As for Juster himself? “I grew up before television, no computers, no little machines to do things for us,” the 82-year-old author of “The Phantom Tollbooth” told an audience at New York City’s BookFest last week who had gathered to celebrate the book’s 50th year in print. “It was a more privileged time,” he said, deadpan. “It forced me to use my imagination.”

Riddled with puns, illustrated by Pulitzer Prize-winner Jules Feiffer and joyously anarchic in its wordplay, Juster’s “The Phantom Tollbooth” broke open the mold of anodyne kids’ books like “Dick and Jane.” Publishers said that kids would never go for a book whose vocabulary stretched to include such choice morsels as “macabre,” “dissonance” and “dodecahedron.” They were wrong. Fifty years later, the country is awash in events commemorating the book’s impact, including the release of an annotated version and a series of essays by writers from Michael Chabon to Phillip Pullman about how the book changed their lives.

In person, Juster — who sat down with The Daily at the BookFest event — is warm and bespectacled, with a white ruff of hair that lines the rim of his face like a halo. Though his book has been devoured by three generations of readers, fame still surprises him. On the street, when encountering readers who ask, “Are you Norton Juster?” his first instinct, he said, is to respond with an air of polite bewilderment: “Yes, I’m sorry, how do I know you?”

The much-beloved “The Phantom Tollbooth” starts with a listless boy named Milo, who at a young age projects a world-weariness as potent as that of any baby boomer. Here he is, surveying his room: “The books that were too much trouble to read, the tools he’d never learned to use, the small electric automobile he hadn’t driven in months — or was it years?” Chronically bored, he trudges wearily through the commitments of a grade-school life. Until one day, an odd package arrives in his room without fanfare, bearing a tollbooth, a map of the Lands Beyond and a placard: “FOR MILO, WHO HAS PLENTY OF TIME.”

Had he lived in this decade, Milo might have popped some Prozac and taken up youth soccer. In “The Phantom Tollbooth,” he hops into his toy electric car, pays his toll and ends up variously touring Digitopolis (where the soup du jour is subtraction stew), Dictionopolis (where freshly picked words are hawked on the sidewalk) and the Sea of Knowledge (where you can swim all day and never get wet). Along the way, he’s joined by a watchdog named Tock and oddities like the awful Dynne — who loves a raucous noise — along with the Spelling Bee, the Which and the Senses Taker.

There’s a hectic, irreverent mood that fills the book — one that isn’t surprising, given Juster’s love of pranks and the Marx Brothers. (In the 1950s, he learned the best way to meet the comely females written up in the New York Times’ theater pages was to call them up, posing as a reporter from a made-up publication.) While writing “The Phantom Tollbooth,” he needled his friend and illustrator Feiffer — who lived in the Brooklyn apartment above him — by dreaming up characters that were impossible to draw, including the Triple Demons of Compromise: one tall and thin, one short and fat, and the third exactly like the other two.

“I wasn’t writing the book for any age group,” Juster said. “I was writing it for my own entertainment.”

On the road to promote the just-released anniversary edition of “The Phantom Tollbooth,” the Juster-Feiffer duo are funny and fiery and still speak in a joint “we” (as in, “We don’t believe books should have lessons — they should just engage the reader”).

There’s also a collective nostalgia they share, for the sense of community that defined their childhoods growing up in pre-war Brooklyn. “The Phantom Tollbooth,” with its playful insouciance, was written in a “different, more hopeful” time, said Feiffer. After all, it was published in 1961, pre-Watergate, on the eve of the Vietnam War.

“We can no longer justify any measure of that same hope,” Juster said. “We don’t have a working democratic system, and we’ve reached a tipping point.” Asked about next year’s elections, Juster said he’s not thrilled about Obama. Still, he didn’t hesitate: “I’d rather vote for Attila the Hun than any of the Republican candidates.” He’d join up with the Occupy Wall Street protestors in a heartbeat — only, he said, his back gives him trouble these days.

Meanwhile, both authors — now grandparents — are more disenchanted than ever with the world of Baby Mozart, helicopter parents and organization kids.

“Today, one of the great aims of education is that you should always have something to do, and it should always be very meaningful,” Juster said, looking as dispirited as his young protagonist. “Kids now are all about technology. They’re very busy, very regimented.”

“I don’t know how I would write ‘The Phantom Tollbooth’ today,” he says. “Or even if I would.”

In fact, said Leonard Marcus — who annotated the just-released edition of “The Phantom Tollbooth” — the field of children’s literature is more vibrant than ever, with authors spinning out tales as comic and subversive as anything Juster ever dreamed. From the Jon Scieszkas (author of “The Stinky Cheeseman”) to Lemony Snicket, said Marcus, “A lot of people writing and illustrating now grew up under the liberating influence of ‘Phantom Tollbooth.’ It’s a timeless book.”

Classics don’t age, but authors do. Fifty years after the publication of “The Phantom Tollbooth,” surveying the national landscape, Juster was at pains to identify much that makes him feel any measure of uplift. Finally, though, he hit on something: “If there were no books, if there were no kids reading,” he said speculatively, “I’d feel a lot less hopeful.”

Originally appeared in The Daily

And, like Zhou Pin, they’re willing to pay handsomely for the privilege of having one.

Last year, the 23-year-old Beijing graduate paid a Chinese agency $2,600 to help her land a job as a cashier at a McDonald’s in suburban Connecticut.

“It was an unforgettable summer,” she says of the experience. “American people seem so happy, so relaxed. Except sometimes in the mornings.”

Ever since the 1960s, when the U.S. first began granting J-1 visas to student workers under the Fulbright-Hayes Act, hundreds of thousands of students from around the world have made summer pilgrimages like Zhou’s. These days, dozens of agencies in the U.S. and overseas do brisk business connecting foreign students to summer jobs in the U.S. Last summer alone, 130,000 students came to the U.S. on such visas.

Though the program was first created to promote cross-cultural exchange, critics say the students serve mostly as low-wage labor for employers that range from Six Flags to Wal-Mart. And yet demand overseas remains high. While agencies only began catering to Chinese students in the past few years, business has exploded. In 2009, China sent over 24,000 workers like Zhou to the U.S., making it the largest source country under the J-1 visa program.

To be sure, most of the work is menial and minimum-wage: housekeeping, washing dishes, working the register. Still, payoff comes in the form of improved English skills, new friends and (if all goes as planned), a better understanding of American culture.

“In China, a lot of parents don’t want their kids to work, to suffer that kind of stress,” says Sun Lu, vice president of international partnerships for Biztour, a Beijing-based agency founded in 2008. “So what students are mostly going for is the unique summer experience.”

While many students are astounded by the clean, comparatively traffic-free nature of U.S. cities and the friendly nature of their hosts, others are distinctly unimpressed. Zhang Donglai, 20, who’s tossing pizza dough this summer at an amusement park in Myrtle Beach, South Carolina, says the rides there aren’t nearly as good as the ones in his hometown of Chengdu, China. “The economy in the South is really behind,” he says. He spends his days exhausted from the 30-hour workweeks, he says, and mostly stays in his hotel room to avoid the summer heat, surfing the Internet.

“It’s hard to make friends with Americans,” he says. “There’s a big culture gap. Americans are really noisy and outgoing.”

Though the costs can be prohibitive—Zhang reports his parents have already spent over $6,000 to support his summer in the U.S., including agency fees, travel costs and more—many Chinese students do manage to make the investment back. According to 20-year-old Maochi Yang, who was offered a $7/hour job working as a cook at a North Carolina resort this summer, many Chinese students also seek out second jobs to recoup their investment, some of them working 12 hours a day or more.

“My mom thought I shouldn’t go, [that I should] be a good Chinese girl, stay at home, have a family,” she says. “But I told her I could pay her back, so she agreed.” (The U.S. government, though, denied her a visa.)

For Zhou, her summer in Connecticut was transformative. “I used to be more quiet and shy,” she says. “Now I know that if you open your mouth and you’re friendly, other people will be, too.” Even when she ran into customers who criticized her English, she says, she was always learning something new—including from her Mexican coworkers, who taught her how to dance.

Back in the U.S., though, the program is drawing fire. An AP investigation last year found that J-1 students from Ukraine were forced to work in strip clubs in Detroit, and that lack of State Department oversight has left youth vulnerable to exploitation by agencies that make millions of dollars off students’ fees. Out of the 53 agencies accredited by the government to sponsor visas, many contract out to shady third parties. Horror stories involving the J-1 visa program abound, including those of labor recruiters who charge youth sky-high rent and pack them into fetid apartments so crowded that students are forced to sleep in shifts.

The State Department only created a database of J-1 related complaints late last year, and maintains that the vast majority of seasonal workers find their time in the U.S. to be rewarding. This spring, the government also launched regulations requiring agencies to more aggressively screen their overseas recruitment partners and verify the legitimacy of U.S. employers—though how vigorously the State Department will police these rules remains unclear.

Meanwhile, as the U.S. economy continues to sputter, the J-1 visa program is gaining further detractors. This summer, fully three-fourths of American students are expected to be without jobs, reports the Bureau of Labor Statistics.

For employers, there are advantages to using student laborers from overseas: no need to pay unemployment or Social Security taxes, for one. Agencies such as Jobofer and Seasonal Staffing Solutions, for example, advertise to employers that hiring foreign students can save nearly 8% in payroll expenses.

Still, even as demand in China for J-1 visas soars, agencies such as Biztour and the International Exchange Center report it’s grown more difficult to match their clients with jobs. Among seven of Yang’s classmates who hired agencies to help them seek U.S. summer jobs this year, four weren’t able to find work. Others had to content themselves with less-than-ideal postings: one of them is currently working on a fishing boat in Alaska.

Brian Watson, who’s been in the fast-food industry for 18 years, says he didn’t plan to use overseas labor to staff the two McDonald’s branches he owns in West Virginia. Still, given high employee turnover, he says he felt he had no choice: “Other workers, they come in to work one week, and then they quit.” This summer, Watson hired 11 Chinese students to prepare food and work the register.

“We’re just trying to run our business, and besides, the customers seem to like our students,” he says. “The Chinese are pretty good workers—they’re eager to do a good job.” Like many employers, Watson defends his choice to hire overseas workers, saying that the seasonal swell of tourists during the summer makes it necessary to hire outside labor.

Even if the work is menial in nature, he says he tries to integrate them into his home community of South Charleston, population 12,204. Several of his Chinese workers have even asked to join him in attending services at his Baptist church, he says.

In fact, his own marriage is the product of the J-1 visa program. Watson met his Chinese wife while she was a student working in North Carolina three years ago, when she walked into one of the McDonald’s he was operating there and applied for a job. (She didn’t get one.)

“We try and treat them really well,” he says of this current crop of Chinese students. “Can you imagine how you’d feel, leaving China for the first time to come to West Virginia? It’s not easy.”

It’s not taking any chances, either. Here on the mainland, the government has delayed the release of expected Hollywood chart toppers like Cars 2 and Transformers 3 until late July, giving the party’s film—released this week—a six-week shot at box-office dominance. Across the country, red-blazoned ads backing the film have littered billboards, shopping malls, and even the backs of plane tickets.

Titled The Founding of a Party and timed to coincide with the 90th anniversary of the Communist Party’s founding, besting American competitors at the box office won’t be easy. Even as the Chinese movie industry has exploded alongside the country’s middle class, with box-office receipts vaulting 40% in the last two years, Hollywood continues to dominate domestic ticket sales.

The party’s hoped-for blockbuster is a veritable cattle call of 108 Chinese celebrities, including Hong Kong director John Woo and Chow Yun-Fat. In addition to special effects and fast-paced editing, the dizzying montage of on-screen luminaries is just one part of the party’s efforts to reboot the traditionally stultifying genre.

“[Party films] are much better now,” said an enthusiastic Zhu Han, a 32-year-old cab driver in Chengdu. “The directors, the filming, the actors.”

