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required submittal of a notification to EPA pursuant to 15 U.S.C. § 2604(a)(1).
All in violation of Title 15, United States Code, Sections 2614 and 2615, and Title 18, United

States Code, Section 2.

DATED: A TRUE BILL,
2lvelt7 Varo W200. aus
FOREPERSON

BRIAN J. STRETCH
United States Attorney

Ea.. Qa fot

BARBARA J. VALLIERE
Chief, Criminal Division

(Approved as to form:

)
(‘a AUSA S. WAQAR HASIB

INDICTMENT 11



Di. PEIWEN ZHOU (herein “ZHOU”) was AK SCIENTIFIC’s founder, owner, and chief
executive officer. ZHOU received a Ph.D. in chemistry in 1998. After founding AK SCIENTIFIC,
ZHOU employed between 4 and 50 other people in various capacities, including shipping and receiving.

3. AK SCIENTIFIC purchased chemicals from other chemical supply companies. Some of
AK SCIENTIFIC’s suppliers were located internationally, in the People’s Republic of China, among
other places. AK SCIENTIFIC sold chemicals from its inventory to customers. AK SCIENTIFIC’s
customers included universities, research laboratories, and other entities. Some of AK SCIENTIFIC’s
customers were located domestically, including in the San Francisco Bay Area. Other AK SCIENTIFIC
customers were located internationally, in South Korea, Poland, India and New Zealand, among other
places.

4. AK SCIENTIFIC used common carrier companies to obtain chemicals from its suppliers,
and to deliver chemicals to its customers. AK SCIENTIFIC typically sent and received these chemicals
by both air and ground delivery.

The Hazardous Materials Transportation Act

53 The Hazardous Materials Transportation Act (herein “HMTA”) was enacted by Congress
to protect the public from the risks to life, property, and the environment that are inherent in the
transportation of hazardous materials in commerce. 49 U.S.C. § 5101. Under the HMTA, a “hazardous
material” means any substance or material that the Secretary of the Department of Transportation
designates as hazardous material, including explosive, flammable or combustible liquid, solid, or gas, or
toxic or corrosive material. 49 U.S.C. §§ 5102(2), 5103(a).

6. The HMTA provides the Secretary of Transportation with the authority to prescribe
regulations for the safe transportation of hazardous materials in intrastate, interstate, and foreign
commerce. 49 U.S.C. § 5103(b).

Ts Pursuant to this authority, the Secretary of Transportation has promulgated Hazardous
Material Regulations (HMRs), which appear at 49 C.F.R., Parts 171-180. The HMRs set forth
requirements for the safe and secure transportation in commerce of materials designated as hazardous

materials, and apply to each person who performs, or causes to be performed, functions related to the

INDICTMENT 2



Nom - ion

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through on or about February 3, 2016, in the Northern District of California and elsewhere, the
defendants,

PEIWEN ZHOU and AK SCIENTIFIC,
together with other employees at AK SCIENTIFIC and others known and unknown to the Grand Jury,
knowingly and willfully conspired to defraud the United States and agencies thereof, by obstructing the
lawful functions of the United States Environmental Protection Agency (EPA) to enforce the Toxic
Substances Control Act (TSCA) and the lawful functions of the United States Department of
Transportation (DOT) to enforce the Hazardous Materials Transportation Act (HMTA), by deceitful and
dishonest means.

MANNER AND MEANS

22. Defendants ZHOU and AK SCIENTIFIC and other individuals engaged in a conspiracy
to obstruct the lawful functions of the EPA and the DOT by and through the following manners and
means, among others:

a. ZHOU instructed employees in AK SCIENTIFIC’s purchasing and receiving
department to purchase chemicals, including chemicals listed on the TSCA Inventory, from
suppliers in China using false names for the chemicals, thereby avoiding TSCA requirements.

b. ZHOU instructed employees in AK SCIENTIFIC’s shipping department
to deliberately ship hazardous materials listed in the HMTA as non-hazardous materials, so as to
avoid HMTA requirements.

c ZHOU instructed employees in AK SCIENTIFIC’s shipping department to ship
hazardous materials as “excepted quantity” shipments, even though the shipments contained
quantities greater than allowed under the HMTA “excepted quantity” rules.

