Suspect reportedly to stay in China

A former University of Washington economics professor who is accused of evading U.S. income taxes and selling phony antiques plans to stay in China indefinitely to avoid arrest and extradition, a business colleague says.

Steven Cheung and his wife, Linda, face arrest warrants after failing to appear for a hearing in U.S. District Court in Seattle earlier this year on the tax case.

The Cheungs, who own homes in Seattle, Hong Kong and Shanghai, moved to China after plea-bargain talks fell apart. China does not have an extradition agreement with the United States.

Cheung's status as a tax fugitive hasn't prevented him from traveling to Switzerland, according to Mark Simon, an associate of Cheung's and deputy general manager at Apple Daily, Hong Kong's second-largest newspaper. Simon says he has regular telephone conversations with Cheung.

Cheung insists he was framed on the tax case. Simon says Cheung is also "unbowed, at least publicly," by allegations — published first in The Seattle Times in January — that he was fraudulently selling recently manufactured items as Chinese antiquities.

The Federal Trade Commission and Washington Attorney General's Office are continuing to investigate Cheung for the sales through a Seattle art gallery called Thesaurus Fine Arts and through the eBay Web site.

The agencies declined public comment last week, but two people who have worked with them on the investigation were told to expect consumer-fraud charges in a month or two.

Thesaurus Fine Arts, the store secretly owned by Cheung in Pioneer Square, has remained closed since Jan. 26, the day The Seattle Times published an investigative article titled "The Art of Deception."

The newspaper hired the world's two leading testing laboratories to prove two items were fake, contradicting Cheung's assurance and a supposedly scientific authenticity test done by a Hong Kong physicist hired by Cheung.

Cheung and the physicist then claimed someone had tampered with the items. Experts discounted that claim.

The physicist, assistant professor Po Lau Leung of the City University of Hong Kong, said last week he is still certifying antiques. A sister store to Thesaurus is also still operating in Hong Kong.

Any action by the FTC or attorney general would likely be a civil, not a criminal, proceeding.

The tax charges are far more serious. Cheung, 68, faces up to 83 years in prison and $4.75 million in fines if convicted of hiding millions of dollars of income. His wife, who is 57, faces five years and a $250,000 fine for conspiracy.

Hong Kong police said they've been assisting U.S. authorities on the case and investigations are continuing.

Jack Williams of the U.S. Marshal's Office in Seattle said, "For now, we're still on the case. It's just that he's in China, and we're patiently waiting."

Cheung taught economics at the University of Washington from 1969 to 1982 and at Hong Kong University from 1982 to 2000.

With his wild white hair and outspoken views, Cheung is famous in parts of Asia. He is revered as "the Renaissance Man of Hong Kong," once touted as a candidate for the Nobel Prize in economics, and praised as a writer of academic and popular economics.

Cheung has continued writing columns for Apple Daily and a weekly magazine, both owned by his close friend, the maverick publisher Jimmy Lai. Cheung, Lai and Nobel laureate Milton Friedman have toured China together.

Simon said Cheung's friends have tried to persuade him to surrender to American authorities.

"It's tragic," Simon said. "But at the end of the day, he was doing a tax scam and an antiques scam, so he needs to do his penance."

Hong Kong freelance reporter Connie C. Ling contributed to this report. Duff Wilson: 206-464-2288 or dwilson@seattletimes.com