At its midnight premiere in the western city of Chengdu, the seats were less than half full, despite the half-price tickets being sold that night. Still, the government has good reason to feel confident about the film’s prospects. The last historical epic the Communist Party embarked on, a 2009 film detailing the
party’s rise to power in 1949, scored $65 million at the box office, making it the third highest-grossing Chinese-language movie in the country’s history. This year, the film’s producers expect The Founding of a Party to double those ticket sales and ultimately reach an audience of 30 million—a new record.

“Ordinary people might not buy tickets,” says Fang Jinping, who attended the film’s premiere with her husband. “But lots of big companies will buy tickets for their workers, especially the ones with strong ties to the government.” Communist Party members—there are 78 million of them in China—will also see the
movie, she adds.

Certainly, movie theaters are making every effort to play up the film’s release. In downtown Chengdu, one movie theater was showing the film 34 times a day, running at regular 20-minute intervals.

Inside, movie-goers stayed silent as they watched Mao Zedong and company warble “The Internationale” atop a boat, stride emphatically about and exchange spirited lines (“The Japanese prime minister’s brain has been kicked by a donkey!”), interrupted only by the periodic sound of audience members talking on
their cell phones.

Jinping is confident it will be the summer’s hit. “In China, there are so many people who will go see the movie because of their jobs. It’s an obligation.” Certainly, companies will buy bulk blocks of tickets for employees—though whether workers will actually sit through the film is another question. At one screening in Chengdu in which the seats were two-thirds sold out, only a dozen or so viewers actually turned up.

Co-directed by Huang Jianxin and Han Sanping, producers began shooting last August, bolstered by a $10.7 million budget. The film’s plot focuses on the years between 1917 and 1921, the period immediately after the fall of China’s last dynasty. It features the 33-year-old heartthrob Liu Ye as a youthful Mao Zedong—who, in this film, is both slim and a non-smoker who enjoys watching fireworks with his future wife.

Originally swamped by a lineup of 178 stars, many who appeared pro bono, the directors—citing time constraints—eventually cut over five dozen from the final version, including Tang Wei. The actress had been cast as one of Mao Zedong’s early lovers, but her previous racy scenes in Ang Lee’s NC-17-rated Lust, Caution reportedly aroused the complaints of Mao’s grandson, a major-general in the People’s Liberation Army.

The celebrity-studded casting has rankled some critics, despite the state-backed Xinhua new agency’s description of effort as a way to encourage youth to “understand and focus on our party’s splendid history.” As one critic in Nanfang Daily wrote, unlike the pouty-lipped pop star cast as Deng Xiaoping,
the real-life architect of China’s economic reforms was shorter, “slightly fat and had a round face.”

As big-screen ads for luxury watches and expensive cars rolled before the film began, Xie Cao looked bored and fiddled with her phone. “It’s very commercial,” the 27-year-old pharmacist said. Still, halfway through the film, she was dabbing her eyes. “It’s not just about patriotism, it’s about romance, too,” she
said, walking out of the theater. “I didn’t think it would be so moving.”

The historical epic will be shown in 10 countries, including the U.S., where the fact that a General Motors’ joint venture in China is sponsoring the state-backed film has generated some outrage.

Even with all the state’s efforts to recruit a Who’s Who of celebrities to the screen, will China’s youth turn out to see the film? “I think these kinds of movies don’t really have any meaning,” said Cora Zhou, a 19-year-old student who was going to see a romance film instead. “But young people will want to see it. As long as there are lots of movie stars, they’ll watch it.”

Whether or not they’ll line up at the box office, though, is another question. “I definitely want to see it,” her boyfriend, Xu Wei, said, adding, “It’s already available on pirated DVD.”

Here in the China’s northeast, where winter temperatures plummet to -40ºF, cities are getting serious about giving old, drafty buildings a face-lift. Last year, Harbin spent $1.1 million to retrofit 21 million square feet (2 million square meters) of residential buildings—adding five new layers of wall insulation, as well as better windows and roofing that tenants like Ma affectionately describe as the building’s new “winter clothes.”

“Before, the temperature in this room was 12 degrees [53ºF]. Now it’s 18 degrees [64ºF],” said Ma, 76, surveying the apartment with pleasure. For Ma, who runs a small Chinese medicine shop with her husband out of their front room, the change has meant fewer chilly days for both herself and her customers.

The Challenge to Keep Warm

Beijing’s snarled traffic and the smokestacks smoldering over the Pearl River Delta may be the most iconic images of China’s environmental woes.

But these days, policymakers are increasingly turning their attention to the buildings of China’s industrial northeast, as well. This is the country’s frigid rust belt, where cold fronts roll in directly from Siberia’s frozen tundra to the north, and residences need to be heated six months out of the year.

After all, in the developed world, fully 40 percent of carbon dioxide emissions come from heating, cooling, and powering buildings. Already in China, nearly 30 percent of the country’s energy is absorbed by its building sector—a figure that has tripled within three decades, and growing.

In 2006, as part of the country’s most recent five-year plan, China pledged to reduce overall energy intensity by 20 percent. It’s an ambitious goal, one that local officials were scrambling to meet by the end of 2010—shuttering factories and even briefly powering down hospitals in a last-ditch scramble to reach their quotas.

But if China does hit its 20 percent target, it won’t be thanks to improvements to the building sector, said Mark Levine, head of the China Energy Group at the U.S. Department of Energy’s Lawrence Berkeley National Laboratory. “Efforts in this area have been terrible,” said Levine. National subsidies, he noted, have been too slim to inspire much effort at the municipal level, where cities have typically used the funds to install meters instead of embarking on more costly retrofits.

But there have been a few notable exceptions, including Harbin, the largest city and capital of Heilongjiang province, with a population of nearly 10 million, a place often known as “Ice City.” Officials in Harbin project that the retrofitting drive of 2010 will increase energy efficiency in affected areas by 50 percent. Other cities also have embarked on efforts to make buildings more energy efficient, like Qingdao in the eastern Shandong province and Lanzhou, capital of Gansu province in the northwest. And across China, there has been one improvement that officials are quick to note: compliance with existing building codes has increased to at least 98 percent, according to government figure.

Still, such progress might not “necessarily result in energy savings, because living standards are increasing as well,” said Ping Yowargana, Beijing-based energy analyst with Azure International. China is adding new buildings at a clip of 22 billion new square feet (2 billion new square meters) a year—which means more concrete being poured, more steel being manufactured, and additional mass consumption of energy. At the same time, residents these days expect more air conditioning, lighting, and heat than ever before. Accordingly, even a building at code today can still use energy in excess of its leaky, poorly insulated predecessors.

Then there’s the fact that China’s heating sector is riddled with inefficiencies, including pricing systems that create no incentive to conserve. For example, Ma pays a flat sum of 200 renminbi ($30) per year to supply her heat—a fee charged according to the size of her residence, not her energy use. Which is why Ma won’t be turning down the thermostat anytime soon.

“It’s warm and cozy inside now,” she said. “The government takes good care of us.”

A Need for Deeper Change

Heating price reform—already under way in certain regions—and better funding for retrofitting efforts will likely be a priority in the next five-year plan, said Levine. What’s less clear, he said, is whether China’s central planners can effectively push the country beyond the heavy, energy-intensive industry that’s propelled it forward. “They have to make structural change in the economy,” he said. “And so far, that hasn’t happened.”

Back in Harbin, some residents continue to eye retrofitting programs with suspicion. Although the effort was government-financed, a number of Ma’s neighbors complain bitterly that the construction was slapdash, and that the material won’t weather the years well. Meanwhile in Shanghai, after a blaze took 58 lives in a building undergoing renovations, sparking local furor, all other retrofitting projects were temporarily halted.

“Right now, the government wants to complete goals faster, Chinese-style. There are big targets,” said Ruidong Jin, building energy efficiency expert with the Natural Resources Defense Council. China’s national energy efficiency goals are ambitious, he says, and municipalities just focus on keeping pace.

“There’s not much time to talk to people and make them understand,” said Jin. “Local governments have to keep moving, faster.”

Published in National Geographic News. Photo Credit: Wikimedia Commons

Even more unsettling is the name of this place, Shimian Xian: Asbestos County, a reference to the many mines and factories in the area that for decades produced the silicate mineral, sometimes known as “the other deadly white powder”.

Long known to be a carcinogen, asbestos has killed millions of people and is banned or restricted in 52 countries. In Hong Kong, the importation and sale of the most dangerous types of asbestos were banned in 1996 and no building constructed after 1986 should contain any. Even so, the use of the material is more prevalent than ever before on the mainland – and the population of Asbestos County seems oblivious to the danger that literally hangs in their air.

As a friendly middle-school teacher explains the origin of the area’s name, she points to the hills that surround the small town, towards the site of a former asbestos mine. Opened in 1951, the Xin Kang Asbestos Mine was worked by prisoners undergoing “reform through labour”. When the asbestos began to run out, the mine was shut down, along with the town’s factory.

The teacher then points to the Asbestos Mine Hotel, which occupies the site on the main street on which the factory stood.

Although the factory and mine are no more, locals here remain at serious risk from the asbestos fibres that continue to blow off the hills and through the town. The teacher is one of the few people interviewed who have a limited awareness of the threat.

“Several people have developed lung cancer,” she says. “I worry about my mother and father because they both worked in the factory. I hope they’re OK because neither was directly involved in production.”

As she walks along the street, she points to the dimly lit small shops, grocery stores and restaurants lining the pavements.

“The parents of all these shop owners once worked in the mine or factory,” she says.

ASBESTOS IS A FIBROUS mineral that is strong, absorbs sound and is resistant to heat, but it has long been known that inhalation of the fibres can cause lung cancer, asbestosis and mesothelioma, an aggressive form of cancer usually found in the lining of the lungs.

“Logically, people who have been dramatically exposed to asbestos fibres for a long period will develop asbestosis or breathing diseases,” says a Western expert on asbestos who works on the mainland. He requests anonymity in case his remarks anger the government. “According to examples such as Pakistan, the average rate of death related to asbestos could reach 40 per cent of the people who are living in such an area.”

Widespread public ignorance of the threat can be traced to a government ban on public discussion of the topic, which has left people across the mainland in the dark and at risk. While there have been countless scientific reports on the dangers, there is almost nothing in the popular media and the government has taken only small steps to deal with the issue. Experts say tens of millions of Chinese are exposed to asbestos in their daily lives.

The mainland appears doomed to an explosion of asbestos-related illness. A formula developed by Antti Tossavainen, of the Finnish Institute of Occupational Health, calculates that “one mesothelioma case occurs for every 170 tonnes of asbestos produced and consumed”. This means at least 3,700 cases of the disease can be expected each year on the mainland, in addition to thousands of cases of lung cancer, asbestosis and stomach cancer.

China has yet to see the level of disease experienced in Europe, the United States and other industrialised

parts of the world, because per capita consumption of asbestos remained low into the 1970s. However, China is now the world’s biggest user of the mineral, with annual consumption of more than 600,000 tonnes of chrysotile, the technical name for white asbestos. An increase in consumption is being driven, in part, by a global network of lobby groups that has endeavoured to preserve the international market for asbestos since the mid-80s.

Jukka Takala, director of the European Agency for Safety and Health at Work, estimates that, by 2035, 10,000 to 15,000 Chinese will die every year from asbestos-related ailments. Others put the current annual figure as high as 40,000, with one million suffering asbestos-related respiratory illnesses.

Itgium, a French environmental technology firm working in China, says the country has 120,000 workers in 31 asbestos mines, 11 of which have significant reserves, and 1.25 million people involved in the industrial production of chrysotile. A further 800,000 Chinese are involved in ship-breaking; ships built more than 20 years ago contain large amounts of asbestos. In addition, the company says, 80 million Chinese are potentially exposed to asbestos in their homes.

The mainland’s prodigious appetite for the mineral is expected to have lethal consequences at least into the middle of the century.

Asbestos was long considered a wonder material for its ability to resist fire and heat. For decades, industrialised countries relied on it for countless products, including pipe and ceiling insulation, ship-building materials, automotive brake systems, bricks, roofing and flooring.