OVERT ACTS

23. In furtherance of the conspiracy, and to carry out the objects of the conspiracy, the
following overt acts, among others, were committed in the Northern District of California and
elsewhere:

a. On or about September 19, 2012, Company #1 shipped a package from Shanghai,

INDICTMENT 7



quantities” typically will not be subject to many of the shipping, marking, labeling, and training
regulations described above that would otherwise apply if the package contained larger quantities of
hazardous materials. However, even when shipped in excepted quantities, packages must be durably

and legibly marked with the following marking:

Tnlilenlililaliclalalaled |

~~ a> SOO | OO SN
~TMBR RTMN BQBAa_Q QA B.AaWQ

»s

, ft ef ft th ht he eh

with the “*” replaced by the primary hazard class of the hazardous materials contained in the package,
and the “**” replaced by the name of the shipper or consignee, if not shown elsewhere on the package.
49 C.E.R. § 173.4a(g).

11. The Department of Transportation’s Pipeline and Hazardous Materials Safety
Administration (PHMSA) is delegated authority under the regulations to conduct inspections of
hazardous materials and to conduct enforcement activity involving the inspecting of labels and
packaging. 49 C.F.R. §§ 107.301, 107.303, and 107.305. Intentionally mislabeling packages that

contain hazardous materials interferes with this lawful government function, among others.

INDICTMENT 4



oD wm ND

transportation of such materials. 49 C.F.R. §§ 171.1 and 171.8.

8. The HMRs contain a Hazardous Materials Table, which lists hazardous materials
descriptions, proper hazardous materials shipping names, hazard classes, materials identification
numbers (also known as United Nations numbers or UN numbers), packing group numbers, label codes,
and other pertinent information. 49 C.F.R. § 172.101.

9. Among other things, the HMRs require any person who offers for transportation in
commerce a hazardous material designated in the Hazardous Materials Table to:

a. Provide a shipping paper that sets forth the proper shipping name prescribed for
the hazardous materials, the hazard classes, the material identification numbers, the packing
group numbers, and the total quantity of the hazardous materials. 49 C.F.R. §§ 172.201-172.203.

b. Mark the package with the proper shipping name, identification number, and
technical names, on a label with sharply contrasting color. 49 C.F.R. §§ 172.301 (general
marking requirements for non-bulk packages) and 172.304 (marking requirements).

C. Label the package with specified labels designated in the regulations. 49 C.F.R.
§§ 172.400, 172.402, 172.407, and 172.411-172.448.

d. Provide emergency response information that is immediately available for use at
all times the hazardous material is present. 49 C.F.R. §§ 172.600 and 172.602.

e. Ensure that each employee handling hazardous materials is trained to comply with
the HMRs that apply to that employee’s particular job functions, including training on measures
to protect the employee from the dangers associated with hazardous materials to which they may
be exposed in the workplace, and training on measures and procedures for avoiding accidents.
49 C.F.R. §§ 172.700-172.704.

10... The HMRs allow certain hazardous materials to be shipped in very small quantities,
known as “excepted quantities.” 49 C.F.R. § 173.4a. Typically, in order to qualify as an excepted
quantity, a package must contain no more than 30 grams of a hazardous material (though some
particularly dangerous substances can only be sent in quantities of no more than | gram in order to

qualify as an excepted quantity). A package that contains hazardous materials in these small, “excepted

INDICTMENT 3



seize any such chemical substances, and to take other appropriate actions. 40 C.F.R. § 721.35. A failure
to notify the EPA that a chemical substance such as triphosgene is being used for a significant new use
interferes this lawful government function, among others.

