Undercover investigation implicates firm accused of pedaling counterfeit parts
Documents reveal network involving warehouses around county
Undercover federal agents and the Detroit Three automakers joined forces to investigate a Warren firm suspected of selling counterfeit bumpers, grilles and other auto parts, according to unsealed search warrant documents obtained by The Detroit News.
The undercover operation involved federal investigators targeting aftermarket dealer Quality Collision Parts in Warren and a series of warehouses across Metro Detroit where Department of Homeland Security agents believed counterfeit goods were stored, according to search warrant affidavits and a civil lawsuit. The documents offer a rare look at an alleged crime that is on the rise, while prosecutions of counterfeiting and related activity, and convictions, are plummeting in federal courts nationwide.
The search warrant affidavits describe a clandestine probe involving inexpensive, phony Ford, Chevrolet and Dodge car parts, secret agents, auto industry officials posing as buyers and a retired Detroit police officer in a security guard shack who told the feds they’d missed a spot. No one has been charged with wrongdoing.
That tip led U.S. Department of Homeland Security agents to another warehouse, one of six locations across southeast Michigan that investigators got court approval to search, including a shop in the shadow of Stellantis’ Warren Stamping Plant, an abandoned Big Kmart and an industrial building in Fraser with what the court records say were bumpers, wheels, tires, and thermostat hoses stacked to the ceiling.
The records also describe a costly crime in the backyard of the country’s auto industry. A Federal Trade Commission study estimated that counterfeit auto parts, which may not have undergone the same levels of testing and design, cost the industry $3 billion a year in the United States and $12 billion a year globally.
“What is the part made of? Steel or chrome? You have no idea,” said Kari Kammel, director of the Center for Anti-Counterfeiting and Product Protection at Michigan State University. “It could potentially be very dangerous.”
The status of the investigation is unclear.
Federal prosecutors also declined comment. But in asking that search warrant records be unsealed earlier this month, Assistant U.S. Attorney Timothy Wyse wrote that the government was no longer concerned that someone might flee the area or that evidence might be destroyed if the investigation
was publicized.
Wyse added that “the United States is no longer apprehensive that there is danger of harm to potential government witnesses if any persons become aware of the substance of the search warrant and affidavit.”
Defense attorney Jason Covert, a former federal prosecutor who represents Quality Collision in the criminal investigation, declined comment.
Quality Collision was incorporated in 2008, and its president is Shelby Township resident Nathir “Nick” Hermez, according to state business filings. Hermez did not respond to a message seeking comment.
Raids set off lawsuits
Court records, however, reveal that after the July 2022 raids, a GM subsidiary sued Quality Collision for patent infringement. The case is pending, and the subsidiary’s lawyers want a federal judge to issue a permanent injunction preventing Quality Collision from infringing on the patents.
In return, Quality Collision blames GM for improperly influencing the federal raids in Warren and a second location based on false or misleading allegations.
“GM also sent its employees and/or agents into Quality Collision’s facilities with United States Department of Homeland Security agents throughout the raid to direct the taking of Quality Collision’s servers, business records and inventory, which caused disruption to Quality Collision’s business, including the shutdown of its facilities for many months,” Quality Collision lawyer Joseph Barber wrote in the lawsuit.
The raids involved “hundreds of agents,” according to Quality Collision’s lawyers, who said a safe was destroyed during a search that caused “hundreds of thousands, if not millions, of dollars” in damages, including to dented hoods and other authentic parts.
Quality Collision wants to be compensated for that damage.
“To stifle aftermarket competition, GM takes aggressive, and sometimes unlawful action against aftermarket companies,” Barber
wrote.
The government’s search, the lawyer added, “did not result in seizure of any GM counterfeit parts.”
A GM spokesperson declined comment.
Border trouble prompts probe
Five search warrant affidavits unsealed earlier this month chronicle an investigation that started almost three years ago with trouble at the border with Canada.
On Oct. 6, 2021, U.S. Customs and Border Protection investigators learned about a shipment of auto parts that had been detained for possible trademark violations. The shipment, according to a search warrant, contained mostly bumpers and grilles with the Chevrolet signature bowtie hidden behind a piece of plastic.
The shipment arrived at a Canadian National railyard in Detroit after being transported from Changchun, China, an industrial area known as the “City of Automobiles.”
The shipment was bound for Quality Collision Parts in Warren, a long beige building at the base of an industrial park off 9 Mile. The building is across Mound Road from Warren Stamping Plant, a 78acre factory where more than 1,300 workers produce hoods, fenders and other, authentic auto parts for Ram trucks, Jeep Grand Cherokee and other vehicles.
The shipment was detained because Quality Collision had imported counterfeit auto parts in the past, according to one search warrant affidavit.
The shipment was transferred to a warehouse near Green Dot Stables in Corktown for further inspection. Inside, investigators found 160 counterfeit Chevrolet grilles worth almost $132,000.
Over the next two months, agents detained shipment after shipment after shipment after shipment bound for Quality Collision, including cargo that arrived on Christmas Day 2021. The shipments contained approximately 500 counterfeit Chevrolet grilles and the seized items were
worth $711,721.
Agents showed photos of the parts to a GM global brand protection investigator who said the seized Chevrolet auto parts in all the shipments were counterfeit, according to Lorin Allain, a special agent with Homeland Security Investigations.
