Owner Of AK Scientific Pleads Guilty To Felony Transportation Of Hazardous Materials

San Francisco, California – Peiwen Zhou, pleaded guilty in federal court in San Francisco today to illegally transporting hazardous materials and failing to properly declare imports of toxic substances, announced United States Attorney Brian J. Stretch, Environmental Protection Agency Special Agent in Charge Jay Green, and U.S. Department of Transportation Office of the Inspector General Regional Special Agent in Charge William Swallow.  The plea was accepted by the Honorable James Donato, U.S. District Judge.

In pleading guilty, Zhou, 55, of Palo Alto, admitted he did not adequately train employees at his company, AK Scientific, Inc., currently located in Union City, Calif., on the requirements of the Hazardous Materials Transportation Act, or HMTA.  Zhou further admitted that as a result of his failure, he caused AK Scientific employees to ship hazardous materials on a number of occasions without properly labeling, marking, and identifying the packages as containing such materials, in violation of the HMTA.  Zhou also admitted that he caused AK Scientific employees to fail to comply with the rules and regulations set forth in the Toxic Substances Control Act, or TSCA.

Specifically, Zhou admitted that he caused AK Scientific employees to not file TSCA import certifications on a number of occasions when the company imported chemical substances into the United States, including on one occasion when the chemical substance 1,2-dibromoethane was shipped to AK Scientific from China under a different name.  In sum, Zhou and AK Scientific each were charged by superseding information with one count of violating the HMTA, in violation of 49 U.S.C. § 5124, and one count of violating the TSCA, in violation of 18 U.S.C. § 2.

As part of today’s agreement, Zhou pleaded guilty to a felony violation of the HMTA and a misdemeanor violation of TSCA.  He also agreed to step down as CEO of AK Scientific and to play no role in the company’s shipping or regulatory functions.  The company, meanwhile, entered into a deferred prosecution agreement in which it agreed to pay a $100,000 fine and retain an independent monitor to oversee compliance.  Pursuant to the deferred prosecution agreement, the charges against the company will be dismissed if AK Scientific abides by the terms of the agreement for three years, including by maintaining compliance with safety and labeling requirements.

“The rules and regulations the defendant violated are designed to keep the public safe from hazardous materials and toxic substances, and we are committed to prosecuting those who flaunt them,” said U.S. Attorney Stretch.

“Americans must be protected from those who skirt laws designed to protect workers and the public from mismanagement of toxic substances,” said EPA Administrator Scott Pruitt.  “The illegal importation and shipment of toxic substances in this case represents a clear threat to public safety and we will hold the responsible parties accountable under the law.”

“The plea agreement reached today demonstrates that ensuring the safety of the Nation’s transportation systems remains a high priority for both the Office of Inspector General (OIG) and the Department of Transportation (DOT),” said William Swallow, DOT-OIG Regional Special Agent-in-Charge. “Working with our law enforcement and prosecutorial partners, we will continue our efforts to prevent and punish those who seek to compromise the integrity and safe transportation of hazardous materials.”

Judge Donato scheduled Zhou’s sentencing hearing for April 18, 2018.   The maximum statutory penalty for Zhou for violating the HMTA is five years in prison and a fine of up to $250,000; the maximum statutory penalty for Zhou for violating TSCA is up to one year in prison and a fine of up to $50,000 for each day of violation.

The press release is available at justice.gov.

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