16. Under TSCA, any person who imports certain chemical substances listed in the TSCA
Inventory is required to file a certification with U.S. Customs and Border Patrol (CBP) stating that the
chemical shipment is either subject to TSCA and complies with it, or is not subject to TSCA. 19 C.F.R.
§ 12.121(a). This certification is known as a TSCA Import Certification. In addition, TSCA delegates
authority to the Secretary of the Treasury to impose tariffs on chemical substances imported into the
United States that are listed in the TSCA Inventory. 15 U.S.C. § 2612. These tariffs are imposed in
accordance with the Harmonized Tariff Schedule of the United States. Tariff Act of 1930, 19 U.S.C.

§ 1202. Failure to file a TSCA certification and failure to identify an import as containing a chemical
substance listed on the TSCA inventory constitutes a violation of the Tariff Act. 19 U.S.C. § 1592(a).

17. Under TSCA, any person who exports or intends to export certain chemical substances
listed in the TSCA Inventory is required to notify the EPA of such export. 15 U.S.C. § 2611(b); 40
C.F.R. § 707.60. This notification is known as a TSCA Section 12(b) notice.

18. Triphosgene is a chemical for which a TSCA Section 12(b) notice is required prior to or
upon export. 15 U.S.C. § 2611(b); 40 C.F.R. § 721.20; 40 C.F.R. § 721.4880.

19. Upon receipt of a TSCA Section 12(b) notice of export, the EPA is required under the
regulations to notify the receiving country’s government within 5 business days of the identity of the
chemical being shipped, and the risks of injury it may pose to health or the environment. 40 C.F.R.

§ 707.70. Failure to file a TSCA Section 12(b) notice interferes with this lawful government function,

among others.

COUNT ONE: 18 U.S.C. § 371 - Conspiracy to Defraud the United States
20. The factual allegations set forth in paragraphs | through 19 above are re-alleged and
incorporated as if fully set forth herein.

21. Starting on an unknown date, but no later than approximately 2008, and continuing

INDICTMENT 6



AO 257 (Rev. 6/78)

DEFENDANT INFORMATION RELATIVE TO A CRIMINAL ACTION - IN U.S. DISTRICT COURT

sy: 1) compcaint C1 InrorMATION INDICTMENT
UO supersepinc

-———— OFFENSE CHARGED
18 U.S.C. § 371 - Conspiracy To Defraud The United States; CO Petty
18 U.S.C. § 545 - Smuggling Into The United States; .
15 U.S.C. §§ 2614 and 2615 ~ Toxic Substances Control Act; [Minor
49 U.S.C. § 5124 - Hazardous Materials Transportation Act;
Ey Misde-
meanor
Felony

PENALTY:
Please see attachment.

Name of Distrighqu and/or Judge gistrate Location
NORTHERN’ DISTRICT OF CALIFORNIA

Len OAKLAND DIViBION
"5

i
(=, DEFENDANT. - U.S"

ae

5 3
WS C4 CO
RAW. = JENTIFIC, IN
DISTRICT COURT NUMBER
DEFENDANT

PROCEEDING
Name of Complaintant Agency, or Person (& Title, if any)

Environmental Protection Agency

o person is awaiting trial in another Federal or State Court,
give name of court

this person/proceeding is transferred from another district
Oo per (circle one) FRCrp 20, 21, or 40. Show District

this is a reprosecution of
o charges previously dismissed

which were dismissed on motion SHOW

of: DOCKET NO
(us.attorNey [[] DEFENSE }

this prosecution relates to a
pending case involving this same

defendant MAGISTRATE
CASE NO.
prior proceedings or appearance(s)
(before U.S. Magistrate regarding this
defendant were recorded under —____

Name and Office of Person
Furnishing Information on this form

[K]U.S. Attorney [] Other U.S. Agency

Brian J. Stretch

Name of Assistant U.S.

