'Smoking Dragon' Uncovers Alleged U.S.
Surface-to-Air Missiles Smuggling Scheme

Los Angeles, California (FBI) -- Using an anti-terrorism statute for the first time in the nation, a federal grand jury in Los Angeles Wednesday returned a superseding indictment that accuses two men of conspiring with foreign nationals to smuggle into the United States shoulder-fired surface-to-air missiles designed to shoot down aircraft.

The new indictment charges Chao Tung Wu, 51, of La Puente, California, and Yi Qing Chen, 41, of Rosemead, California, with conspiracy to import missile systems designed to destroy aircraft. This statute, which was enacted in December 2004 as part of an intelligence reform package, carries a mandatory minimum penalty of 25 years and the possibility of life without parole in federal prison.

The superseding indictment is the result of Operation Smoking Dragon, an FBI-led undercover investigation into smuggling operations in Southern California. Smoking Dragon and a related investigation in New Jersey this summer led to the indictment of 87 individuals – including Wu and Chen – on charges related to international conspiracies to smuggle counterfeit United States currency, drugs and other contraband into the United States.

In August, Wu, Chen and two others were indicted for allegedly conspiring to distribute methamphetamine and Ecstasy, as well as on charges of importing millions of counterfeit cigarettes. Wu was also charged in a scheme to import "Supernotes" – extremely high quality counterfeit $100 bills – into the United States. The indictment adds the charge related to the surface-to-air missiles against Wu and Chen.

The indictment charges that Wu and Chen met with an undercover FBI agent and agreed to arrange the importation of several QW-2 shoulder-fired missiles, as well as the missiles' launch and operation hardware, from another country. Wu and Chen told the undercover agent that a third country would pretend to order the missiles from the manufacturer, but the missiles would, instead, be shipped to the United States in sea-land containers. As part of the scheme, the missiles allegedly would have been fraudulently manifested as "civilian" equipment, such as machine components.

Wu, Chen and unindicted co-conspirators allegedly were to pay bribes to customs officials in other countries to ensure the shipment. One payment was to be a $2 million bribe to an official in a foreign country.

Wu and Chen allegedly traveled overseas on several occasions in furtherance of the conspiracy and gave the undercover agent documents regarding the weapons. The agent received a brochure which described in detail the capabilities of the QW-2 missiles, describing the missiles' targets to include the F-15 and F-16 Fighters, the A-10 Attack aircraft, the AH-64 "Apache", and the Tomahawk cruise missile.

During the alleged conspiracy, Wu and Chen also referred the undercover agent to a foreign "General" with whom the undercover agent had contact regarding the purchase of weapons. The indictment further alleges that Wu sold the undercover agent a bogus passport to assist him in negotiating overseas the purchase of the weapons.

After Wu and Chen were arrested in August during the takedown of Smoking Dragon, the undercover agent had additional contacts with a foreign individual who said he wanted to complete the weapons deal even without Wu or Chen.

Wu and Chen were previously ordered held without bond. They are scheduled to be arraigned on the superseding indictment on Monday.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.

Operation Smoking Dragon, which was announced on August 18, resulted in four indictments in Los Angeles that name 30 defendants. The indictments allege that several individuals in California were importing counterfeit products, including $40 million worth of cigarettes that were manufactured in a foreign country, through the Los Angeles and Long Beach waterfronts. An FBI undercover operation arranged the shipment of these counterfeit goods into California for the purpose of identifying the entire criminal enterprise. FBI undercover agents posed as underworld criminals who could move these counterfeit products into the United States and Canada. The defendants, believing they were dealing with other criminals, paid for some of the illegal shipments with counterfeit cigarettes and narcotics.

Operation Smoking Dragon led to the seizure of nearly $1.2 million in Supernotes.

"Operation Smoking Dragon uncovered an extremely sophisticated smuggling operation that included the production of counterfeit goods and their distribution across the country," said United States Attorney Debra Wong Yang. "Today's indictment shows a willingness of the smugglers to acquire practically anything for importation – no matter how dangerous or destructive."

Operation Smoking Dragon was an investigation run by the Federal Bureau of Investigation, which received substantial assistance from U.S. Immigration and Customs Enforcement and the United States Secret Service.