Ominous reports about the dire health impact of asbestos began to surface in Europe in the late 1800s and, in 1931, the International Labour Organisation issued a warning: “All [asbestos] processes from extraction onwards unquestionably involve a considerable hazard.”

Despite this, use of asbestos remained widespread until 1999, when the European Commission declared all products made of white asbestos would be outlawed on January 1, 2005.

While many countries have banned the use of asbestos, China’s breakneck economic expansion of the past three decades has resulted in demand that is so strong, the country now imports the mineral from Russia.

“Every official agency in the world has noted that exposure to asbestos gives rise to all kinds of diseases,” says Dr Arthur Frank, professor at the Drexel University School of Public Health, in Philadelphia,

in the US, and an expert on health risks related to the substance. “One really wonders why this is still going on [in the mainland].”

Few mainlanders are willing to discuss the problem. About a dozen experts – including government officials, doctors on the front lines and university researchers – turned down requests for interviews. A reporter from the Ningbo Evening News, who wrote a rare and informative story on the topic, also declined to speak.

Sitting in a coffee shop in Shenzhen, a labour-rights activist and former asbestos miner say they would like to disseminate information about the threat of asbestos. They want to search for former workers to advise them to get health examinations. However, they say, they lack resources for such an effort.

“We’re also afraid of getting into trouble,” adds the activist, before asking that their names and that of their organisation not be used.

The average person in Asbestos County waves away questions about the threat from asbestos.

“It’s not a problem anymore, the mine and factory have moved,” says a pharmacy owner, as he pulls a flimsy gauze mask from a counter and hands it to a visitor. When told there are still factories and mines not far from here, he shrugs. “The production process has improved,” he says, turning to another customer.

“It’s only a problem in the mountains,” says a Tibetan man making tiny Sichuan dumplings in the back of his small eatery. When pressed, he concedes some people in the town have developed occupational illnesses, but he remains unfazed.

It is early morning and two men are sitting outside an Asbestos County herbal-medicine practice, chatting as the pharmacist picks exotic herbs from little drawers, weighing each one gently on a small traditional scale. The two acknowledge they have heard about people in the town with lung diseases.

The herbal doctor, who has been listening to the conversation, occasionally glancing in our direction over the rims of his reading glasses, joins in: “A lot of people here will develop lung problems from working with asbestos. It can take decades to appear, but it will happen.”

The two customers draw the line, though, at the suggestion a person need only spend three hours in Asbestos County to become harmed.

“No, no, that’s ridiculous,” says one, as if speaking to a child.

“Three hours? That can’t be true,” says the other. They laugh and shake their heads in unison.

However, experts say it doesn’t take a lot of exposure to be affected by this sometimes invisible killer.

“Any contact, even as short as one day, can give rise to cancer,” says Frank, who has been studying asbestos in the mainland for 20 years. “The risk starts when you take it out of the ground. Miners, manufacturers, people putting the product in place and family members – because workers bring the dust home in their clothing – are all at risk. If you leave the waste material out and it has dust in it and it starts blowing around, it’s potentially dangerous to the people around it. The risk is there as long as the asbestos is there.”

Cleaning an area after a mine has shut down is not easy, experts say, and a threat remains if the job is not done properly.

“The fibre can be everywhere and that’s a problem,” says the Western expert. “It sprays all over the place. Even if factories and mines are closed, the asbestos level can still be up to 100 micro-fibres per litre.

“Asbestos is a slow way of killing. There’s absolutely no mystery in that. Many Chinese may not want to say to you, `Yes, there is cancer in my family.’ But if you ask more questions, such as, `Can your father breathe freely?’ you’ll understand. If you talk more with people, they’ll start to tell you about their father, mother, uncles and friends.”

YUYAO CITY, IN ZHEJIANG province, is home to dozens of small asbestos workshops. A report in a local newspaper in April said health officials found that of the 787 cases of occupational illnesses discovered in Yuyao from 2001 to last year, 674 involved pneumoconiosis, a disease of the lungs caused by the inhalation of asbestos and other dusts.

At a family-run asbestos-cloth factory in Yuyao, the 27-year-old owner plays down the risk of lung problems, saying the dust is not a big threat and that the workers are issued “special masks for this type of work”. A glance shows his workers are wearing the same cheap gauze masks worn in other workshops.

He describes a gruelling schedule in which workers get just one day off a month and work between 10 and more than 20 hours a day, which means exposure to a multitude of fibres. In many cases, he says, production lines run for 24 hours to meet demand, with husband-and-wife teams sharing the load.

“When the husband is tired, the wife will take over, and vice versa,” he explains.

The owner plays down the risk to casual observers.

“You can completely relax. There’s absolutely no problem, absolutely no problem,” he says. “It’s not as bad as some people say. It’s not like as soon as you breathe in some dust you’re going to get sick.

“When the machines are running, there’s not a lot of dust and so people won’t breathe in much,” he says, contradicting the evidence around him. “You can throw it around, stand in it, walk in it, do whatever you want with it. It’s not a problem.”

However, having entered a small musty room, the door muffling the sound of machinery outside, he unexpectedly changes his tune.

“Well, of course there’s some risk,” he says. “If you work inside the workshop for five or six years, you could end up with an occupational illness.”

Asked if anyone works here for as long as five or six years, he shakes his head.

“Even if someone wanted stay in an asbestos factory for four years, a boss wouldn’t let him,” he says. “Generally, after four years I let the workers go.”

When asked why, he offers a brutal explanation: “Because if you work in a workshop like this, after four years it will definitely affect your health. If a worker gets an examination and it’s found he has a lung problem, I’ll have to pay the medical expenses for life.”

He insists he educates workers about the danger but adds, “We generally get our workers from Guizhou [province] and the education level of people there is relatively low. So they really don’t understand a lot about this.”

He, too, seems to be ignorant, of at least one important point: he, his wife and their young child are also at risk, living just feet from the open workshop doors and windows, where the air is full of fibres.

But if the factories are bad, the mines are worse.

IN THE SHENZHEN COFFEE shop, the 27-year-old former miner, from Gansu province, says he worked at mines in Xinjiang and Qinghai, in China’s northwest, for 15 months. He describes living in a world of fibre-filled white dust; the cloud hanging over the mine could be seen from 50 kilometres away.

“In the workshop, you couldn’t see anything, even from this far,” he says, stretching his hand in front of him. “We wore masks because of the heavy dust and not because of the asbestos. We didn’t know about that. We had no concept of safety, either at work or off. When you went to work, they told you nothing at all about the danger.”

He says miners purchased their own masks and some just used a piece of cloth.

“Our masks were four or five yuan each,” he says. “I don’t know if they were of any use. The mine was at [an altitude of] 4,000 metres and it was hard to breathe, so some people didn’t even wear a mask.”

Employed as an explosives worker to break up asbestos-laced rock, he describes crawling into spaces too cramped to stand in. The dust was so thick at times, he says, the workers had difficulty opening their eyes.

“In the workers’ dormitory we didn’t wear masks,” he says. “I wiped my bed with my hand each night and the asbestos dust would come off.

“Even the bosses didn’t take precautions. They didn’t wear any masks. I don’t know why. Maybe they didn’t know.”

Asked if he was ever given a physical, he smiles, then inhales deeply, as if for the first time confronting the serious danger he was exposed to. “Mei you!” he replies, stressing the words. “No.”

“There was no place to buy anything, let alone a hospital,” he says. “We lived on top of the mine.”

He says he didn’t know about the danger until a colleague, the activist in the labour-rights organisation, returned last year from a meeting of anti-asbestos activists in Hong Kong, bringing grim news of the fibres’ effects.

“My first thought was that this was incredible,” he says. “I worked there for more than a year and didn’t know about the danger. And even if it was discovered that I had a lung problem, I couldn’t afford the medical treatment.”

Conditions can be even more lax in the many mines where prison labour is used.

“This is very sensitive,” says the Western expert. “I went to a [prison] mine and I was very surprised. The safety conditions were awful. I went there wearing an EPP3 mask [an industrial mask for working with dangerous materials] but the people there were unprotected. It’s not too dangerous if you’re there for one or two hours but they’re doing this every day.”

When he told the mine’s manager the prisoners should be protected, the manager replied: “Those people don’t need protection.” He interpreted that to mean the prisoners had forfeited their right to safety.

“They’ve not been given a death sentence but it’s the same,” he says.

The labour activist says once he returned from the conference he began to spread the news.

“We discovered a lot of workers did not know about the risk and some didn’t even know they were working with asbestos,” he says. “Some knew nothing at all about asbestos. Some people may have become sick but never knew it was due to asbestos.”

The public is equally ill-informed. Experts estimate 80 million people in the mainland are exposed to asbestos in the buildings in which they live. While the presence of asbestos in a building is not necessarily a risk, if the products deteriorate, or are disturbed, such as during a renovation, there is a danger.

What’s worrying, say engineers, is that many mainland buildings erected in recent years were poorly constructed and will soon need renovating. The task of handling the asbestos they contain will be daunting.

The Western expert says about 20 per cent of buildings built before 2005 that he’s inspected in Tianjin and Beijing contain asbestos products.

“Living and sleeping in an apartment where the level of fibres is up to five fibres per litre is a major risk,” he says. “Many buildings or residences I checked in downtown Beijing – and many more in Tianjin – had levels as high as 20 to 100. But nobody is aware of the situation, even the owners.

“I saw workers on the 11th floor of a building throwing things out of a window,” he says. When he looked more closely, he noticed it was packs of asbestos in simple plastic bags, not the polymer bags required for transporting the material in other countries.

“If you toss this from the 11th floor, asbestos fibres are going to float away,” he says.

He went to the city government to explain the danger. “`It’s none of your business,’ they told me. `You don’t have to worry about this.’”

So why are the authorities turning a blind eye to the danger?

“China is a big producer and consumer of asbestos and the number of people working in the industry is huge,” the activist says. “Shutting down production could result in unemployment. The mines are in

very poor areas and if they stop production, it could lead to economic difficulties. Local governments don’t want to shut the mines because that would hurt their income.”

Workers’ rights activist Li Qiang, of New York-based China Labour Watch, says, “Unfortunately, the use of asbestos seems still common in China for its low cost. This reflects the situation that economic development is out of control and many profit-driven businessmen sacrifice workers’ health and lives to make money. Labour resources are regarded the same as any other resource available to make profits.”

One industry source says the China Non-Metallic Minerals Industry Association is aware of the situation but it lacks the power to do anything.

“They’re scientists and chemical engineers, so when they say asbestos is dangerous, the officials say, `We have to consider the economic situation.’ They’re gifted people but they have no political power. So it’s difficult for the association to have the final say.”

“It’s not that nothing can be done,” the activist argues. “The government could tell workers about the dangers, adopt better mining methods and improve safety measures. We need to do something.”

Some experts say the government should help manufacturers switch to safer alternative products, with the same characteristics as asbestos.

DRIVING OUT OF Asbestos County early in the morning, we notice a table set up at a busy intersection and manned by white-coated doctors and nurses. A long red banner with large white characters is tacked to the front of the table. Perhaps it’s part of a campaign to inform citizens about the dangers of the asbestos fibres they’ve breathed in for six decades.

As our car drives slowly past, however, it becomes clear the medical personnel have a more modest agenda. The banner explains they are here to inform people about the danger of rabies.

With Paul Mooney  and Jim Morris. Originally published in the South China Morning Post magazine.

Founded in 1947, USSA has a vivid, tumultuous history: one that spans infiltration by the CIA and organizing on everything from civil rights in Atlanta to the war in Vietnam. The group has been the training ground for generations of activists and leaders, including Tom Hayden, Representative Barney Frank and Democratic strategist Donna Brazile. Though it has rarely been at the vanguard of the student left, its history closely tracks the down-to-brass-tacks trend in post-1990s student activism. In recent decades USSA has stepped away from gauzy declarations of belief on all matters foreign and domestic, and instead defined itself as a ground-level, policy-savvy organization bent on advocating one goal: increased access to higher education.