Attorney (if assigned) S. Wagar Hasib

PROCESS:
Oo SUMMONS oO NO PROCESS* WARRANT

If Summons, complete following
OD Arraignment [J Initial Appearance

Defendant Address:

Date/Time:

ADDITIONAL INFORMATION OR COMMENTS

Bail Amount:

* Where defendant previously apprehended on complaint, no new summons or
warrant needed, since Magistrate has scheduled arraignment

IS NOTIN CUSTODY

Has not been arrested, pending outcome this proceeding.
If not detained give date any prior

summons was served on above charges d

2) (1 Is a Fugitive

3) [7 Is on Bail or Release from (show District)

IS IN CUSTODY
4) [ On this charge

5) ([] On another conviction

} CJ Federal [J State
6) [[] Awaiting trial on other charges
If answer to (6) is "Yes", show name of institution

If"Yes"
} give date

Has detainer L] Yes

been filed? [No filed
DATE OF > Month/Day/Year
ARREST

Or... if Arresting Agency & Warrant were not

DATE TRANSFERRED Month/Day/Year
TO U.S. CUSTODY

O This report amends AO 257 previously submitted

Before Judge:

Comments:



All in violation of Title 18, United States Code, Section 371.

COUNT TWO: 18 U.S.C. § 545 — Smuggling into the United States

24. The factual allegations set forth in paragraphs 1 through 4 and 12 through 19, above, are
re-alleged and incorporated as if fully set forth herein.

25: On or about September 19, 2012, in the Northern District of California and elsewhere, the
defendants,

PEIWEN ZHOU and AK SCIENTIFIC,

fraudulently and knowingly imported and brought into the United States merchandise, to wit: 25
kilograms of 1,2-dibromoethane, contrary to the law of the United States, by claiming said merchandise
to be “Bema Inkjet Ink(Flush),” and failing to properly complete a TSCA Import Certification, in
violation of the Tariff Act of 1930, 19 U.S.C. §§ 1202, 1592(a), and 19 C.F.R. § 12.121.

All in violation of Title 18, United States Code, Sections 545 and 2.

COUNT THREE: 15 U.S.C. §§ 2614 and 2615 - Toxic Substances Control Act

26. The factual allegations set forth in paragraphs 1 through 4 and 12 through 19, above, are
re-alleged and incorporated as if fully set forth herein.

27. On or about November 11, 2014, in the Northern District of California and elsewhere, the
defendants,

PEIWEN ZHOU and AK SCIENTIFIC,

knowingly and willfully failed and refused to comply with a requirement and rule promulgated under the
Toxic Substances Control Act, to wit, the requirement to file a TSCA Section 12(b) notice for the export
of triphosgene, in violation of 15 U.S.C. § 2611(b) and 40 C.F.R. §§ 721.20 and 721.4880.

Allin violation of Title 15, United States Code, Sections 2614 and 2615, and Title 18, United

States Code, Section 2.

INDICTMENT 9



China, to employees at AK SCIENTIFIC. The package contained 25 kilograms of 1,2-
dibromoethane, a hazardous material regulated by the HMTA and a chemical substance
regulated by the TSCA Inventory. The shipping papers attached to the package falsely described
the contents as “Bema Inkjet Ink(Flush).”

b. On or about November 11, 2014, employees at AK SCIENTIFIC shipped a
package to Company #2 in Gyeonggi-do, South Korea. The package contained triphosgene, a
hazardous material regulated by the HMTA and a chemical substance regulated by the TSCA
Inventory. The shipping papers that AK SCIENTIFIC employees attached to the package
described the contents as “laboratory chemical reagent for laboratory research,” and did not
declare any hazardous materials.

c. On or about September 26, 2014, employees at AK SCIENTIFIC shipped
packages to Company #3 in Wellington, New Zealand. The packages contained imidazole, 4-
(Trifluoromethyl) aniline, and copper sulfate, anhydrous, which are all hazardous materials
regulated by the HMTA. The hazardous materials were all shipped in quantities greater than 30
grams. The packages did not include shipping papers, labeling, marking, or emergency response
information as required under HMTA.

d. On or about January 8, 2015, ZHOU sent a letter to the Federal Aviation
Administration claiming that the hazardous materials described above that AK SCIENTIFIC
shipped to Company #3 in New Zealand were all under 30 grams and therefore were shipped as
“excepted quantities.”

