First Superseding Indictment — United States v. Jia Bei Zhu et al., Eastern District of California

Summary

First Superseding Indictment in United States v. Jia Bei Zhu, aka Jesse Zhu, Qiang He, and David He, and Zhaoyan Wang, No. 1:23-cr-00219, in the U.S. District Court for the Eastern District of California. The grand jury charges that from not later than around August 2020 until at least around March 2023 the defendants, who owned Ai De Diagnostic Co. LTD and the companies UMI and PBI, imported COVID-19 test kits from China declared as pregnancy test kits and told buyers the kits were made in the United States and approved by the FDA. It alleges that UMI and PBI sold hundreds of thousands of test kits and received over $1,700,000. Count One charges conspiracy to commit wire fraud under 18 U.S.C. § 1349, Counts Two through Nine wire fraud, Counts Ten and Eleven distribution of adulterated and misbranded medical devices, and a further count false statements.

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PHILLIP A. TALBERT

United States Attorney
JOSEPH D. BARTON FILED
HENRY Z. CARBAJAL Ul EASTERN DISTRICT OF CALIFORNIA

Assistant United States Attorneys
2500 Tulare Street, Suite 4401
Fresno, CA 93721

Telephone: (559) 497-4000
Facsimile: (559) 497-4099

Attorneys for Plaintiff
United States of America
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF CALIFORNIA
UNITED STATES OF AMERICA, CASENO, 1:23-cr-00219-NODJ-BAM
Plaintiff, 18 U.S.C. § 1349 — Conspiracy to Commit Wire
Fraud; 18 U.S.C. § 1343 — Wire Fraud; 21 U.S.C. §§
Vv. 331(a) and 333(a)(2) — Distribution of Adulterated
and Misbranded Medical Devices; 18 U.S.C. §
JIA BEI ZHU, 1001(a)(2) — False Statements; 18 U.S.C. §
aka Jesse Zhu, Qiang He, and David He, and 981(a)(1)(C) and 28 U.S.C. § 2461(c) —
ZHAOYAN WANG, Criminal Forfeiture
Defendants.

FIRST SUPERSEDING INDICTMENT

COUNT ONE: [18 U.S.C. § 1349 — Conspiracy to Commit Wire Fraud]
The Grand Jury charges:
JIA BEI ZHU, aka Jesse Zhu, Qiang He, and David He, and
ZHAOYAN WANG,
defendants herein, as follows:

I. INTRODUCTION

1. At all relevant times, defendants ZHU and WANG owned and controlled Ai De
Diagnostic Co. LTD (“Ai De”), which had its principal place of business in China, and Universal

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Meditech Incorporated (““UMI”) and Prestige Biotech Incorporated (“PBI”), which had their principal
places of business in Fresno County, State and Eastern District of California.
2. At all relevant times, Ai De, UMI, and PBI were alter egos of one another.

Il. RELEVANT BACKGROUND ON THE FDA

3, The Food and Drug Administration (“FDA”) is the federal agency that is responsible for
protecting the health and safety of the American public by enforcing the federal Food, Drug, and
Cosmetic Act (“FDCA”). Its responsibilities include regulating the distribution of medical devices in
interstate commerce to ensure that the devices are safe and effective for human use.

4. COVID-19 in vitro diagnostic test kits (““COVID-19 test kits”) collect, prepare, and
examine samples taken from the human body to detect diseases or other conditions in humans.
Therefore, COVID-19 test kits are medical devices under the FDCA.

5, Medical devices are classified into one of three categories: Class I, Il, or II. Class III
medical devices are the most highly regulated.

6. Generally speaking, for Class III medical devices, anyone who proposes to introduce, or
deliver for introduction, such devices into interstate commerce for distribution is required to obtain pre-
market approval, pre-market clearance, emergency use authorization, or other approval from the FDA.

7, At all relevant times, COVID-19 test kits were Class III medical devices. Therefore,
obtaining pre-market approval, pre-market clearance, emergency use authorization, or other approval
from the FDA was required before distributing such test kits in the United States.

8. At all relevant times, any COVID-19 test kits distributed in the United States without
obtaining pre-market approval, pre-market clearance, emergency use authorization, or other applicable
approval from the FDA were adulterated and misbranded medical devices under the FDCA.