And following Obama’s election, USSA is starting to feel like it’s in the driver’s seat.

“Right now, our challenge is to persuade other millennials that we no longer have to fight for crumbs,” says USSA president Gregory Cendana, who was elected in July at USSA’s most recent gathering. “It’s a time to really ask ourselves, What do we want from our elected officials?”

Of course, the challenge USSA’s members have laid out for themselves is steeper than that: overhaul the student lending system and pass the DREAM Act — granting undocumented students who pursue higher education a path to permanent residency — and all in just the next twelve months. Both are heavily embattled measures that have stumbled in Congress for years.

But that’s not slowing USSA down. Nationwide, USSA claims a membership of 4.5 million students on campuses that have elected to join through their student governments, which pay dues and help frame policy. Since 2006 membership has doubled — in part reflecting a growing strength in the state-based student organizations that form USSA’s spine.

Though USSA was once known for publishing thick booklets containing an A-to-Z platform, the organization has narrowed its sights to advocate more strictly for student aid. Between 1982 and 2007, the costs of college fees and tuition rose by 439 percent. Last year, the average debt for graduating seniors who took out student loans ballooned to $23,200, up 24 percent since just 2004. Meanwhile, Pell Grants — once the keystone of federal student aid — which covered more than 80 percent of the cost of a public four-year education in the 1970s, today cover only 35 percent.

Like other student advocates, USSA is hoping that the new administration — even beset by two wars and an economic crisis — can help reverse the tide. Obama’s stimulus package, for example, contained a massive $115 billion infusion into state education budgets, as well as into Pell Grants, tuition tax credits and other programs. While the funds haven’t stanched ongoing layoffs in the education field (including 143,000 in the past five months alone), the measure represents the government’s largest-ever single investment in education.

What’s more, the White House has been unafraid to take on an issue that has stymied Congress in years past: subsidies for student lenders. Out of the $66 billion borrowed in federal loans during the 2007-08 school year, about 80 percent was disbursed through banks and private lenders that participate in the Federal Family Education Loan program. Critics of FFEL note that by assuming private lenders’ risks, the government is inflating their profits on the taxpayers’ dime. Obama backs eliminating FFEL in favor of lending directly from the Treasury, bypassing the private middleman — a measure previously championed by Senator Ted Kennedy, and one the Congressional Budget Office says could save $47 billion to $87 billion over the next ten years.

Recent public revelations about how the system has bred too-cozy relationships — and kickbacks — between lenders seeking preferential access and campus financial aid officers have given such reform efforts greater vigor. In September the House voted to end FFEL by approving the Student Aid and Financial Responsibility Act (SAFRA), a bill that calls for any savings to be reinvested in community colleges and other education programs, including $40 billion for Pell Grants and $10 billion to pay down the deficit. USSA, along with groups like Campus Progress and USPIRG, strongly backs the measure, which is expected to face a more contentious vote in the Senate.

After all, student lenders aren’t giving up without a fight. Over the past year and a half, Sallie Mae (for which participation in FFEL accounts for one-third of its income) has spent some $5.8 million to lobby against Obama’s plan, enlisting powerhouse lobbyist shops like the Podesta Group to sink Democratic support for it. To date, Democratic senators such as Arlen Specter (Sallie Mae is based in Pennsylvania), Jeff Bingaman, Tom Udall and Ben Nelson (Nebraska is home to student lender Nelnet, Nelson’s top campaign contributor) have all expressed opposition to the measure.

USSA’s other legislative priority, the DREAM Act, is unlikely to be heard this fall, but Hill staffers say that the measure may be broached in the spring as part of a broader immigration reform package.

Against this backdrop, USSA has turned out the one resource it can count on: its base. In early October, as part of Raising Pell, a weeklong campaign to support SAFRA, students made more than 1,200 phone calls to senators. Since May, USSA students have lobbied 150 members of Congress in direct meetings. The group also retains a full-time lobbyist and has worked to cultivate close ties with Speaker Nancy Pelosi and other key legislators, conducting joint press conferences and rallies.

Of course, as Barmak Nassirian of the American Association of Collegiate Registrars and Admissions Officers notes, for members of Congress it’s easy for USSA to “very quickly turn into a prop — warm and fuzzy and positive but without substantive influence.” That said, Nassirian thinks USSA’s presence “scares the bejesus out of the opposition, because they’re reminders of what’s really at stake here: students, not lenders.” In recent legislative sessions, USSA students have testified at hearings and served on various rule-making teams at the Education Department, including a rule-making committee working on lender regulations in the Higher Education Opportunity Act this past spring.

The USSA may be outgunned, and its leadership frequently in flux: the DC-based staff turns over every two years. But for students seeking direct representation in Washington, says Nassirian, there simply isn’t anyone else like USSA at the table.

Outside Washington, says Paul Loeb, a historian who’s worked to chronicle student activism, one of USSA’s functions is less obvious but still crucial: tuning students in to DC policy movements that might otherwise dodge public scrutiny. Campus “administrations aren’t out there telling students what’s going on, and the media isn’t covering it,” says Loeb.

Victor Sánchez, a senior at UC, Santa Cruz, and president of the University of California Students Association, agrees. “Without USSA, we wouldn’t have the information to effectively organize on student issues,” he says.

USSA faces internal challenges: its student government-based model of membership, for one, has liabilities. Not all students counted as members are aware of their campus’s affiliation, and occasionally the group attracts censure for seeming too remote. At the same time, though, historian Angus Johnston — who recently completed a dissertation on USSA — argues that USSA’s structure is mostly a virtue. “In the ’60s, folks could read about SDS in Newsweek and just declare themselves a chapter,” he says. And while SDS self-immolated in the late 1960s, says Johnston, “USSA remains accountable to a specific membership, who pay dues and have a real stake in its future.”

In the meantime, USSA’s tighter legislative focus on student aid has helped minimize infighting over political identity, which straddles a diverse, sometimes fractious constituency. During the organization’s National Student Congress in 2008, conservative delegates from the University of North Carolina Association of Student Governments were booed for opposing internal rules that require a certain number of campus delegates to be female, minority, working class or queer. “We didn’t feel terribly welcome,” says T. Greg Doucette, a recent North Carolina graduate. (The group withdrew from USSA earlier this year, citing financial as well as political concerns.)

At USSA’s National Student Congress in July, though, the group’s top legislative priorities — SAFRA and the DREAM Act — were passed by delegates with unanimous consent, something almost unprecedented in the group’s history. “We’re working hard to build collective power across all our campuses,” says Lindsay McCluskey, USSA’s current vice president. “That includes conservative as well as liberal students.”

As someone who grew up in an overwhelmingly Republican town in Minnesota, Josh Mann, a senior at the University of Wisconsin, Milwaukee, says his experience with USSA is a testimonial to “how the organization can really change people.” Before he joined USSA, he says, he’d never been politically active, but his involvement — he’s been both a board member and an advocate for the past three years — has been “eye-opening.”

“Sometimes it’s not until you have the opportunity to get involved with a group like USSA that you see what power you can have,” he says. Mann says that after he graduates he wants to keep working for USSA: first as a staffer in DC, then someday as an elected official.

This article appeared in the November 23, 2009 edition of The Nation.

But you won’t find their activity downtown.

Ringed by thickly forested mountains, illicit cigarette factories dot the countryside: carved deeply into caves, high into the hills, and even buried meters beneath the earth. By one tally, some 200 operations are hidden in Yunxiao, a southwestern Fujian county about twice the area of New York City. Over the past ten years, production of counterfeit cigarettes in China has soared, jumping eightfold since 1997 and making China the world leader in fake smokes. Chinese counterfeit cigarette factories now churn out an unprecedented 400 billion cigarettes a year, enough to supply every U.S. smoker with 460 packs a year. Yunxiao — once famed for its bright yellow loquat fruit — is the trade’s heartland: the source of half such production, officials say.

Today, China’s fake cigarettes fuel a multi-billion dollar black market and are even more hazardous for smokers, yet the industry is little-known. From New York delis to London storefronts, China’s brand rip-offs are now sold in cities around the world. While a pack of fake Marlboros costs $0.20 to make in China, in the United States, it can fetch up to twenty times that amount, even when sold at cut rates. Spurred by global crime rings, the counterfeit trade has exploded, propping up addiction and robbing governments of billions in annual tax revenue. Officials can only guess at the size of the industry here in the United States, but to give a sense of scale, from 1999-2005, one ring smuggled a billion fake cigarettes into Los Angeles and New Jersey. Fully 99 percent of the U.S. counterfeit market is supplied by China, and up to 80 percent of that in the European Union. Meanwhile, Chinese government efforts to stop the trade are met by street riots, machete-armed manufacturers and retaliation killings.

“Most factories are underground,” confides a Yunxiao cigarette broker in hushed tones. “They’re under buildings, unimaginably well-hidden, with secret doors from the basements.” Even the village temple — topped with a lilting red roof and twisting, frescoed spires — conceals a factory below, she says.

Sixty Versions of Marlboro

Though a nearly invisible industry, cigarette counterfeiting is an immensely lucrative one, with profits rivaling those of the narcotics trade, officials say. While one 40-foot container of cigarettes (containing 10 million sticks) can be produced in China for just $100,000, the street value of such a container smuggled into the United States is up to $2 million. And though a drug trafficker might land a life sentence if caught, a cigarette counterfeiter receives a comparative slap on the wrist — a handful of years in jail, or possibly a fine.

Interviews with law enforcement officials, tobacco industry investigators, and the smugglers themselves reveal the Chinese business is booming, with no shortage of groups vying to enter the trade. The Chinese diaspora plays a major role in distribution, with groups particularly active around New York City, Vancouver, Rotterdam, Le Havre, Valencia and Hamburg. The industry has also attracted a sprawling network of middlemen and smugglers, notably from the Middle East and Eastern Europe.

“In the last few years, pretty much every market has been targeted,” says Andrew Robinson, who directs the brand integrity division for Philip Morris International (PMI). In 2001, Chinese manufacturers were producing eight different varieties of counterfeit Marlboros. As of last year, though, PMI reports, Chinese counterfeiters were manufacturing separate versions of Marlboro tailored for some 60 countries — down to the specific detail of tax stamps and regional health warnings.

“Ten years ago, [there were] almost no counterfeit cigarettes,” says Austin Rowan, who heads cigarette fraud investigations for the EU’s Anti-Fraud Office, known as OLAF. Last September, though, the tide of fake smokes flooding the European Union — most of them Marlboros from China — prompted OLAF to post its first-ever officer to Beijing. In the United Kingdom alone, the illicit trade costs the government nearly $5 billion a year. “People are hungry for these products,” says Rowan.

Inhaling the knock-off cigarettes, however, may do even more damage than their legitimate counterparts. Lab tests show that Chinese counterfeits emit higher levels of dangerous chemicals than brand-name cigarettes: 80 percent more nicotine and 130 percent more carbon monoxide, and contain impurities that include insect eggs and human feces. And by targeting smokers with cheap cigarettes, health authorities fear the counterfeit influx diminishes incentives to quit. (Centers for Disease Control studies show that every 10 percent increase in cigarette prices causes a 4 percent drop in consumption.)

Back in the 1990s, counterfeit packs from China often came riddled with easy giveaways: misspelled health warnings, blurred lettering. These days, OLAF reports that sophisticated industry forensics are needed to identify China’s counterfeits. In the United Kingdom, where authorities in some areas report that up to one-third of all cigarettes sold are fake, mostly from China, customs officers have deployed a trained dog to try and sniff out counterfeits on the streets.

When it comes to the source of top-quality fakes like these, all roads lead back to Yunxiao. The area’s cigarettes are so renowned that Yunxiao has become a watchword among China’s counterfeiters, with manufacturers from other regions even claiming their cigarettes originate in the area — a kind of double-layer decoy.

