were the first key to the investigation, prosecutors said.
"They were movers," said Michael Drewniak, spokesman for the U.S. attorney's office in New Jersey, which is prosecuting the case. "As you can see, there is a natural progression in the way the case evolved. It started with cigarettes and expanded to other kinds of contraband."
After a few preliminary meetings with the undercover agents, the Lius met with the agents at a rest stop in Delaware to give them documents for the goods. The Lius paid from $50,000 to $70,000 to the agents for each container smuggled into the Newark port, the indictment said.
Each shipment carried from 8 million to 11 million cigarettes, labeled as crafts, wicker, bamboo or rattan products or plastic toys, the indictment said.
The couple then sent some of the money to the undercover agents to launder for Cheng Ming Hsu, the head of the organization, prosecutors said. The group also trafficked in counterfeit Viagra pills, wallets and wristwatches, the indictment said.
The undercover agents maintained warehouses and moved the merchandise to keep up their cover, according to Drewniak.
Chang Shan Liu was arrested last weekend in an elaborate FBI sting. He and his wife were invited to attend the wedding of one of their conspirators aboard a yacht in Atlantic City. It turned out, however, that the conspirator was an FBI agent.
Chang Shan Liu and other suspects were taken into custody. He has since been released to home detention with electronic monitoring on $400,000 bond.
May Liu also was invited to the wedding, but she could not attend because she was recovering from a stroke, according to Drewniak.
She and Gu were arrested in Maryland. They have both been released on bond.
The suspects are scheduled to appear Wednesday in federal court in New Jersey.
Staff researcher Bobbye Pratt contributed to this report.