9. At all relevant times, any COVID-19 test kits whose packaging did not bear labels
containing the names and places of business of the actual manufacturers, packers, and distributors were-
also misbranded medical devices under the FDCA.

Ii. CONSPIRACY

10. Beginning on a date unknown to the Grand Jury, but not later than in or around August

2020, and continuing at least until in or around March 2023, in Fresno and Tulare Counties, State and

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Eastern District of California, and elsewhere, defendants ZHU and WANG, and others known and
unknown to the Grand Jury, did knowingly conspire, combine, and confederate with each other to cause
writings, signs, signals, pictures, and sounds to be transmitted by means of wire and radio
communications in interstate commerce, in furtherance of a material scheme and artifice to defraud
buyers of UMI and PBI’s COVID-19 test kits, and to obtain money and property from the buyers, by
means of materially false and fraudulent pretenses, representations, and promises, in violation of 18
ULS.C. § 1343.

IV. MANNER AND MEANS

11. Defendants ZHU and WANG, and others known and unknown to the Grand Jury, carried
out their scheme and artifice to defraud by using the following manner and means, among others:

12. Defendants ZHU and WANG, and others known and unknown to the Grand Jury, caused
UMI and PBI to import COVID-19 test kits from Ai De that were manufactured in China. On forms
used for evaluation or inspection by United States Customs and Border Protection, they caused the
COVID-19 test kits to be falsely declared as pregnancy test kits. This was because Ai De was not
authorized by any federal agency to import COVID-19 test kits into the United States, but it was
authorized to import pregnancy test kits. Therefore, ZHU and WANG illegally imported COVID-19 test
kits from China by falsely representing and declaring that the test kits were authorized pregnancy
test kits.

13. Defendants ZHU and WANG, and others known and unknown to the Grand Jury, caused
false and fraudulent representations to be made to the buyers of UMI and PBI’s COVID-19 test kits,
including but not limited to the following:

14. Defendants ZHU and WANG, and others known and unknown to the Grand Jury, caused
false and fraudulent representations to be made to the buyers of UMI and PBI’s COVID-19 test kits, to
wit: that the test kits were manufactured in the United States. They knew, however, that the test kits
were manufactured in China.

15. Defendants ZHU and WANG, and others known and unknown to the Grand Jury, caused
false and fraudulent representations to be made to the buyers of UMI and PBI’s COVID-19 test kits, to

wit: that the test kits were manufactured by, or in connection with, laboratories certified by the United

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States Centers for Disease Control and Prevention (“CDC”). They knew, however, that the test kits
were not manufactured by, or in connection with, CDC-certified laboratories.

16. Defendants ZHU and WANG, and others known and unknown to the Grand Jury, caused
false and fraudulent representations to be made to the buyers of UMI and PBI’s COVID-19 test kits, to
wit: that UMI and PBI could manufacture up to 100,000 test kits per week in the United States. They
knew, however, that UMI did not have the capacity to make test kits at that rate and would have to
import additional test kits manufactured in China.

17. Defendants ZHU and WANG, and others known and unknown to the Grand Jury, caused
false and fraudulent representations to be made to the buyers of UMI and PBI’s COVID-19 test kits, to
wit: that UMI and PBI had obtained the required approvals from the FDA to distribute the test kits in the
United States. They knew, however, that UMI and PBI had not obtained any such approvals.

18. Defendants ZHU and WANG, and others known and unknown to the Grand Jury, caused
these false and fraudulent representations to be made to the buyers of UMI and PBI’s COVID-19 test
kits through various methods. Those methods included text messages, WeChat messages, WhatsApp
messages, emails, calls, in-person meetings, UMI and PBI’s websites, and contract documents.

19. When certain buyers of UMI and PBI’s COVID-19 test kits requested to inspect UMI and
PBI’s facilities in the United States pursuant to the terms of their contracts, defendants ZHU and
WANG, and others known and unknown to the Grand Jury, denied them access and fabricated reasons
for the denial. The fabricated reasons included that UMI and PBI’s facilities were undergoing
construction and renovation, and that the companies had proprietary and confidential information and
technology inside their facilities that they could not allow anyone else to see. In reality, however, they
did not want the buyers to know that UMI and PBI were obtaining the COVID-19 test kits from China.