Yunxiao is the center of China’s cigarette counterfeiting industry. A slogan in the city’s downtown reads: “Build a peaceful Yunxiao, increase economic development.” Te-Ping Chen/ICIJ

Last December, China’s Ministry of Public Security announced the bust of one of the largest international schemes in years, a network of 27 suspects that reportedly smuggled at least 600 million fake cigarettes around the globe. While the cigarettes — mostly counterfeit Marlboros and 555s — were shipped as far as South Africa, Greece, Indonesia and the United Kingdom, they’d all been manufactured in southwest Fujian, deep in rugged mountains.

Fujian’s cigarettes also lay behind a massive U.S. smuggling network the FBI busted in 2005. Two sting operations code-named “Operation Royal Charm” and “Operation Smoking Dragon” netted a group of 62 ethnic Chinese who smuggled one billion cigarettes into the Los Angeles-Long Beach and Newark ports, using false descriptions such as “wicker furniture” and toys. The counterfeits, largely Marlboros and Newports, were in turn sold on the streets of Los Angeles, Chicago, and New York City.

“Any brand or quality, Yunxiao can help you make it,” says a former cigarette smuggler from Fujian. “You just need to name your price.”

A Flood of Fakes

It’s hard to overstate the ubiquity of tobacco in China, a country home to one of the world’s most elaborate and entrenched smoking cultures. Here, the introductory exchange of cigarettes is as ritualized as a handshake, while expensive packs moonlight as everything from wedding gifts to bribes — even offerings on ancestors’ tombs.

As an official from the tobacco company Rothmans once put it, “Thinking about Chinese smoking statistics is like trying to think about the limits of space.” Every year, China’s smokers consume one-third of the world’s tobacco: an overwhelming 2.2 trillion cigarettes. Cigarette-related mortality levels, too, are equally staggering, with fully one-third of all Chinese men under age 30 predicted to die from the pandemic.

Like anything else related to tobacco in China, the number of counterfeits flooding the domestic market is similarly off the charts. “Each of us has come up with our own strategy to deal with it by now,” says one Beijing smoker, who personally refuses to buy at locations where he doesn’t know the owner. The problem is so bad that on trains, conductors roam the aisles, industriously hawking 75 cent keychain lights that purportedly reveal fake packs.

From Chinese ports like Xiamen, 40-foot containers of cigarettes depart for high-tax markets like those in the United States and European Union. Te-Ping Chen/ICIJ

After all, while the West is the most lucrative counterfeit market, for smugglers, it’s also the riskiest. Inside China, local ties and protectionism afford some degree of control: a friendly $10,000 tribute, one customs official confides, has been the going rate to bribe a container out of the Xiamen ports in recent years. (And even without payment, inspection rates at China’s ports are a low one to two percent) Beyond China’s borders, though, containers are more vulnerable to detection by outside law enforcement, many of them newly vigilant against the fake trade.

“We’re seeing seizures all the time,” says PMI’s Robinson. In May, UK authorities seized over 20 million counterfeit Regals (valued at $8.6 million) imported from China into Southampton. Likewise that month, Spanish authorities grabbed 20 million fake Marlboros — falsely described as mattresses — imported from the Chinese ports of Chiwan and Shekou. Also in May, French customs intercepted more than 15 million made-in-China fake Marlboros outside Paris, some bearing Vietnamese as well as Arabic and French health warnings.

Nevertheless, says OLAF’s Rowan, such seizures are just “the tip of the iceberg.” Smugglers frequently ship cigarettes through an array of destinations such as Dubai and Singapore to mask a container’s origin, with some spending up to three months at sea before delivery. And even if a container is seized, given exorbitant per-container profits, the loss is a slim deterrent. “With nine containers seized in ten,” Rowan says, “[smugglers] still would not be losing money.”

For counterfeiters, the rewards are especially prodigious. According to manufacturers, state-of-the-art cigarette machines (available online from sites like Alibaba.com) can fetch a pricey $1.5 to $3 million. “But everyone knows that the investment can be recouped in just a few months of manufacturing,” says a Yunxiao broker. Some factories boast up to 500 workers and over $100 million in annual sales.

With so much profit at stake, this underground industry has cultivated a notably violent set of players. Past factory raids have yielded semi-automatic rifles and met with armed resistance, and every year, several state and private investigators are killed in their efforts to penetrate the trade. The average raid is carried out by hundreds of Chinese police. During one 2003 operation, says a security consultant at ZIC, fully 5,000 officers were deployed. (ZIC no longer takes on cigarette cases, according to the consultant, because the risks have become too great.)

In the 1990s, Chinese counterfeiters relied heavily on Macao, Taiwan, and Hong Kong for technical expertise, as well as high-quality packaging. These days, though, China’s counterfeiters source the majority of their supplies from the mainland: tobacco from Yunnan province in the west, packaging from Dongguan and Shantou in nearby Guangdong province, and cast-off machines bought online from underground manufacturers or recently shuttered state facilities. (Over the past decade, China’s legal cigarette industry has been consolidated, with the number of factories shrinking from 185 to 31 since 2001.) Counterfeiters have not only acquired the technology to mimic holograms used to distinguish real packs, but also the rounded-corner packaging the tobacco industry has introduced in recent years.

Yunxiao’s cigarette counterfeiters are well-armed and well-protected; in some raids, police have had to blast through concrete bunkers to find the machines.

And as manufacturing technology has improved, so, too, has the speed with which counterfeiters respond to shifting markets. This December, when Irish authorities seized a shipment of 20 million counterfeit cigarettes, they found the made-in-China packs bore exact replicas of Ireland’s latest tax stamps, which had been in circulation only a few months.

With the advent of the Internet, counterfeiters have become more brazen as well. Many openly court clients through online storefronts, touting quality guarantees and their equipment’s international caliber. One Yunxiao operation, established in 1993, assures customers of its experience exporting to Asia and Africa, and says it maintains its own tobacco leaf fields in Laos. The company — which churns out some 80 million cigarettes a week—promises a six-day manufacturing turnaround, door-to-door delivery for certain overseas clients, and impeccable customer service.

The tone is reassuring and gently instructive. For tentative buyers, the owners guarantee that for the U.S. in particular, it’s a “profit business.” Reads their website: “We strive to build and maintain a total honesty management culture, and will appreciate the chance to do business with you.”

James Bond and Pig Pens

In China, as elsewhere, a successful business relies on more than just technology — it requires serious support from investors and brokers. Men, for example, like Tony Tung.

Originally a fishmonger from Fujian, for the past 15 years, Tung — square-jawed, middle-aged, with a thick coif of black hair — has ranked among China’s most notorious cigarette dealers. Tung, though, didn’t start out smuggling fakes. In the early 1990s, he found gold in the genuine product: Marlboros and 555s smuggled into China from abroad.

For years, the Chinese government has worked strenuously to keep foreign cigarette companies at bay, capping imports and levying tariffs as high as 430 percent. That, though, didn’t deter companies like British American Tobacco from smuggling their products into China — or Chinese enterprisers like Tung, who made millions smuggling legally produced cigarettes in the Philippines into China.

Once a humble fishmonger, Tony Tung has become a top dealer in contraband cigarettes. Credit: Next Magazine.

But when China cracked down on the trade in the 1990s, Tung turned his sights to the next industry bonanza: counterfeiting. Tung built up factories in Fujian, as well as in the Philippines (closed by authorities in 2005) and the free-trade zone of Rajin, North Korea. In recent years, his enterprise has reportedly shipped up to 50 containers a month — or 500 million cigarettes — to markets throughout the United States, Europe and Asia. Tung continues to elude authorities, shuttling between Singapore and nearby countries, according to a tobacco industry source familiar with Asia. Recently, his syndicate has started using fishing boats to smuggle its product around Asia, the better to dodge inquisitive customs officials.

Tung and his fellow counterfeiters employ an impressive bag of tricks to avoid scrutiny. One manufacturer (arrested in 2001) constructed a factory that masqueraded as a People’s Liberation Army compound, complete with 20 laborers — dressed in cast-off military uniforms — who would conduct faux-army drills and sing the national anthem in the yard every morning. Other machines have been lodged on ships, inside concrete bunkers, and even under a lake.

“Finding these guys is like a James Bond movie,” says Keith Tsang of the China Association of Industry Security Professionals. “You’d never believe it was for real.”

In Yunxiao, factories are frequently hidden in dim, bricked-in facilities underground, accessible only via trapdoor and ladder. The turf masks the tobacco scent, while nearby sentries are used to monitor passersby. Workers staff production lines in teams of six or seven, feeding tobacco into large, heavy machines anchored in concrete foundations. Above ground, manufacturers use other ploys to hide the tell-tale aroma: double-paned glass and cotton quilts tacked to the walls, with pig pens sited nearby. In Yunxiao, investigators say, the easiest way to find a factory is often by searching for signs of industrial power sources.

Like many industries, China’s counterfeit operations are distributed: tobacco cutting and drying at one site, cigarette rolling at another location, and packing still elsewhere. These days, the packing — usually managed outside port cities, just prior to shipment — is the only process that hasn’t yet been mechanized. In major distribution centers like the city of Guangzhou, 300 miles west of Yunxiao, laborers still fill and seal the branded packs by hand. In one city corridor crammed with wholesalers, teenage girls from Fujian stroll arm-in-arm in the quiet pre-dawn darkness, awaiting their next shift.

Twenty-five years ago when multinational tobacco companies’ smuggling activities took off, Chinese smokers flocked to foreign brands. Now, cigarette vendors say fake Marlboro and 555s are so common that many Chinese simply choose to avoid them altogether. As one former cigarette smuggler from Shenzhen explains, “Nobody can tell anymore whether they’re real.”

The Mountains Are High

Since its accession to the World Trade Organization, China’s lackluster efforts to protect intellectual property rights have attracted sharp criticism. But with regard to tobacco, Beijing has waged a more aggressive war. All legal manufacture and distribution of cigarettes is state-owned, and in a nation of 400 million smokers, that’s big business. (Local governments are zealous about defending it, too: until this May, officials in Hubei were required to smoke a collective 230,000 packs of regional brands a year.) With cigarette sales accounting for nearly 8 percent of China’s budget in 2007, the state has a strong motive to keep its supply counterfeit-free.

To dodge official scrutiny, counterfeiters tunnel deep within the mountains to hide their workshops, which helps mask the scent.

Certainly the relevant authority, the State Tobacco Monopoly Administration, has spared no resources in trying. By 1995, long before multinational tobacco companies had seriously mobilized on the issue, the STMA had already dedicated $12 million to combating counterfeiters. The agency today fields 50,000 agents to fight the fakes, according to industry sources. Meanwhile, this year, according to a police officer in the Yunxiao region, the STMA has dispatched some 150 officers directly to the region for up to year-long postings.

Last year, officials say, the STMA raided 3,312 production sites throughout China, apprehending 7,128 people in the process and seizing 8.3 billion counterfeit cigarettes. The STMA also regularly holds public “destruction ceremonies” to demolish seized cigarette equipment, hoisting the machines up into the air by crane before dashing them onto concrete below.

“China devotes a huge amount to enforcement,” agrees Martin Dimitrov, a professor at Dartmouth College who has studied the issue. “The puzzle is that there seems to be little effect.”

It’s not that manufacturers don’t feel the pressure. One manufacturer reports that local counterfeiters are losing up to $300,000 a day in seized materials, and phone calls to a handful of different counterfeiters suggest a number are currently laying low, hesitant to expose themselves to new buyers.

But when it comes to Yunxiao’s factories, an old Chinese idiom seems particularly fitting: The mountains are high, and the emperor is far away. Yunxiao villagers, too, quote their own motto: “Any official can absolutely be bought within half a month.” In some cases, a gift of just $1,500 can buy a counterfeiter a license to operate and some official breathing room. Last year, 28 officials were reportedly detained in connection with cigarette counterfeiting on charges such as dereliction of duty, cover-ups, or actually participating in the trade.

