The high-powered drug maker Pfizer sure knows how to get the attention of federal agents and prosecutors.
The drug maker contacted Immigration & Customs Enforcement (ICE) agents in Houston to blow the whistle that a Chinese business was selling counterfeit Viagra pills on the Internet, and now a full year later, that business owner is locked up at the Federal Detention Center in Houston.
Kum Leung Chow, also known as Lawrence Chow, owner of Kingdom International Enterprises, is scheduled to appear before a federal magistrate in Houston this week on felony counts of Trafficking in Counterfeit Goods and selling Misbranded Pharmaceuticals.
ICE agents spelled out their entire investigation in an affidavit to support the criminal charges against him. He was indicted by a federal grand jury last week and will face a judge for arraignment on Friday.
When agents got the call from Pfizer's investigative staff, complaining that its lucrative erection booster was being copied and sold online, agents arranged a controlled delivery. That means federal agents immediately jumped into action when this drug maker called them, and set up a "controlled delivery" to an address in Houston.
Sure enough, after placing that order, the Pfizer people turned it over to ICE agents.
In a matter of days, the affidavit spells out that ICE received an express mail package at their undercover address, containing 200 Viagra tablets that later tested to be counterfeit. Ther were also 15 four-count boxes of Cialis, an erection drug made by Eli Lilly Company.
Agents then contacted Chow at his business, Kingdom International Enterprise in Hong Kong, posing as an anxious customer ready to buy truckloads of the counterfeit drugs.
Phony drugs, especially those made in China, are usually bought for pennies on the dollar, allowing a massive markup for the middle-man, while keeping the price below what legitimate drug stores charge for the authentic drugs. Plus, online sellers from overseas usually require no prescription, whereas the authentic drug requires a doctor's order in the United States.
In March 2009, agents write in their affidavit that Chow, using an e-mail address that begins with "lawking119", offered to ship 280 tablets of Viagra and 120 tablets of Cialis. The going rate? He charged $10 per box of both drugs (each box containing 4 pills each).
Less than a month later, the shipment arrived at the undercover mail box in Houston. The package was described as "gift" on the waybill (paperwork required for international shipments).
Then, the plot thickened as Chow apparently sensed he had a hot customer.
In an April 12, 2009 e-mail to the undercover ICE agents, the court affidavit says Chow described his company as being a "reliable exporter from China to States."
Chow is quoted as writing, "I personally have very good reputation in most of the importers in New York. We believe we are able to do things together since I am able to travel to States and China easily and our company is a registered limited company in Hong Kong."
In the first transaction, agents wired $1,000 into Chow's bank account, and then another order was placed by agents for $2,250. The second order was for 200 four-count boxes of Viagra and 50 four-count boxes of Cialis at a price of $9 per box. This time the waybill said "Plastic box" when asked what was contained in the shipment.
An undercover agent then called Chow on the phone to negotiate much larger sales and that's when the plot thickened. Agents write,
Chow detailed a scheme in which large shipments of pills would be concealed in containers of merchandise arriving into the United States. Chow's forwarder in the United States would then retrieve the pills and send them to the (undercover agent). Chow emphasized that this method would be beneficial because the packages containing the pharmaceuticals would not have to clear Customs."
The undercover agent said that Chow assured him that 8,000 boxes of pills could easily be concealed in the container. Chow told him Customs doesn't check every container and was concerned primarily with payment of duty for the merchandise that was fully disclosed in the container. In other words, they wouldn't even know the pills existed because Customs only wanted the duty fees for the soap or electronics or whatever was actually declared in the load.
ICE agents then placed another order and wired another $2,700 into the bank account provided by Chow, but then the international businessman said he wasn't going to ship that order because he's only in business for massive orders from now on.
Agents write in their affidavit that, Chow stated that going forward, he would not accept small orders of pharmaceuticals. Chow indicated that a minimum order quantity of 5,000 boxes (20,000 tablets) would be required for all future orders of pharmaceuticals. Chow cited recent seizures by Chinese Customs of EMS parcels containing pharmaceuticals as a reason for not wanting to engage in small orders."
ICE agents wanted to keep him on the line, but without paying such a huge sum of money for a larger order than they needed to prove their case, so they agreed to have that $2,700 act as a deposit for a big 20,000 tablet order. They asked if he could send them a sample for that order.
In June 2009, that sample arrived at the Houston undercover address, this time the shipping paperwork that was examined by Customs and postal officials said the shipments contained a "Sample of Toys."
ICE agents had Pfizer and Lilly laboratories test all of the shipments of pills and agents said both companies confirmed the packaging and the pills themselves were all phonies.
During his e-mail communications, Chow mentioned he was going to be in Los Angeles to work out a deal for cigarettes. He was placed on a watch list and court documents show the government database revealed Kum Leung Chow entered the US through Los Angeles International Airport (LAX) on December 7th.
One month later, in January, Chow was arrested by federal agents in New York and then brought to Houston to face the criminal charges.
A second man, Edward Webb (also known as Nick Wells) is also facing similar charges in Houston, accused of trafficking in counterfeit Viagra and Cialis that were coming from China. A warrant was issued last week, requiring him to appear before a magistrate judge on 6 felony counts.
Court papers were vague, so it was unclear if he is the freight forwarding agent or exactly how he was involved in the scheme.
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