Federal investigators have linked a Chinese state-run export company to a conspiracy to sell surface-to-air missiles in the United States, Justice Department officials said.
The China Xinshidai Group, a conglomerate of several Chinese state-run manufacturers, is accused in a scheme to illegally export Chinese missiles to the United States through organized crime groups.
“This is all part of the conspiracy to sell, essentially, surface-to-air missiles manufactured by the Xinshidai company in China,” one official said.
The officials said the case also involves bribes paid to a foreign government, but they would not elaborate.
Charges in the case have been drawn up by federal prosecutors in Los Angeles, and an indictment for conspiracy to import missiles designed to shoot down aircraft is expected to be issued in the near future, said officials who spoke on the condition of anonymity.
Justice Department spokesmen in Los Angeles declined to comment. A Xinshidai spokesman could not be reached for comment.
The case is the first to be investigated under a 2004 law that makes it a crime to traffic in missiles designed to destroy aircraft.
Officials said the investigation is related to sections of the law making it illegal to import anti-aircraft missiles. The charges being considered can result in a penalty of 30 years in prison and a $2 million fine.
The officials said the missile case developed out of the large-scale federal investigation in Los Angeles known as Smoking Dragon.
A defendant in that case, Taiwanese national Wu Chao Tung, also known as John Wu, was identified by investigators as a key player, along with a second person identified as Yi Chen, in the scheme to buy the surface-to-air missiles.
Debra Opri, an attorney for Mr. Wu, declined to comment on the charges but said she was “not surprised” that an additional indictment for missile trafficking is being prepared.
Mr. Wu was identified in a federal indictment handed up in June as one of four persons linked to a conspiracy to sell high-quality counterfeit $100 bills known as supernotes. He is in custody in California. Mr. Wu has denied those charges, Ms. Opri said.
The counterfeit notes were produced by North Korea and are the first prosecution of a case involving illegal currency production by the communist country.
Operation Smoking Dragon, along with Operation Royal Charm in Newark, N.J., led to the arrests in August of 59 persons — many of them Taiwanese or Chinese nationals — on charges related to counterfeiting, drug trafficking and dealing in contraband cigarettes. The indictments named 87 persons involved in the illegal activities.
Prosecutors said two men linked to the New Jersey cases told undercover federal agents they could provide $1 million in arms, and the agents wire-transferred a $50,000 deposit for the weapons, which were never delivered.
A second official close to the investigation said the surface-to-air missile case was developed after one of those arrested in August disclosed additional information about the Chinese missile smuggling scheme.
The missiles involved were not identified by type.
However, since the 1990s, China has produced a shoulder-fired missile known as the HN-5, which is made by the China National Precision Machinery Import and Export Corp., part of Xinshidai.
Xinshidai was hit with U.S. sanctions in September 2004 for illicit sales of missiles and related goods to Iran, U.S. officials said.
The Chinese missile case is the second one in recent years involving covert sales in shoulder-fired missiles. British arms dealer Hemant Lakhani was convicted earlier this year of attempting to sell 50 Russian surface-to-air missiles to an FBI undercover agent. He was sentenced to 47 years in prison.