20. The false and fraudulent representations that defendants ZHU and WANG, and others
known and unknown to the Grand Jury, caused to be made to the buyers of UMI and PBI’s COVID-19
test kits were important to the buyers. The buyers would not have made the purchases had they known
that the test kits were not manufactured in the United States and were instead manufactured in China
because this created quality and customs concerns for them. They also would not have made the

purchases had they known that the test kits were not manufactured by, or in connection with, CDC-

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certified laboratories. Nor would they have made the purchases had they known that UMI and PBI
could not manufacture the test kits at the promised rates. Finally, they would not have made the
purchases had they known that the test kits were not approved by the FDA.

21. As a result of the false and fraudulent representations that defendants ZHU and WANG,
and others known and unknown to the Grand Jury, caused to be made to the buyers of UMI and PBI’s
COVID-19 test kits, UMI and PBI sold hundreds of thousands of the test kits and received over
$1,700,000 in payments. Many payments were made by interstate wire transfers sent from outside
California and deposited into UMI’s bank accounts opened in Tulare County, State and Eastern District
of California.

22. At all relevant times, defendants ZHU and WANG, and others known and unknown to
the Grand Jury, acted with the intent to defraud.

All in violation of 18 U.S.C. § 1349.

COUNTS TWO THROUGH NINE: [18 U.S.C. § 1343 —Wire Fraud]

The Grand Jury further charges:
JIA BEI ZHU, aka Jesse Zhu, Qiang He, and David He,
and ZHAOYAN WANG,

defendants herein, as follows:

23. Paragraphs | through 9 and 11 through 22 are incorporated by reference as though fully
set forth herein.

24. Beginning on a date unknown to the Grand Jury, but not later than in or around August
2020, and continuing at least until in or around March 2023, in Fresno and Tulare Counties, State and
Eastern District of California, and elsewhere, defendants ZHU and WANG, knowingly devised,
intended to devise, participated in, and executed a material scheme and artifice to defraud the buyers of
UMI and PBI’s COVID-19 test kits, and to obtain money and property from the buyers, by means of
materially false and fraudulent pretenses, representations, and promises.

25. On or about the dates set forth below, in Fresno and Tulare Counties, State and Eastern
District of California, and elsewhere, defendants ZHU and WANG, and others known and unknown to

the Grand Jury, for the purpose of executing their scheme and artifice to defraud, caused to be

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transmitted, by means of wire and radio communication in interstate commerce, writings, signs, signals,

pictures, and sounds as follows:

Date

TWO

08/11/2020

Wire transmission of monies in the amount of $12,000, originating
from COMPANY ONE’s bank account opened outside California, and
sent to UMI’s bank account ending — 9664 opened in Tulare County,
State and Eastern District of California, that was processed on
computers located outside of California through the Federal Reserve
Bank’s Wire Transfer Network (“Fedwire”)

THREE

12/15/2020

Wire transmission of monies in the amount of $100,000, originating
from COMPANY TWO’s bank account opened outside California, and
sent to UMI’s bank account ending — 9664 opened in Tulare County,
State and Eastern District of California, that was processed on
computers located outside of California through Fedwire

FOUR

12/24/2020

Wire transmission of monies in the amount of $275,000, originating
from COMPANY TWO’s bank account opened outside California, and
sent to UMI’s bank account ending in — 9664 opened in Tulare County,
State and Eastern District of California, that was processed on
computers located outside of California through Fedwire

FIVE

01/13/2022

Wire transmission of monies in the amount of $49,000, originating
from COMPANY FOUR’s bank account opened outside of California,
and sent to UMI’s bank account ending in — 9345 opened in Tulare
County, State and Eastern District of California, that was processed on
computers located outside of California through Fedwire

SIX

01/14/2022

Wire transmission of monies in the amount of $24,500, originating
from COMPANY FOUR’s bank account opened outside of California,
and sent to UMI’s bank account ending in — 9345 opened in Tulare
County, State and Eastern District of California, that was processed on
computers located outside of California through Fedwire

SEVEN

01/14/2022

Wire transmission of monies in the amount of $24,500, originating
from COMPANY FOUR’s bank account opened outside of California,
and sent to UMI’s bank account ending in — 9345 opened in Tulare
County, State and Eastern District of California, that was processed on
computers located outside of California through Fedwire

EIGHT

01/19/2022

Wire transmission of monies in the amount of $43,000, originating
from COMPANY FOUR’s bank account opened outside of California,
and sent to UMI’s bank account ending in — 9345 opened in Tulare
County, State and Eastern District of California, that was processed on
computers located outside of California through Fedwire

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NINE 01/26/2022 Wire transmission of monies in the amount of $36,000, originating
from COMPANY THREE’s bank account opened outside of
California, and sent to UMI’s bank account ending in — 9345 opened at
the same bank in Tulare County, State and Eastern District of
California, that was processed internally by the bank.

