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A California woman pleaded guilty on Friday to defrauding the US Postal Service of $150 million by allegedly using fake postage to ship tens of millions of parcels to customers that came to the US from China-based logistics businesses. That's bound to make sellers fume given the high cost of postage for domestic shippers. Sellers who have access to below-market shipping costs can lower their prices, giving them an advantage over other sellers (whether or not they're aware of any fraudulent activity on the part of their vendors).
The US Department of Justice said the defendant, who has been in federal custody since her arrest in May 2023, pleaded guilty to one count of conspiracy to defraud the United States and one count of use of counterfeit postage.
Citing the defendant's plea agreement, the DOJ alleged that she and her co-defendant provided shipping services, including the shipping of packages via U.S. Mail, for China-based logistics businesses from at least November 2019 to May 2023 and further alleged that the defendants printed duplicate and counterfeit Netstamps - "stamps that may be purchased online from third-party vendors and printed onto adhesive paper."
The office of US Attorney Martin Estrada in the Central District of California issued an announcement that explained how the scheme allegedly worked:
"Starting in 2020, Chen and Hu began affixing counterfeit postage to mail they presented to USPS for delivery. Chen and Hu received parcels from the China-based vendors and others, applied shipping labels showing postage purportedly paid and then arranged for the parcels to be transferred to USPS facilities to be shipped across the nation. The shipping labels were fraudulent and frequently included, among other red flags, "intelligent barcode data" recycled from previously mailed packages, according to court documents. Intelligent barcode data is used in some postage shipping labels to evidence the payment of required postage for the shipped item."
Doing the math for one 5-month period, the defendants allegedly sent an average of 6.8 million packages/month bearing counterfeit postage: "From January 2020 to May 2023, Chen and Hu knowingly mailed and caused to be mailed more than 34 million parcels containing counterfeit postage shipping labels, which caused more than $150 million in losses to USPS."
According to the
plea agreement published on the Court Docket on April 7, 2024, the defendant (and co-defendant) allegedly operated their businesses through multiple business entities, including: AHC International Group, Inc.; AHC Supply Chain Management, Inc.; Art Plus Technology, Inc.; Coco USA Group, Inc.; Coco USA Group International, Inc.; and ZHC Logistics, Inc.
The charging document affidavit by the Postal Inspector investigating the case included the following image of one of the parcels with alleged counterfeit postage:
The government noted in the
announcement on the DOJ website: "An indictment is merely an allegation, and the defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law."
United States District Judge Josephine L. Staton scheduled an August 2 sentencing hearing, at which time the defendant will face a statutory maximum sentence of five years in federal prison for each count.