From another perspective, the counterfeit industry is also a boon for local employment, which some officials are loath to suppress. “The question for authorities now, with the economic slowdown, is: Do you really want to shut these places down?” says Tim Trainer, who heads the Global Intellectual Property Strategy Center in Washington, D.C.

Much of China’s counterfeit cigarette industry is literally underground, with factories accessible only by trapdoor and ladder.

For some, it seems, the answer is no. Last year, though China’s Administration of Industry and Commerce completed 13 percent more intellectual property raids than in 2007, the number of such cases transferred for criminal prosecution dropped 40 percent. This January, the Guangdong prosecutor’s office instructed prosecutors to “cautiously choose whether cases should be brought,” and with less serious criminal cases, “postpone enforcement where appropriate.” Likewise in December, the deputy minister of Shandong’s public security bureau (recently arrested for corruption) pressed police to avoid “aggravating” businesses’ production problems, for fear of “increas[ing] the likelihood of mass protests.”

No matter Beijing’s intentions, national priorities can only filter down so far. One police officer based just outside Yunxiao, who asks to remain anonymous, reports that his superiors deliberately downplay fighting those in the trade, and that an arrest is an anomaly. Most workers caught will “just pay some fines,” and even if arrested, their bosses will bribe or bail them out. As for catching production bosses, he says, it’s “impossible.” They’re too deeply insulated, he says, and too adept at hiding: some hold as many as 100 fake identity cards from China’s 22 different provinces.

Even if caught, the maximum sentence a cigarette counterfeiter can expect is just seven years. Three years is the minimum and more common sentence, says CAISP’s Tsang. To put someone in jail for even that long, authorities have to seize over $36,800 in contracts or goods, a threshold counterfeiters try to duck by scattering storage and production efforts.

“It’s impossible to root out this business,” says the police officer. “Even though there are crackdowns, I don’t see any long-term plan to eradicate the industry.” While the STMA pays any police division up to 15 percent of the retail price of any goods seized, those incentives, he explains, are useless in nabbing those involved. “When cars [with cigarettes] are stopped, the drivers run away, but the police don’t care, because they’ll get a reward anyway,” he says.

In the last five years, one multinational tobacco company has altered its tactics on the mainland, choosing to focus its efforts on seizing goods as they leave China, rather than on identifying production sites. “In an ideal world, we’d be able to go after them, but that became too hard,” says a tobacco industry official. There are simply too many—and besides, as he asks, “At the end of the day, are we really going to convince the provincial authorities in Fujian to crack down?”

The Shanghai Professor

Few in Yunxiao will talk openly about the village’s main industry. One knowledgeable resident, a 30-year-old woman and sometimes cigarette broker, tried to explain why the trade flourishes so well in her community. The counterfeiting industry, she told visitors, is more than just a business, it’s a brotherhood. Only those whose entire family tree can be traced to the area are permitted to work in production. Regional markets are divided by family, and once established, firmly respected — spurring others, in turn, to develop their own new markets. Unity is fierce, she says: that’s why Yunxiao is so well-protected.

Cigarette stalls like these are ubiquitous within China, where one third of the world’s smokers consume 2.2 trillion cigarettes a year. Te-Ping Chen/ICIJ

Surveillance is heavy in Yunxiao’s narrow side streets and in its hotels, and outsiders are frequently tailed. Though authorities offer rewards of up to several thousand dollars for information, few residents dare to take them, she says. “Even if you get the money, you won’t have any life left to enjoy it in afterwards.”

But when it comes to production, she adds, Yunxiao people are nothing less than business-minded “professionals.” She tells the story of one Shanghai chemistry professor, who manufacturers collectively enlisted five years ago to help them better mimic the popular Chinese cigarette brand Hongtashan. Counterfeiters paid him $15,000, and have rewarded him with royalties ever since. Similarly, in years past, she says, local counterfeiters have invited retired workers from the state-owned Shanghai Cigarette Factory — home to some of China’s top brands — to tour Yunxiao for a month, helping fine-tune local recipes.

As they battle with Beijing, Yunxiao’s manufacturers show no signs of backing down. Some have stepped up investment in new factories outside the area, including the cities of Pinghe and Zhangpu. Others are shifting production outside of China altogether, as far away as Vietnam and Burma. Meanwhile, overseas law enforcement facing the counterfeit influx is baffled by the trade: tracing a seized container to its producers, industry officials say. is “almost impossible,” given that the majority of company names used on accompanying records are also fake.

Yunxiao might someday change, but such a transition would take many years, says the broker. One manufacturer she knows invested $2.5 million to start another legitimate business elsewhere, but recently quit and returned — disappointed, she reports, because “the profits could never match counterfeit.”

Still, though, she hopes the industry will make a shift: “We locals hope we can work together to build up a real factory someday.”

Originally appeared in the South China Morning Post magazine.

To be sure, as a former law enforcement trainer in Colombia, Risheim had seen his share of personal danger. But since moving his wife and three children to Panama to start work on anti-counterfeiting for Philip Morris International, a top multinational, he thought they would be safe.

“You just never think something like that would happen,” Risheim says. “We’re talking about counterfeit [cigarettes] here.”

It was winter 2003, and Risheim was Philip Morris’s newly appointed brand integrity manager for the region. He’d been on the job just six months, but already seizures of counterfeit Marlboros had spiked. Local smugglers were taking notice, too. Late one night, a group of them approached the Risheims’ home and slipped a nozzle into the air conditioning unit. Clouds of anesthetic swelled within; the Risheims sank into a stupor. The thugs picked the locks and crept inside his home.

Risheim says his family was lucky to have woken up at all. “The [anesthesia] could have killed us,” he says. He didn’t quit, but in the days to come, he took no chances. He moved his family into another neighborhood, and Philip Morris dispatched 24-hour security to protect them.
$200 Billion of Counterfeits

Since the 1990s, trafficking in counterfeit goods has become a windfall for some of the world’s top organized crime and terrorist groups. In New Jersey, Italy’s Camorra reaps profits off fake electronics, while in Afghanistan, the Taliban exact a surcharge on smuggled shipments of counterfeit cigarettes. Today, counterfeit products — from toothpaste to brake pads — surface in virtually every corner of the globe, with sales clocking in at an estimated $200 billion per year, according to the Organization for Economic Co-operation and Development.

And with many countries where products are manufactured — such as China or India — unable or unwilling to quell the deluge, often it’s private investigators like Risheim who end up on the front lines. Today, at least 25,000 of them are stationed around the world, fighting counterfeiters in countries from Romania to Uruguay, according to the National Intellectual Property Law Institute’s James Chandler. From fly-by-night operations in China to boutique outfits set up by retired FBI agents, the number of investigators in the field has jumped fourfold since 1995, Chandler says.

Hired as in-house employees by companies, or independent outside contractors, investigators conduct surveillance, collect evidence, and even assist with raids in dozens of nations. They can’t make arrests, but otherwise act as a private police force — that is, one operating on foreign soil, and at the behest of multinational corporations from Colgate to Nike to Louis Vuitton.

The Levinson Case and Other Dangers

Despite the size of the counterfeit industry, the investigative profession has kept a low profile. Which, given the proprietary information involved, is the way that companies like it. Particularly when it comes to fake cigarettes, one of the most lucrative counterfeit items around, investigations can be perilous: a murky world of dubious informants, counter-surveillance, and occasional death threats.

In one particularly chilling case, an investigator in Fujian Province, China, had his arm macheted off by local cigarette counterfeiters. In Ukraine, just prior to the 2005 Orange Revolution, one operative working for a multinational tobacco company was arrested on charges of espionage, and thrown into jail for days. In northern Bolivia, another local cigarette investigator was awakened at 3 a.m. by a staccato knock, and a man delivering a death threat.

The public got a rare window into the risks in March 2007, when the case of Robert Levinson, a former FBI agent turned private investigator, made headlines. Levinson — a 61-year-old father of seven from Coral Springs, Fla. — disappeared on a trip to Kish Island, Iran, where he was investigating cigarette smuggling in the region, according to his wife.

Little is known about Levinson’s specific plans on Kish Island, a free trade zone notorious as a hotbed for smuggling into the Middle East. Before heading to Kish, though, Levinson had stopped en route in Dubai as part of an assignment for the London-based advocacy group, Global Witness, and e-mail records obtained by ICIJ show he also hoped to meet with another Dubai-based trader — Ahmed Barakat, who worked as a consultant for Philip Morris International from 2001 to 2007. Barakat declined to respond to questions from ICIJ.

Since checking out of his hotel the next day on Kish Island, a half-hour plane flight away from Dubai, Levinson has not been publicly heard from, and Iranian authorities deny any knowledge of his whereabouts.

But while Levinson’s story lies on the more dramatic side of the register, he’s hardly alone in the field — or in facing the risks involved.
An Explosion of Investigators

Back in the 1980s, when the counterfeit tobacco trade was starting to explode out of Taiwan and South Korea, well-established companies like Kroll and Pinkerton dominated the investigative trade. Since the 1990s, though, a fresh wave of retiring U.S. federal agents — part of an expansion of law enforcement under President Nixon — has challenged their supremacy, with many now working either as in-house brand integrity managers or as independent, private contractors.

These days, as well, there are any numbers of overseas operators enlisting in the business. In Guangzhou, China — a country that leads the world in counterfeit goods, accounting for up to eight percent of its GDP — some 80 firms are working as contractors for outside corporations. Though brand owners are close-mouthed about how much they’re spending to stop the counterfeit scourge, to take just the tobacco industry as an example, companies like Philip Morris and British American Tobacco work with dozens of investigators and informants around the world.

Of course, getting police in the developing world to see major multinational companies as victims — and to take action — isn’t easy. “Look at a country like Colombia, who’s fighting a civil war on the side, and drug lords,” says Risheim. “You tell them, ‘We’ve got a problem,’ and what’s the response? ‘Get in line!’”

Controversial Ties to Police

In many countries, building relationships with law enforcement means contributing funds, storage space, and equipment such as infrared readers or night-vision goggles. Some industries, like tobacco companies, go still farther, signing cooperative agreements with local customs agencies that — in the case of Uruguay, for example — pledge that local police will coordinate any media releases related to activities along with the affected company. Given the tobacco industry’s history of complicity in smuggling, anti-smoking advocates worry that these relationships jeopardize law enforcement’s ability to stay vigilant against any such corporate malfeasance. “Some of the major tobacco manufacturers have distracted or compromised domestic and international law enforcement efforts, and few agencies are really taking an independent look at what’s going on,” says John Colledge, who oversaw international tobacco smuggling programs at the U.S. Customs Service between 1999 and 2002.

But without such overtures, says Daniel Chow, an Ohio State University law professor and former tobacco industry consultant, local authorities are rarely responsive. In China, he says, investigators have to bring authorities cases “essentially gift-wrapped.” Says Chow, “You have to tell them, ‘Here’s the warehouse, here’s the factory, here’s the evidence.’”

To build his cases, Ted Kavowras — a former New York City cop and 15-year veteran of the field — starts by conducting undercover surveillance and test buys in markets throughout China. He and his colleagues at Panoramic Consulting employ a California-based make-up artist to keep their identities shrouded, with the aid of multiple facial prosthetics, beards, and wigs.

“We pretend to be big buyers,” says Kavowras, who met his wife while monitoring a neighbor’s sales front in Beijing, “and ultimately, they believe us.” (For the first year of their courtship, his wife-to-be thought he was a high-rolling trader from Dubai.)

But while getting the evidence is one thing, persuading authorities to act is another. In South America, investigators in the tobacco industry admit that on occasion they lie to local police, telling them that certain warehouses contain drugs — not just counterfeit cigarettes — because they know police are more likely to raid those that contain the former. In China, cajoling authorities to act often means cultivating them with overtime fees, equipment, or contributions to a local police retirement fund. Such payments, if properly documented, are legal under the Foreign Corrupt Practices Act, and investigators insist they’re necessary to getting any traction on their cases.