All in violation of 18 U.S.C. § 1343.

COUNTS TEN AND ELEVEN: [21 U.S.C. §§ 331(a) and 333(a)(2) — Distribution of Adulterated and
Misbranded Medical Devices]
The Grand Jury further charges:
JIA BEI ZHU, aka Jesse Zhu, Qiang He, and David He, and
ZHAOYAN WANG,
defendants herein, as follows:
27. Paragraphs 1 through 9, 14, 15, and 17 are incorporated by reference as though fully set
forth herein.
28. | Onor about the dates set forth below, in Fresno and Tulare Counties, State and Eastern
District of California, and elsewhere, defendants ZHU and WANG, with the intent to defraud and
mislead, caused to be introduced and delivered for introduction into interstate commerce, medical

devices that were adulterated and misbranded as follows:

Count Date | From Sent To Medical Devices

TEN 01/15/22 | UMI in Fresno COMPANY FIVE in | Approximately 10,000 COVID-19
Southern California test kits
and then to
COMPANY FOUR
in Texas

ELEVEN | 01/26/22 | UMI in Fresno COMPANY THREE | Approximately 10,000 COVID-19
in Texas test kits

All in violation of 21 U.S.C. §§ 331(a) and 333(a)(2).

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COUNT TWELVE: [18 U.S.C. § 1001(a)(2) — False Statements]

The Grand Jury further charges:

JIA BEI ZHU, aka Jesse Zhu, Qiang He, and David He,
defendant herein, as follows:

29. On or about May 2, 2023, and May 3, 2023, in Fresno County, State and Eastern District
of California, defendant ZHU did willfully and knowingly make materially false, fictitious, and
fraudulent statements and representations in a matter within the jurisdiction of the executive branch of
the government of the United States, to wit: defendant ZHU made materially false, fictitious, and
fraudulent statements and representations to FDA officials, including that:

a. He was not defendant ZHU aka Jesse Zhu and was instead Qiang He aka David He;

b. He was hired by UMI as a COVID-19 consultant in 2021;

c. He was hired by PBI just a couple of weeks prior to speaking with the FDA officials to

coordinate the company’s interactions with government agencies;

d. He did not know the manufacturing and distribution histories for UMI or PBI; and

e. He did not have access to UMI or PBI’s distribution records, financial records, or

ownership records.

All in violation of 18 U.S.C. § 1001(a)(2).

FORFEITURE ALLEGATION: 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461(c) — Criminal Forfeiture

30. | Upon conviction of one or more of the offenses alleged in Counts One through Nine of
this First Superseding Indictment, defendants ZHU and WANG shall forfeit to the United States,
pursuant to 18 U.S.C. § 981(a)(1)(C) and 28 U.S.C. § 2461(c), all property, real and personal, which
constitutes or is derived from proceeds traceable to such violations, including, but not limited to, a sum
of money equal to the amount of money that constitutes or is derived from proceeds traceable to the
offenses for which the defendants are convicted.

31. If£any property subject to forfeiture as a result of the offenses alleged in Counts One
through Nine of this First Superseding Indictment for which the defendants are convicted:

a. cannot be located upon the exercise of due diligence;

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b. _ has been transferred or sold to, or deposited with, a third party; —
c. has been placed beyond the jurisdiction of the court;
d. has been substantially diminished in value; or
e. has been commingled with other property that cannot be divided without difficulty;
the United States intends, pursuant to 28 U.S.C. § 2461(c), incorporating 21 U.S.C. § 853(p), to seek
forfeiture of any other property of the defendants, up to the value of the property subject to forfeiture
A TRUE BILL.

/s/ Signature on file w/AUSA
FOREPERSON

PHILLIP A. TALBERT
United States Attorney

HENRY Z. CARBAJAL for

KIMBERLY A. SANCHEZ,
Assistant United States Attorney
Chief, Fresno Office

FIRST SUPERSEDING INDICTMENT 9


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