@: On or about January 28, 2016, employees at AK SCIENTIFIC attempted to ship a
package to Company #4 in Calcutta, India. The package contained 5 grams of 4-
aminopropriophenone, a hazardous material regulated by the HMTA and a chemical substance
regulated by the TSCA Inventory. The shipping papers that AK SCIENTIFIC employees
attached to the package described the contents as “laboratory chemical reagent for research, non-
hazardous.” The package did not include the marking described above in paragraph 10,

indicating that it contained an “excepted quantity” of hazardous materials.

INDICTMENT 8



on a

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The Toxic Substances Control Act

12. The Toxic Substances Control Act (TSCA) was enacted after Congress found that there
were some chemicals whose manufacture, processing, distribution in commerce, use or disposal
presented an unreasonable risk of injury to health or the environment. 15 U.S.C. § 2601(a)(2). Under
TSCA, the Administrator of the United States Environmental Protection Agency (EPA) is required to
maintain an inventory (herein “the TSCA Inventory”) of each “chemical substance” which is
manufactured or processed in the United States. 15 U.S.C. § 2607(b). The TSCA Inventory currently
lists approximately 85,000 chemicals and is published online and elsewhere by the EPA. See generally

https://www.epa.gov/tsca-inventory; 40 C.F.R. Part 710.

13. Under TSCA, the EPA Administrator is authorized to issue “significant new use rules,”
governing the use of particular chemical substances, if the manufacture, processing, distribution in
commerce, use, or disposal of such substances presents or may present an unreasonable risk of injury to
health or the environment. 15 U.S.C. § 2604(b)(4)(A).

14. | The EPA Administrator has issued a significant new use rule for the chemical substance
known as triphosgene, also known as methanol, tricholoro-, carbonate (2:1), also known as
bis(trichloromethyl) carbonate, or BTC. This rule requires any container of triphosgene in the
workplace to bear the following statements on the container label:

This substance may cause: skin irritation
This substance may cause: respiratory complications
This substance may cause: central nervous system effects
This substance may cause: cancer
When using this substance: avoid skin contact
When using this substance: avoid breathing substance
When using this substance: avoid ingestion
This substance may react to form phosgene gas.
When using this substance, handle with extreme caution.
40 C.F.R. § 721.4880(a)(2)(i). A failure to ensure that each container of triphosgene in the workplace is
labeled with these statements is a significant new use of triphosgene requiring notification to the EPA.
15 U.S.C. § 2604(a)(1); 40 C.F.R. § 721.72(b).

15. The EPA has authority under the regulations to enjoin the manufacture, import or

processing of a chemical substance such as triphosgene in violation of any significant new use rules, to

INDICTMENT 5



BRIAN J. STRETCH (CABN 163973)
United States Attorney

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA 7/9)
OAKLAND DIVISION
CRiz <~ Oa
UNITED STATES OF AMERICA, ) CASE NO.
)
Plaintiff, ) NIOLATIONS: 18 U.S.C. § 371 — Conspiracy To
) Defraud The United States; 18 U.S.C. § 545 —
v. ) Smuggling Into The United States; 15 U.S.C. §§ 2614
EE nO ae ; and 2615 — Toxic Substances Control Act; 49 U.S.C.
: 2 ) § 5124 — Hazardous Materials Transportation Act; 18
Defendants. J USS.C. § 2 — Aiding and Abetting
) OAKLAND VENUE
)
INDICTMENT
The Grand Jury charges:

INTRODUCTORY ALLEGATIONS

At all times relevant to this Indictment:

PEIWEN ZHOU and AK SCIENTIFIC, INC.

1. AK SCIENTIFIC, INC. (herein “AK SCIENTIFIC”), was incorporated on June 23, 2004,
and began operating in approximately 2006. AK SCIENTIFIC was involved in the business of selling
research and specialty chemicals. The company was initially located in Mountain View, California. In

approximately 2010, the company relocated to Union City, California.

