Bad Chinese Magnesium Entered US Arsenal

2010-05-03

U.S. Federal authorities charged six people and three companies with importing substandard magnesium powder from China into the United States, where officials say it got into the Defense Department's arsenal but was discovered before being used in combat or exercises.

The powder was used to make 1.8 million "countermeasure" flares, worth $42 million, used by military aircraft to divert heat-seeking missiles. Officials said that none made it onto aircraft before being quarantined, and that all will be destroyed.

A grand jury indictment outlined an elaborate scheme that allowed defendants, from New York, Pennsylvania and China, not only to benefit from a lucrative defense contract, but also to avoid steep tariffs meant to protect the American magnesium industry.

The Chinese-made magnesium was mixed with aluminum nuggets and mislabeled when it entered the country in sealed drums through ports in Los Angeles and Washington, investigators said, so that it would not be subject to a 306% duty.

Once inside the United States, the quarter-inch aluminum nuggets were sifted out and the magnesium sold to an unknowing defense contractor, Kilgore Flares, investigators said.

"As a result, DOD was sold non-conforming flares, which could have put our war fighters at additional risk," said Lev Kubiak, an Immigration and Customs Enforcement agent in Buffalo. None of those charged was in custody Friday, authorities said. An arraignment had not yet been scheduled.

Among those named in the indictment was Charles Wright, the owner of ESM Group Inc. in the Buffalo, NY suburb of Amherst, who allegedly received the Chinese magnesium and then sold it to Kilgore Flares.

Wright allegedly received the material from a Franklin, Pa., company, Superior Metal Powders, via Qian Chen, of Beijing, as well as Buffalo-area importer William Nehill and Nehill's International Technology Group. All were charged in the indictment, along with Superior employees Gregory Magness and Justin Magness.

The Defense Department requires all the finely ground magnesium used for flares to be made in the United States or Canada. The material, which originated in China, did not meet the military's stringent quality standards and might have resulted in a shorter shelf life for the flares, authorities said.

The charge of wire fraud carries a possible 20-year prison term and $250,000 fine. The conspiracy charge carries a maximum five-year term and the same fine. The government also is seeking to recover millions of dollars through the forfeiture of assets.