Falling short of his father’s expectations at Oregon State University, Chinese national Quan Jiang jumped at the chance to get involved in what was billed to him as a lucrative “phone repair’’ business, his lawyer said Monday.
Jiang ended up importing 2,000 counterfeit Apple iPhones from China and “wheedling’’ new iPhones from the manufacturer in exchange for the fake products in an elaborate warranty scam that cost Apple up to $1.2 million, according to Assistant U.S. Attorney Ryan Bounds.
U.S. District Judge Karin J. Immergut sentenced Jiang to three years and one month in federal prison, rejecting the defense lawyer’s request for probation.
Jiang, 30, pleaded guilty in April to trafficking in counterfeit goods. He had dropped out of the Oregon State University’s engineering program because of his limited English.
His lawyer, Celia Howes, argued that Jiang didn’t orchestrate the fraud. He learned of it from a fellow college student and the leaders of the scheme are based in China, she said. Jiang didn’t recognize right away that the phones he received, which he then turned in to Apple to obtain replacements, were counterfeit, she said.
He earned $20 to $30 for each new iPhone he then sent back to China and made about $40,000 in total.
“His role was to receive, send in and return’’ the phones, Howes said. She asked that Jiang be placed on probation with a requirement to complete at least 1,000 hours of community service so he could educate other students.
“There’s a lot of students who are being duped by these employees in China, many of whom are still operating,’’ Howes told the court.
The prosecution countered that Jiang orchestrated the “repetitive racket’’ in the United States that lasted at least two years and took advantage of his friends by using their names or addresses when submitting more than 1,000 warranty claims to “trick and defraud Apple.’’
The fraud lasted from January 2016 through at least February 2018, according to Bounds. Jiang imported the counterfeit iPhones from Hong Kong, coordinating their delivery to multiple addresses in Oregon, Washington and Colorado. He and others sent each phone to Apple Inc., complaining it wouldn’t power on, in exchange for a new phone under Apple’s warranty process, according to the government.
Jiang then had the new phones shipped back to China for someone else to sell for hundreds of dollars and got a cut of the profit.
Jiang managed a ring of people in the United States who accepted shipments of the fake iPhones from China, Bounds said. Jiang also submitted warranty claims in his friends’ names. In January 2018 alone, for example, 50 phone warranty claims were submitted under more than a dozen different names, according to Bounds.
Apple’s records reflected that Jiang used more than 250 names and 1,330 email addresses for the submission of 3,069 fraudulent warranty claims. Apple then sent back to Jiang and his accomplices 1,493 new or refurbished iPhones, each with an average resale value of $600.
Jiang came to the United States on a student visa in 2012 and wasn’t allowed to work, the prosecutor noted. After dropping out of Oregon State because of his fourth-grade English level, he enrolled at Linn-Benton Community College.
Jiang, dressed in a blue suit and white dress shirt, stood before the judge and apologized, speaking through a Mandarin interpreter. He said he never intended to break the law. At times, he became emotional and dabbed his eyes with a tissue, as he apologized for disappointing his wife and parents, and being considered a “dishonoring son’’ in his homeland.
“Two years ago, I was so naive, innocent and kind of stupid as well,’’ he said. “ I want to apologize from the bottom of my heart. I’m terribly sorry.’’
Once he realized the scheme was unlawful, he said, “I did not want to face the truth because at the time I really needed the job. … I felt ashamed and embarrassed.’’ He said he was grateful to federal agent Thomas Duffy, an investigator with the U.S. Department of Homeland Security, for catching him in the crime.
If not, he said, he feared he would have just “sunk deeper and deeper.’’
Because of the “ongoing and calculated scheme’’ and Jiang’s continued participation in it for two years, the judge said prison was warranted to deter him and others.
“I do not find the naiveté is an excuse for the behavior,’’ Immergut said.
Jiang has paid $200,000 to Apple in restitution, money his parents obtained through the sale of their home in China, according to court records. He also was ordered to forfeit his 2015 Mercedes-Benz. He’ll be on GPS monitoring until his surrender to prison on Dec. 5. He also is likely to face deportation after completing his sentence.