INDICTMENT 1



-~ ~

Gnuited States District Court

FOR THE
NORTHERN DISTRICT OF CALIFORNIA ay
Fey

VENUE: OAKLAND

Soy,

en

Ap,
D

UNITED STATES OF AMERICA,
V.

CRI? “=” On Ub

PEIWEN ZHOU and
AK SCIENTIFIC, INC.

DEFENDANT(S).

INDICTMENT

18 U.S.C. § 371 — Conspiracy To Defraud The United States;
18 U.S.C. § 545 — Smuggling Into The United States;
15 U.S.C. §§ 2614 and 2615 — Toxic Substances Control Act;
49 U.S.C. § 5124 — Hazardous Materials Transportation Act;
18 U.S.C. § 2 — Aiding and Abetting

A true bill. \ “
— Kginml I O0ame
Foreman
Filed in open court this 1G day of
eer Zo
Laurel Beeler ( Clerk
Unit te Judge.

ne hel worrakh fr Pawn Lhsd
Bail, $
[ yor ty KE SAA



ATTACHMENT TO PENALTY SHEET

PEIWEN ZHOU and AK SCIENTIFIC, INC.

Count Offense Maximum Penalty
1 18 U.S.C. § 371 —Conspiracy To | 5 years in prison
Defraud The United States 3 years supervised release
$250,000 fine
$100 special assessment
2 18 U.S.C. § 545 — Smuggling Into | 20 years in prison
The United States 3 years supervised release
$250,000 fine
$100 special assessment
3,11 15 U.S.C. §§ 2614 and 2615 — Up to | year in prison
Toxic Substances Control Act Up to I year supervised release
Up to $50,000 for each day of violation
$25 special assessment for ZHOU
$125 special assessment for AK SCIENTIFIC
4 through | 49 U.S.C. § 5124 — Hazardous 5 years in prison
10 Materials Transportation Act 3 years supervised release

$250,000 fine
$100 special assessment



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COUNTS FOUR THROUGH TEN: 49 U.S.C. 5124(a) — Hazardous Materials Transportation Act

28. The factual allegations set forth in paragraphs 1 through 11 above are re-alleged and
incorporated as if fully set forth herein.
29. On or about the dates set forth in the table below, in the Northern District of California,
the defendants,
PEIWEN ZHOU and AK SCIENTIFIC,
willfully and recklessly offered for transportation the hazardous materials set forth in the table below,

without labeling the packages as containing hazardous materials, in violation of 49 C.F.R. § 172.400:

COUNT | DATE OFFERED FOR HAZARDOUS MATERIAL SHIPPED
TRANSPORT
4 July 3, 2014 1,2-dibromoethane
5 March 27, 2015 N-Bromosuccinimide
6 August 26, 2015 P-toluenesulfonyl cyanide
7 August 26, 2015 3-fluorophenylacetylene
8 August 26, 2015 3,3-dimethylcyclohexanone
9 September 21, 2015 Di-tert-butyl dicarbonate
10 January 28, 2016 4’-aminopropriophenone

All in violation of Title 49, United States Code, Section 5124(a) and Title 18, United States
Code, Section 2.
COUNT ELEVEN: 15 U.S.C. §§ 2614 and 2615 - Toxic Substances Control Act

30. The factual allegations set forth in paragraphs 1 through 4 and 12 through 19, above, are
re-alleged and incorporated as if fully set forth herein.

31. On or about February 3, 2016, in the Northern District of California, the defendants,

PEIWEN ZHOU and AK SCIENTIFIC,

knowingly and willfully failed and refused to comply with a rule promulgated under the Toxic
Substances Control Act, to wit, the rule set forth in 40 C.F.R. § 721.4880(a)(2)(i) requiring that any
container of triphosgene in the workplace bear required statements on the container label as described

above in paragraph 14, said failure and refusal constituting a significant new use of triphosgene that

INDICTMENT 10