“Every time we went to the Public Security Bureau, they’d ask for money to open up a case, or make an arrest,” says Chow. “They were notorious for that.” The average fee per arrest, he adds, was a hefty $7,000.

Death Threats and Dirty Tricks

In Eastern Europe, an American who handled cigarette investigations in Latvia recounts how the police frequently wiretapped his office to keep tabs on his activities. “Cigarette counterfeiting would always go up during election time, for campaign money, so everyone would be watching us,” he says. The counterfeiters would tap his office phones, too, as would other consultants receiving commissions from the investigations industry. At one point, the investigator says, he received a death threat from a Russian general allied with a Latvian investigations company, who felt that the American was stealing their business.

“Sometimes your worst enemies are not the counterfeiters but the people you work with,” he says.

In China, source of two-thirds of the world’s counterfeit goods, the private investigations field is particularly notorious for corruption. Numerous Chinese fronts acting as investigators are fly-by-night operations: “cockroach companies” with little or no scruples, as one Western investigator describes them. With no regulation or licensing, there are currently some 1,000 China-based brokers vying for fees from multinationals, estimates Keith Tsang of the China Association of Industry Security Professionals (CAISP). Some are composed of former members of the Chinese enforcement agencies, others just enterprising youth looking for a buck.

Local companies, of course, are cheaper to retain than big-name Western outfits (which subcontract out much of their work to such firms anyway). A successful raid might cost $1,800, with bonuses for additional seized products, and another $7,300 commission if followed by a criminal conviction. But on the flip side, it’s very hard for companies to know what’s happening on the ground.

Investigative companies looking to fleece multinationals use any number of stand-by tricks. Pawning off recycled photos of old counterfeit seizures as evidence in new cases is a favorite. (In one case, a Chinese company went so far as to film a faux-raid as evidence of a counterfeit sting operation.) Crooked investigators are known to tamper with police lists of seized goods, as well; one easy ruse is to add an extra digit on the number of seized goods: 109 quickly becomes 1,090, for example. Some companies have even been known to place orders with counterfeiting factories before launching raids, to increase the number of products seized (and in turn, their commission).

Investigators also sometimes extort bribes from the counterfeiters — in cooperation with the police, according to Daniel Plane, in-house intellectual property counsel at Gide Loyrette Nouel’s law offices in Hong Kong. “During a raid, the investigator says, ‘Pay us 40,000 RMB [almost $6,000], and we’ll tell the brand owner that everything got shipped out the night before the raid,’” he says. “The brand owner never knows, and the investigator and cop split the fee.” Plane says he’s even heard of cases in which counterfeiters gain contract work as investigators, and use their position to raid the factories of their competitors.

“Frankly, a lot of [brand owners] have their heads in the sand about what’s actually going on here,” Plane says.

Few companies are immune to the seedy side of the business. A number of years ago, unbeknownst to cigarette companies that had hired a well-known Western firm to conduct anti-counterfeit work in China, a local manager for that firm had developed close ties to the official State Tobacco Monopoly Administration, which itself is charged with investigating counterfeit cigarettes. Through that manager, the STMA would pass tips to the investigative firm, which in turn would charge its clients to investigate the information — neatly outsourcing its own work on the tobacco companies’ dime.

To keep his own investigators honest, Kavowras’s team of 30 covertly records all interactions with their targets. “I believe them, and I trust them,” Kavowras says. “But I trust them a lot more when I have it on tape.”

“It’s a real double-edged sword,” Plane adds. While investigations in China can be done cheaply, he says, “a bribe might be paid in your name, and after a raid, your investigators might be buying the police prostitutes. … You just don’t know.”

The high stakes and stress contribute to high levels of burnout in the business. For some, the risks are simply too high, and the profits aren’t there. Take, for example, the undercover informants that companies hire to investigate suspected factories, who pose as workers for months on end. For such informants — who in Fujian, China, earn as little as $5 a day — the task is “very dangerous” as well as poorly paid, according to a Xiamen-based lawyer whose firm contracts with such laborers. “If the factory finds out who they work for, they’ll be badly beaten,” he says.

Mario Loaiza, whose company conducts investigations in Latin America for several large brand owners, says he knows it’s a dangerous game. “We’re talking about organized crime here, big business, in some cases just as profitable as selling drugs,” says Loaiza, a former criminal investigator with the U.S. Department of Defense. But when it comes to his 17 investigators, he explains that he does what he can to keep them safe — for one, by never asking them to do something he wouldn’t be willing to do himself.

“I tell them, it’s just a damn pack of cigarettes,” Loaiza says. “It’s just a pair of jeans. … Your life is more important than that.”

Yet the complex is the busiest in America, the arrival point for nearly half the volume of all U.S. imports. And it’s here that, like so many other smugglers, Charles and May Liu first struck gold.

By all accounts, the Lius were not extraordinary. After emigrating from China around 1980, the pair settled into the Washington, D.C., suburb of Gaithersburg, Maryland. Charles was quiet, a student in political science at New Jersey’s Seton Hall University, where he received a master’s degree. At age 67, he had a professorial look, with chinos and sweaters his preferred attire. May was a romantic, someone the agents who arrested her would later describe as a “true lady,” one who loved ballroom dancing, wore pantsuits, and fastidiously watched her weight.

Fake Marlboros arrived at the ports falsely labeled as “toys” and “wicker furniture.” Credit: Te-Ping Chen.

But the pair wasn’t quite what they appeared. By the time the FBI arrested them in August 2005, the Lius had led a team of agents straight into the heart of a vast Chinese smuggling network — one that sold, among other goods, counterfeit pharmaceuticals, fake $100 bills, and weapons from North Korea. And then there was their real gold mine: cigarettes. Low-grade, brand-name counterfeits. Over a billion of them, all told — more than enough to supply every man, woman, and child in America’s 50 largest cities with a pack.

Like drug trafficking, the trade in fake cigarettes is big money. While in China it costs as little as $125,000 to manufacture a 40-foot container of cigarettes (or 10 million individual sticks), here in the United States, such a container’s contents can be sold for as much as $2 million. Historically, several U.S. multinational tobacco companies, notably R.J. Reynolds and Philip Morris, dominated the global cigarette smuggling trade alongside British American Tobacco. Yet since a series of exposés and multibillion-dollar lawsuits in the European Union and the U.S. clamped down on such activities after 2000, the United States has itself become a target for a new wave of smugglers who have stepped in to fill the industry’s shoes.

Today, with less scrutiny from law enforcement than drug trafficking and lighter penalties for those caught, the cigarette smuggling business is a bonanza for organized crime syndicates, everyday crooks — and even terrorist cells.

As with drug smugglers, cigarette smuggling rings are difficult to penetrate, with networks insular and compartmentalized. “The person in a warehouse who’s responsible for receiving the containers [of cigarettes] only knows what they need to know,” said Kevin Kozak, deputy special agent in charge of the U.S. Immigration and Customs Enforcement investigations office in Los Angeles. “Try coming in with a warrant then, and you have no case.”

“You have to be patient,” he said.

Undercover FBI agents Lou Calvarese, Jack Garcia, and Tom Zyckowski know a lot about being patient. For six years, the trio painstakingly worked to cultivate Charles and May Liu’s confidence. Over the course of some 1,000 meetings, their investigation — dubbed “Operation Royal Charm” — would pull the agents deep into a tangled Chinese underworld spanning coasts and continents. Together with a parallel California case, “Operation Smoking Dragon,” the twin investigations would result in 10 indictments, with 87 individuals charged, mostly ethnic Chinese.

“We really got to see a network of cigarette smugglers up close,” said Garcia — who, like the other agents, has since retired and is sharing his full story with a reporter for the first time. “It’s sophisticated, the way it works. And these guys are like hookers,” he said. “There’s a lot of them.”

Calvarese, Garcia, and Zyckowski — based out of Atlantic City, New Jersey — first heard from an Italian informant about Charles and May Liu in 1999. The informant had fingered the pair as cigarette smugglers, wheelers and dealers who’d been sneaking counterfeit smokes into the Los Angeles and Long Beach ports. But authorities had lately intercepted a few of their containers. The couple might be receptive to an offer of assistance at the ports, the informant intimated — that is, from the right kind of individuals.

Undercover G-men Lou Calverese (left) and Tom Zyckowski (right) celebrate with their “fellow smugglers” just prior to Calvarese’s faux weekend wedding.

At a formidable 6 feet 4 inches and 375 pounds, Zyckowski (or “Z-man,” as his targets knew him) thought he could play the part. A longtime undercover agent, he was used to adopting the braggadocio needed to pose as a member of the Italian Mob. Some shiny suits, a pair of Cadillacs retrieved from the FBI’s stock of impounded vehicles, and a purple Porsche Carrera — seized from a drug dealer with only 7,000 miles on it — gave him and his fellow agents all the other panache they needed.

As it turned out, the ruse was easy. The Lius, evidently, had never dealt with the Italian Mafia before. When the agents assured them that as mobsters, they knew corrupt officials at the Newark port, the couple easily absorbed the story. After their containers had been seized in California, the Lius figured they’d try their luck elsewhere. A deal was made: For $60,000 per container, the agents would guarantee delivery of their cigarettes.

And, gradually, a friendship was struck. “From the time I first met her, May actually started to kind of fall in love with me,” Zyckowski said. “Well, not me, exactly. It was the Italian wise guy she liked.” Those feelings, Zyckowski said, had real roots — though nothing ever came of them. “Charles was often away in China, always focused on their business,” Zyckowski said. “I think she was lonely. In some ways, I think she just wanted companionship.”

“Chinese Beverly Hills”

Fifteen miles east of Los Angeles lies the San Gabriel Valley: a cluster of low-slung, palm-lined suburbs variously nicknamed Little Taipei, New Chinatown, and the “Chinese Beverly Hills.” The area is heavily immigrant, its streets lined with stores bearing bleached Chinese characters advertising everything from dentists to dumplings. Around here, Chinese so heavily dominate the valley that one auto shop worker quips, “The best way to learn English is to go to jail.”

Like his counterparts in Atlantic City, FBI agent Bob Hamer knew little about the Chinese trade in counterfeit cigarettes. But by the time he was tapped to become the West Coast undercover agent in “Smoking Dragon,” he’d heard about it. Since the late 1990s, when Chinese counterfeiters first developed the ability to mimic the holograms used to indicate legitimate packs, the industry has accelerated. “In China, counterfeiters provide economic benefits [such as jobs],” said former tobacco industry consultant Tai-Ming Cheng, “so there’s always been a disincentive to crack down.” And greased by the generous amounts of official payoff (the cost to bribe a container out of China runs about $20,000), the trade is flourishing. Today, China is the world’s biggest producer of counterfeit cigarettes, churning them out at a rate of roughly 200 billion sticks per year, according to smuggling experts.

That was mostly news to Hamer. Nevertheless, with his over 20 years of experience infiltrating groups from La Cosa Nostra to the Russian Mafia, Hamer’s supervisors assured him he was the man for the job. “Asians respect age,” they told him. “We need you.”

“At the time, I was only 52,” Hamer recalled, hardly flattered. But in September 2002, he adopted a tottering gait and a cane, and with good grace went to meet his first target: Willon Kow Szeto. A 68-year-old father from Rosemead, one of the San Gabriel Valley’s majority-Asian towns, Szeto had been smuggling containers of cigarettes into the Los Angeles-Long Beach port complex along with several associates living in the San Gabriel Valley, including Dong Jie Li, 31, from China, and her 52-year-old Taiwanese boyfriend, Giashian Lin.

John Tung Wu, pictured here with FBI agent Bob Hamer, was one of many smugglers importing counterfeits into California.

Apart from the occasional container customs managed to confiscate, business was good. “If they sent 10 containers over and could get half of them through, they were happy,” Hamer said. “And overall [customs] really inspected so few anyway.” Nationally, about 22 percent of containers entering U.S. ports undergo some level of inspection upon arrival — either an X-ray scan or a random-box search. But while port-by-port numbers aren’t released to the public, one customs officer at the Los Angeles-Long Beach ports estimates the local figure is considerably lower: somewhere closer to 13 percent. After all, every day, over 15,000 containers stream into the port complex — or one every six seconds.

