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DA: Huge counterfeit cellphone seizure

Nassau County District Attorney Kathleen Rice looks over

Nassau County District Attorney Kathleen Rice looks over counterfeit cell phones. (June 20, 2012) Credit: Patrick E. McCarthy

Tens of thousands of counterfeit cellphones from China shipped to two Nassau County warehouses were seized in a scam in which three men, two of them from Syosset, were arrested, authorities said Wednesday.

The seized phones -- 32,627 of them worth more than $2 million total -- were to be sold online or to wholesalers who likely were unaware the goods were counterfeit, Nassau District Attorney Kathleen Rice said at a news conference at Kennedy Airport.

The operation involved repairing broken phones at factories in China, shipping them to New York City, packaging and labeling them at the two warehouses in Plainview and Hicksville, and selling them as new phones, said Nassau Police Det. Sgt. Patrick Ryder, head of the asset forfeiture and intelligence unit.

The phones sold were labeled as legitimate products made by companies such as Motorola, HTC, LG and Casio, authorities said.

An unknown number of people who bought the phones have no recourse, Rice said. Authorities said the scam went on for years, but they don't know exactly how long."Customers instead of getting the brand new phone they thought they were purchasing were stuck with a cheap knock-off," said Rice in announcing the results of a six-month investigation.

Consumers can protect themselves by buying from manufacturers, or from authorized sellers such as mobile providers and by checking with the Better Business Bureau, Rice said. Also, customer reviews on websites could steer consumers to legitimate retailers, Rice said.

The investigation began in January when customs agents at JFK doing random inspections noticed a suspiciously large shipment of the phones, authorities said.

The joint investigation involving the Nassau County district attorney's office, Nassau police, the Department of Homeland Security and U.S. Customs and Border Protection was dubbed "Operation: Long Distance Haul."

The joint investigation led to the arrests on state trademark counterfeiting charges of Qiang Chen, 44, and Ye Zhang, 43, both of Syosset, and Robert Eisenberg, 28, of Manhattan. They were arraigned Wednesday in Nassau District Court in Hempstead. If convicted, each suspect faces up to four years in prison.Chen is charged with five counts of trademark counterfeiting in the second degree. He was ordered held on $3,000 cash or bond. Zhang faces two counts of the counterfeiting charge and was ordered held on $10,000 cash or bond. Both men, doing business as AMAX International Group Inc., ran factories in China where the work was being done, authorities said.

Eisenberg, who did business as Cellphone Wholesale USA Inc. and faces one count of the trademark counterfeiting charge, ran websites selling the phones and supplied documentation in the shipments, authorities said. He was released on his own recognizance.

All three surrendered their passports, prosecutors said.

Brian Humphrey, the U.S. Customs and Border Protection port director at Kennedy Airport, said the January shipments came in boxes of about 50 phones each instead of individual shipments. Rather than being sent in their packaging, the phones were in individual cardboard sleeves.

Customs agents removed a sampling of the phones and sent them to the manufacturers they were labeled as. Those companies confirmed they were counterfeit, made with inferior parts, authorities said.

Upon confirmation the phones were counterfeit, Rice said, agents tracked eight more shipments between China and Long Island, and on Tuesday authorities executed a search warrant on a new shipment at Kennedy Airport and raided the two warehouses, seizing the phones and 40 iPads.

Nassau police also searched two safe deposit boxes belonging to the suspects Wednesday and seized about $500,000 in suspected proceeds, authorities said.

Several bags with bundles of $100 bills, along with several phones, were displayed at the news conference.

Rice said the investigation is ongoing and the severity of the felony charges could be ramped up if more proceeds are discovered.

Ten employees who were packaging the phones could be charged if they knew what the operation was doing, Rice said.

The three suspects also could face federal charges, said Nassau District Attorney Deputy Chief Anne Donnelly.

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