“Our genuine parts do not have the bowtie placeholder concealed by our suppliers during shipping,” the GM official told investigators. “Further, GM does not offer or sell the facias with the grille and radiator portion pre-installed or painted…”
On Jan. 13, 2022, the same day the GM official said the parts were phony, the Homeland Security investigator started surveilling Quality Collision.
Undercover reps recruited
Next, Allain recruited brand protection representatives from Fiat Chrysler (Stellantis) and GM to work undercover. The federal agent wanted them to make test purchases of auto parts from Quality Collision.
“A lot of companies hire former law enforcement,” MSU’s Kammel said.
It is common for brand protection representatives to work with active law enforcement officials, she said.
“They will come in and train customs officials on what authentic products look like,” Kammel said. “The cases are much stronger when they work together.”
In late March 2022, a retired Homeland Security Investigations special agent who works as an investigator for Stellantis went undercover, calling Quality Collision and posing as a parts buyer interested in a 2018 Dodge Journey grille.
During the discussion, the worker mentioned that Quality Collision had three other warehouses, including two directly across 9 Mile. She also quoted a price for the Dodge Journey grille: $76.32, according to one search warrant affidavit.
An authentic grille would have cost $464.
The next day, two undercover Stellantis investigators visited Quality Collision in Warren. They spotted one customer buying headlights and a Dodge Durango grille wrapped in opaque plastic bubble wrap with markings for Tong Yang, a Taiwanese supplier, the filing alleges.
Tong Yang is known to make counterfeit and unauthorized grilles, the auto company investigator wrote.
The Stellantis investigator bought the grille and later concluded it was counterfeit because, among other reasons, it did not include markings and labels consistent with authentic parts, according to the search warrant affidavit.
One month later, in April 2022, GM teamed with an unidentified investigative agency to test purchase Chevrolet Malibu parts at Quality Collision.
The grille and fascia were an “identical reproduction,” the GM investigator said.
GM investigators also bought Chevrolet Impala and Cruze parts and concluded those, too, were reproductions after noticing the parts had, among other issues, inconsistent weld marks or were missing mold and paint labels.
A Ford investigator also bought a company-branded grille from Quality Collision in early April 2022 that was deemed counterfeit, according to the Homeland Security agent.
Security guard gives search tip
Prosecutors used the allegations to convince a judge to let Homeland Security investigators search Quality Collision and other locations July 6, 2022.
During the search, Homeland Security agents met a security guard who worked in a shack outside auto supplier Flex-N-Gate, across Pinewood Street from Quality Collision Parts.
The security guard — a retired Detroit police officer — said he noticed agents did not enter the building next door to Quality Collision along Pinewood.
The guard said he had watched semi-truck trailers travel from Quality Collision to the Pinewood warehouse where workers unloaded bumpers, fenders and other parts as recently as July 4, 2022 — a national holiday.
A Quality Collision manager later told agents the company had recently bought the vacant warehouse and used it to store auto parts.
Federal agents would return to court and get approval to search the warehouse. The inventory list of what items, if anything, were seized by investigators is sealed.
Trends in counterfeit parts
The searches and seizure of counterfeit auto parts followed a rise in illegitimate goods being smuggled into the U.S. in recent years. In 2021, U.S. Customs and Border Protection officials made more than 27,000 seizures of counterfeit items that, if legitimate, would have been worth more than $3.3 billion — an increase in value of 152% from the previous fiscal year.
At the same time, federal prosecutions and convictions have fallen sharply in recent years. A total of 111 people were convicted of counterfeiting, forgery or copyright crimes in federal courts nationwide in 2022, down almost 77% from the 475 people convicted in 2015, according to the U.S. Sentencing Commission.
The average sentence for people convicted of those crimes was 16 months in federal prison. The median sentence was 12 months.
A Center for Anti-Counterfeiting and Product Protection report in 2022 indicated criminal charges and prosecutions are more likely when the counterfeit product is dangerous.
The Justice Department in recent years has touted prosecutions in counterfeit cases involving the sale of airbags and other automotive safety-related products, including seat belts, brake pads and wheels.
Homeland Security agents also obtained a search warrant for the storage warehouse across 9 Mile from Quality Collision and the building next door.
The search warrant gave investigators permission to seize counterfeit auto parts and related records.
Federal agents raided Quality Collision and two buildings across 9 Mile on July 6, 2022. So far, prosecutors have only publicly acknowledged seizing one thing: $59,980 from Quality Collision.
One affidavit indicates employees from GM, Ford and Stellantis were helping inspect “the large quantity of parts” and concluded a “large percentage appeared to be counterfeit or infringing on patents.
Investigators also obtained a search warrant for a former Big Kmart building 35 miles north in Richmond in July 2022 after learning about the site from a Quality Collision manager. And a review of property and utility records linking Hermez, the Quality Collision owner, to a large cinderblock warehouse in Fraser prompted a search of that building, too, according to a search warrant affidavit.
Lists of any items seized during those searches are sealed in federal court.
Ron Gmeiner, president of the business next door, SPEMCO Switches, told investigators about what he saw inside the Fraser warehouse during a guided tour.
“Gmeiner stated that he saw auto parts filled to the ceiling, to include bumpers, wheels, tires, and thermostat hoses,” Allain, the Homeland Security agent, wrote in a search warrant affidavit.
The allegations described in search warrant records are contrary to the current counterfeiting trend, MSU’s Kammel said.
Instead of brick-andmortar stores selling counterfeit items out in the open, the biggest problem is online sales, she said.
“Sales have exploded,” Kammel said. “The people that you generally see doing this get bolder and bolder until they get caught.”