When Pete Patouhas opened Rocco’s Steaks Diner in an industrial corner of Pennsauken 25 years ago, Aluminum Shapes boomed with three shifts making aluminum scaffolding and truck parts at one of South Jersey’s largest employers. Workers called in food orders and Patouhas delivered breakfast platters and lunches by the hundreds to the factory gates.
“A lot of business, a lot of people,” Patouhas said in his little restaurant at John Tipton Boulevard and River Road in Delair, a few hundred yards from the American flag fluttering at the entrance of the Aluminum Shapes complex.
But the factory now stands vacant except for security guards as it awaits a rebirth, partly as an Amazon-style distribution center. Aluminum Shapes — whose workforce once numbered 3,000 before dwindling to 111 employees — closed after a bizarre chapter in which the plant was controlled by a Chinese billionaire and aluminum kingpin, Zhongtian “Big Boss” Liu, who headed the largest aluminum extrusion company in Asia, China Zhongwang.
Prosecutors said the scam dates from 2010, when the U.S. Commerce department found that Chinese companies were dumping vast amounts of aluminum on the U.S. market. The agency imposed crushing tariffs on Chinese producers to stop the flow.
Liu’s companies were accused of devising an elaborate scheme to avoid paying the tariffs from 2011 to 2014. Aluminum pallets were imported as finished products, a distinction that would enable Liu’s firms to dodge a whopping 374% tariff. And to be sold, the pallets would have to be stored in warehouses in California and Mexico and in Pennsauken, and ultimately remelted into other products.
A multi-year federal investigation found that Liu’s companies secretly exported 2.2 million spot-welded aluminum pallets to the U.S. to evade anti-dumping tariffs on aluminum tubing.
In August, a California jury found six companies tied to Liu guilty of defrauding the U.S. of $1.8 billion in duties on the aluminum pallets. A judge has scheduled sentencing for Feb. 28.
Federal prosecutors said the four warehousing companies and two aluminum companies, all based in California, were “effectively owned and controlled” by Liu.
A spokesperson for China Zhongwang disputed that, telling Forbes in August that the six entities “have no [current] relations to China Zhongwang and Mr. Liu.” The spokesperson said that the Chinese company abides by laws and regulations and that Liu stepped down as chairman of China Zhongwang for health reasons in 2017. Liu, a defendant, has yet to appear in court. Multiple attempts by The Inquirer to reach him were unsuccessful.
Neither Aluminum Shapes nor its South Jersey executives were charged, though the 2019 indictment cited Aluminum Shapes as an integral part of Liu’s scheme.
The South Jersey manufacturer filed for bankruptcy protection in Camden in August, owing millions to suppliers and others. Aluminum Shapes also faced significant fines for dozens of federal safety violations, partly stemming from a worker death.
The plant continued to operate until November when a Bala Cynwyd real estate firm bought the complex and its contents in a bankruptcy auction for $32 million. The firm, Velocity Venture Partners, believes it can bring back 500 jobs in manufacturing and warehousing.
“They just shut everything off” and walked out the door, said Velocity co-founder Tony Grelli. “Nothing was decommissioned. Nothing was taken out of here. So if I knew what I was doing, I could go back there and start one of the presses. Fire it up.”
Motorists crossing the high-arching Betsy Ross Bridge into New Jersey can read “ALUMINUM SHAPES” in red block letters on the factory roof. Shapes, a manufacturer since the 1950s, produced the scaffolding for the Statue of Liberty and Washington Monument restorations and remained one of the larger aluminum extruders east of the Mississippi River. Extrusion is a process in which manufacturers force aluminum alloy through a die to form tubing or shapes.
Over the last decade, the complex also was part of a network of firms, shell companies, trading firms and warehouses connected to “Big Boss” Liu who began his ascent as an aluminum mogul in 1993 as a small producer in China and grew to become one of the world’s aluminum magnates.
Jeff Henderson, president of the trade group Aluminum Extruders Council, said that “Aluminum Shapes was not a central player” in the trade battle between U.S. producers and China Zhongwang, but it played a part.
“It was just an acquisition by the Chinese” as China targeted the U.S. aluminum market, Henderson said. “[Aluminum] is a strategic metal and they know it.”
An initial public offering in Hong Kong for Liu’s aluminum giant, in 2009, made Liu one of China’s richest industrialists. His current net worth now exceeds $1.5 billion, according to Forbes. As part of his dealings, Liu was connected to a Mexican company that stockpiled 6% of the world’s aluminum inventory — or enough for 77 billion beer cans — in an apparent plan to ship Chinese aluminum through Mexico to the U.S. to evade tariffs.
