A federal jury in Chicago on Wednesday, March 15, 2017, convicted Heon Seok Lee, CEO and president of KTurbo and KTurbo USA, of five counts of wire fraud and three counts of fraudulent importation of goods. The case centered on wastewater equipment falsely labeled as assembled in the USA.
The scheme
The 2009 American Recovery and Reinvestment Act required that its funds for building and renovating wastewater facilities be spent on domestic goods. Prosecutors said Lee won contracts with municipalities across the country by claiming that his company’s aeration turbo blowers were manufactured in the USA.
In fact, prosecutors said, KTurbo fully assembled the blowers in South Korea and shipped them in finished form. Placards reading “Assembled in USA” were attached before shipment. The Chicago Sun-Times reported that prosecutors said Lee aimed to collect more than $1.3 million from the contracts.
How it was caught
The 7th Circuit later described how the case began. In December 2010, a U.S. Customs officer opened a container from South Korea at a warehouse near the Los Angeles seaport. Inside was a fully assembled turbo blower with a riveted placard reading “Assembled in USA.”
Lee was extradited from South Korea in 2015. Each count carried a maximum of 20 years in prison. No sentencing date had been set at the time of the verdict.
In 2019, the 7th Circuit upheld his convictions. See our coverage of the appeal.
FAQ
What was falsely labeled?
Wastewater-treatment aeration turbo blowers that were fully assembled in South Korea.
Why did the USA origin matter?
Recovery Act funding for wastewater projects required domestic goods.
What was the verdict?
Guilty on five counts of wire fraud and three counts of fraudulent importation.
Source & credit
Source: Chicago Sun-Times: “South Korean businessman convicted of fraud after Chicago trial”, March 16, 2017.
Also: Associated Press via The Washington Times: “CEO convicted for false claims Korean goods made in USA”; U.S. v. Heon Seok Lee, 7th Cir. 2019.