The Justice Department has quietly settled a lawsuit seeking millions of dollars from companies the agency had accused of importing counterfeit U.S. coins from China and fooling the U.S. Mint into paying nearly full value for them.
A federal district judge in Philadelphia dismissed the case in a July 21 order that said the parties in the case, America Naha Inc. and Wealthy Max Ltd., had reached an agreement with the agency.
The settlement terms haven’t been disclosed, but lawyers for the companies portrayed the agreement as a victory for their clients, who insisted from the beginning that the coins they imported were genuine.
“This settlement is a big victory for America Naha and an admission by the government that its complaint was headed toward certain dismissal,” said America Naha’s lawyer, Lee Vartan of Holland & Knight. “The government never had any evidence that America Naha was engaged in counterfeiting.”
A spokesman for the U.S. attorney’s office in New Jersey, which filed the lawsuit, didn’t have an immediate comment.
The U.S. Mint reimburses people for coins that are bent, burned, fused, chipped or otherwise uncountable by machine, under a program established more than a century ago.
The program has paid out tens of millions of dollars since 2009, the year customs officials noted a sharp increase in large coin shipments from China, but the federal government suspended it last year in light of the counterfeiting investigation, effectively shuttering a mini-industry of mutilated coin importers.
“The recognition that there is no evidence that damaged U.S. clad coins have ever been counterfeited in bulk should lead to the prompt reopening of the U.S. Mint’s Mutilated Coin Redemption Program as it is required to do by law,” said Bradford L. Geyer of GeyerGorey LLP, a lawyer for Wealthy Max, in an emailed statement.
A third company, XRacer Sports, agreed to settle the claims against it earlier this year without admitting wrongdoing, forfeiting $129,000 of the $220,000 the U.S. Mint owed it for mutilated coins.
The U.S. Department of Justice sought to recover $5.4 million in coin reimbursements, a Porsche and a Texas warehouse from the three companies in a March 2015 lawsuit alleging they swindled the U.S. Mint.
The U.S. ships hundreds of thousands of tons of scrap to China each year, shredded vehicles accounting for a large hunk it. The hash of metal is often laden with beat-up coins, which are then plucked out by Chinese workers, according to metal recyclers.
The Chinese scrap yards sell the salvaged coins at a steep discount off their face value to companies like America Naha and Wealthy Max, which then import them into the U.S. and trade them at the U.S. Mint for a lump sum. A Wall Street Journal feature in April described the process.
An investigation by the U.S. Department of Homeland Security concluded that scrapped vehicles couldn’t account for the millions of dollars worth of coins arriving from China. The forfeiture complaint, filed by the Justice Department, cited a lab test showing coin samples from the companies’ shipments contained aluminum and silicon, suggesting they were fakes.
Defense lawyers said the companies obtained coins from sources in addition to shredded vehicles, like old vending and washing machines. The government’s lab report, later obtained by the companies, showed the coins contained only small amounts of the foreign elements — something to be expected of coins processed in an industrial shredder, defense lawyers said.
The U.S. has detained tons of coins imported for reimbursement by companies that haven’t been accused of wrongdoing. Some have filed lawsuits to force the government to free up their shipments.
A spokesman for the U.S. Mint didn’t respond to requests for comment.
SOURCE: The Wall Street Journal
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