The Wall Street Journal reported that Liu’s machinations became an obsession for U.S. aluminum manufacturers because they feared a collapse in aluminum prices. Liu, who is said to live modestly, holds a Maltese passport through a program enabling wealthy people to buy citizenship, media reports say. When a reporter interviewed him in 2016, the mogul claimed he was living in an apartment inside the Liaoning plant in northeastern China. “These things have nothing to do with me,” Liu told the reporter, referring to the Mexican company.
Liu gained control of Aluminum Shapes in December 2012, according to the California indictment.
At Liu’s direction, defendants “would stockpile and cause to be stockpiled aluminum extrusions in the form of pallets … at the Irvine, Ontario, Fontana and Riverside warehouses [in California] and at Aluminum Shapes in New Jersey,” the indictment said. By stockpiling the aluminum pallets, the defendants “maintained the pretense that the sales of aluminum pallets … were actual sales to customers in the United States.”
The U.S. Attorney’s Office said “there were no customers for the 2.2 million pallets imported by the Liu-controlled companies between 2011 and 2014, and no pallets were ever sold.”
By the time Aluminum Shapes sought protection from creditors, the firm owed $1.8 million to PSE&G., more than $2 million to a Teamsters health and welfare fund, and $421,685 to marketing firm Harris, Baio & McCullough, according to bankruptcy documents.
Edmond M. George, a partner with Obermayer Rebmann Maxwell & Hippel who represents Aluminum Shapes, said the bankruptcy filing had nothing to do with the California verdict. He didn’t respond to other questions.
Several scrap dealers said they were missing more than $1 million. They sold door and window frames and vehicle rims to Aluminum Shapes to remelt into new products. They “put a hurting on us,” said Mitchell Goldberg, president and owner of Northeast Metal Traders in Philadelphia. He was owed $172,872.
Aluminum Shapes also had a big bill with the Occupational Safety and Health Administration, or OSHA: $1.9 million in safety fines. An employee was fatally wounded after being crushed by factory equipment in 2016. Federal investigators later learned of employees who were burned when they entered a tank to drain sludge. Supervisors told them to wash the chemical burns and go back to the tank. They suffered more burns, with one hospitalized.
When OSHA levied the fine in 2017, the agency said the company had a long history of failing to comply with safety and health standards and penalized it for 51 violations.
OSHA agreed in December to slash the penalty to $1 million. Jeffrey S. Rogoff, the regional solicitor in New York for the U.S. Department of Labor, said that “while this settlement can never reverse the senseless loss of life and serious injuries that occurred, it goes a long way in ensuring employer accountability and providing key worker protections to prevent future incidents.”
As the economy moves to online shopping, developers have repurposed older industrial buildings with high ceilings and big floors such as Aluminum Shapes for distribution and fulfillment centers.
Amazon, the online-shopping giant, operates about 60 warehouse-style facilities in the Philadelphia region.
Grelli and Zach Moore, Velocity’s co-founders and both 28 years old, met at Drexel University, from which they graduated in 2017. The firm owns and manages six million square feet of industrial space in the Philadelphia area.
In 2019, Velocity bought an adjacent building from Aluminum Shapes in Pennsauken. It is 100% leased to three tenants for warehousing and distribution, Grelli said. One tenant supplies bedding and home goods to Amazon for order fulfillment.
Velocity executives had their eye on the 25-acre Aluminum Shapes property before the bankruptcy.
On a recent tour, the almost-600,000-square-foot complex was eerily quiet. Aluminum Shapes web sites are still available online. But the main phones numbers to the plant listed on the web didn’t connect with anyone.
An auctioneer had red-tagged the company’s push-button phones, chairs, filing cabinets, and conference tables for sale.
“All this stuff’s going to be out of here,” Grelli said. “We’re going to be left with a big shell.” Velocity plans to scrape the floors, install new lighting and make many other improvements.
Sixty percent of the complex could be leased to aluminum or metal companies, Grelli said. Velocity sold three of the biggest Aluminum Shapes presses to two different aluminum groups. They could be too big to relocate economically and the new owners could operate them in place under long-term leases with Velocity, Grelli said. One group could lease the six-oven foundry.
The remaining 40% of the complex, with dozens of truck bays, could be leased to specialty manufacturers, distributors or services firms.
Grelli said they intend to rebrand the complex as Pennsauken Logistics Center II and put “Velocity Ventures” on the factory roof, erasing the landmark “Aluminum Shapes.”