Even so, one of Szeto’s associates — Lin — had lately been arrested. Not because one of his containers was detected. Instead, a couple flying into the Los Angeles airport in April that year were the ones to give the tipoff. When security officials discovered that their suitcases contained 2 million phony California cigarette tax stamps from Xiamen, China — to be affixed on likewise phony packs — they also discovered the name of their intended recipient: Lin. Upon raiding Lin’s apartment, they found shipping documents linking him to 16 million counterfeit cigarettes that had turned up at the ports listed as furniture and chinaware. Lin surrendered his passport and was detained that afternoon, though not for long. Much to the chagrin of his sister-in-law, Lin’s brother agreed to put up $50,000 secured by their $248,000 Monterey Park home for bail.

Five months later on September 16, 2002, FBI agent Hamer sat in a posh Beverly Hills restaurant with Szeto, eating campanelli puttanesca and talking about his supposedly corrupt port “contacts.” After some negotiations, Hamer promised to guarantee Szeto’s shipments for $60,000 per container.

That same day, Lin strode into the gleaming Los Angeles International Airport with a substitute passport he’d obtained from the local Taiwanese Consulate. He went to the counter and bought a one-way ticket to Shanghai. He boarded a plane an hour later.

A Counterfeit Gold Mine

Meanwhile back in New Jersey, Calvarese, Garcia, and Zyckowski were getting impatient. Intent on expanding the case, the agents continued to bring in more cigarettes for the Lius — 10 shipments by September 2003, or some 100 million sticks, mostly counterfeit Marlboro and Newport. Each time, the agents helped route the cartons to the Lius’ various contacts in southern California, Pennsylvania, Canada, Illinois, and New York before receiving payment (usually in paper grocery bags stuffed with $20 bills).

But at this point, the FBI wanted more. They’d met the Lius’ partners, including a pair from the San Gabriel Valley, Cheng Ming Hsu and Taiwanese national Tina Huang. They’d met the Lius’ buyers and distributors. Now, they wanted to know who else the Lius knew — and what else their networks could provide them.

In particular, the FBI was interested in the Lius’ rumored ties to Chinese weapons dealers. But the Lius weren’t giving them up.

“The cigarettes were just such a gold mine for them,” Garcia said. “That was all they were interested in.” Even when customers complained about the cigarettes’ poor quality, their distributors had their tricks. In run-down neighborhoods, the Lius’ contacts would mix fakes with real Marlboros and sell them on the streets, three sticks for a dollar.

“The numbers were astronomical, and it was all very well-organized,” remembered Calvarese, who early on became the primary agent in “Operation Royal Charm.” For each shipment the Lius made, they could net over $1 million. And by the time a container crossed U.S. soil, every carton inside — usually about 900 cases of them — already had a buyer set up and distribution pre-arranged.

Finally, Garcia-the-mobster issued an ultimatum. “If you don’t kick it up a notch, we said, we’re out of here,” Garcia said. His drug contacts in Colombia, he told them — local freedom fighters — were getting antsy, demanding that Garcia produce weapons before they moved ahead with any cocaine deals.

“It was frustrating,” Garcia said. “But worth it. Because in the end, they led us to Keith.”

Co Khanh Tang, or Keith, as the agents knew him, was a Vietnamese-born Chinese who immigrated to the United States in 1975 and eventually settled in the San Gabriel Valley to work the Asian tables at a local casino. An avid golfer, rarely without his Tiger Woods cap, Tang was quiet — in the words of one agent, a real “family man.” Modest and discreet, even at the gambling table. When he flew out to visit with agents at casinos in Atlantic City, he’d win thousands of dollars. But when management offered him special dinners and hotel perks, he’d shake his head and simply walk away.

“He wasn’t at all cocky,” Garcia said. “He seemed like the kind of guy you could be friends with.”

But at least according to agents, Tang also had a murkier past as a former member of a Chinese gang, with the blue-inked tattoos running down his back to prove it. At the very least, from his days working at the casino, he had all the connections he needed to draw on to make him the FBI’s next primary target.

Like the Lius, Tang wanted the agents’ help importing the real moneymaker: counterfeit cigarettes, which he would fly out to the southeastern city of Xiamen, China, to procure. But the agents kept pushing for other products, too, and finally he caved. Through a friend in Taiwan, he managed to obtain “green paper,” or what are more commonly known as “supernotes.” That is, near-perfect imitations of U.S. Treasury bills, manufactured in North Korea and delivered to the dumbfounded agents in stacks at a rate of $0.30 on the fake dollar.

“We showed them to the Secret Service and the FBI,” Garcia recalled. “And suddenly, everyone was in uproar.”

Still more was to come. A month later, Tang invited the agents to Phuket, Thailand, to meet with his supernotes contact, who also dealt in heroin and weapons. It would be a good time, Tang reportedly promised. Food, beaches — and girls. As many as the agents wanted, and all day if they so desired.

“At this point, I’m telling you, everything just mushroomed, out of control,” Calvarese said. At home, he kept three separate phone lines: one for each of his major Chinese contacts. And every day, the phones continued to ring.

Tricks of the Trade

Giashian Lin, fake cigarette supplier, is a fugitive in China. Credit: Interpol.

Three thousand miles away in California, Bob Hamer was finding himself suddenly popular. Since his initial meeting with Szeto, word of his port contacts had spread among other local Chinese eager for his assistance. Apart from Szeto, there was Dong Jie Li, a pretty 31-year-old with a penchant for yaotouwan, or what the Chinese call “shake-head-pills,” ecstasy. There was John Tung Wu, a heavy-set Taiwanese who dealt in crystal methamphetamine as well as cigarettes. There was Alan Hwang, who sold counterfeit Nikes alongside fake Marlboros, and more smugglers besides. “Eventually, it was all I could do to keep them off my back,” Hamer said. And the Chinese were selling to a dizzying array of characters that kept popping up, as well: Armenians from Brooklyn, Middle Easterners from southern California.

Hamer knew who the Chinese were getting cigarettes from: Giashian Lin. Since fleeing to China in late 2002, Lin had again assumed his position as a magnate of the trade, arranging for the shipment of Guangzhou-produced cigarettes out of the Ningbo, Shanghai, and Dalian ports.

The Chinese cigarette trade is powered by people like Lin: brokers who connect overseas Chinese from Los Angeles to Manila to distributors in mainland China, where illicit manufacturers churn out vast quantities to meet overseas demand. Last year alone, for example, the central Chinese government seized 9.3 billion cigarettes and rounded up 7,026 people in connection with their manufacturing, mostly in the southeastern provinces of Guangdong and Fujian.

And yet more sites continue to spring up. The cigarette counterfeiting business is something of a cottage industry in China, with mobile manufacturing sites hidden in caves, barns, or even underground. Meanwhile, since counterfeiting consists largely of “just-in-time” production, it’s difficult for authorities to make substantial one-time seizures. Often, the cigarettes aren’t packaged until “very late, possibly just prior to shipment,” said Daniel Chow, an Ohio State University law professor whose research has focused extensively on Chinese counterfeiting. That way, counterfeiters don’t run the risk of maintaining warehouses full of brand-name contraband. Once Tang placed an order, he told Hamer, it took just four days for the cigarettes to be manufactured for shipment to Los Angeles.

Dong Jie Li, a 31-year-old cigarette smuggler from China, is serving a 46-month sentence in federal prison.

Over the investigation’s course, Hamer learned the tricks of the smuggling trade. At the ports, smugglers relied on the names of humdrum, low-duty products for use on phony bills of lading: wicker furniture, for example, baskets, or paper products. Frequently the packers would assemble a false wall of boxes containing decoy goods to be loaded in the back end of the container, the better to dupe any inquiring port official making a cursory physical inspection of the goods.

He was also struck by the fierceness of the competition. “Everyone had competitors, and they were always bugging me to get their product off the ships to them faster,” Hamer said.

“It functions just like a business,” said Kozak, the Immigration and Customs Enforcement agent. “There are investors here in the states — street gangs or career criminals — who pool their money to purchase and contract the containers for a very calculated payoff. It’s a big pie, and everyone wants a piece of it.”

By this time, Hamer was enjoying himself, riding out this strange wave of smugglers anxious for his attentions. In the car as he drove with them around the San Gabriel Valley, he had a particular soundtrack he liked to play for his newly made friends. He’d turn up Charlie Daniels’ “Uneasy Rider,” so they could all hear the lyrics and maybe sing along: You may not know it but this man is a spy. He’s an undercover agent for the FBI.

By the Andaman Sea

There were just two Mercedes available for rent on the tiny Thai island of Phuket, and upon arrival in July 2004, Lou Calvarese’s hosts had managed to procure both of them. Though Calvarese dodged Tang’s offer to arrange easy female companionship by bringing along another FBI agent to pose as his girlfriend, his hosts now seemed intent on lavishing the pair with all kinds of other hospitalities. Only after a whirlwind Bangkok tour did the business meetings begin — at the extravagant resort Le Meridian, situated in a brilliantly colored cove by the Andaman Sea.

Jyimin Horng was the star of the trip, Tang’s contact and the man that Calvarese had come to see. A short, stocky judo expert from the gambling enclave of Macao, China, Horng was rumored to have competed in the Olympics in the 1980s. Now he served as a go-between for the North Korean government and various clienteles, peddling supernotes and arms. There in Phuket, between bouts of swimming and beneath swaying palm fronds, Calvarese and Horng began negotiations that eventually led to the purchase of $1 million in supernotes and a contract for 1,200 AK47s, 75 anti-tank rockets, 50 rocket launchers, and 100 machine guns with silencers — all through Horng’s North Korean contacts.

“Everything was on the table, and everything was for sale,” Calvarese said.

Phuket, he remembers — with its bare stretches of beach and languid air — was a dream. It also was the beginning of the end for Operations “Royal Charm” and “Smoking Dragon.” After Calvarese returned to the United States, the evidence continued to pile up: a weapons catalogue Horng sent to Calvarese, a half-inch thick, translated from the Chinese, more shipments of cigarettes, and over $3 million in supernotes that arrived into the Newark port, the bills tucked and carefully hidden in boxes of toys. Meanwhile out on the West Coast, Hamer’s subjects had likewise begun to tempt him with offerings of supernotes, crystal meth, and even surface-to-air missiles.

By the time terrorists bombed the London subway in July 2005, the agents were ready to take the group down. Their targets were spooked by the attacks, afraid that law enforcement would be on heightened alert. And besides, as Zyckowski said, “It just got to a point where there was no way we could control it anymore.”

After all, as he added, “How do you keep 90 people dangling on a hook?”

Aboard the Royal Charm

The first wedding invitations were mailed out that summer. Addressed to subjects across China, the United States, and Canada in delicate script, the cards announced that Calvarese and his phony FBI girlfriend — Melissa Anderson — were to be wed on August 21. The ceremony would take place aboard a yacht off of picturesque Cape May, New Jersey: a yacht, the invitations declared, named “Royal Charm.” Transportation to the wedding would be provided.

Back in Los Angeles, Bob Hamer readied his own bait: a divorce party. He told his targets that his wife had left him, and invited them all to a massive get-together on August 22 at the Playboy Mansion for some consolatory festivities.

None of the suspects ever made it to either celebration. In Atlantic City, the agents spent the days in the run-up to the wedding with Charles Liu, Tang, and Horng, reveling at different restaurants, hamming it up. At a three-hour rehearsal dinner at Caesar’s the night before the wedding, the agents and their targets ordered a $4,000 meal: shrimp cocktails, caviar, bottles of Don Perignon. Melissa flashed a 4-karat diamond engagement ring on her finger, on loan from the FBI. Garcia played best man. The room was buoyant with toasts and laugher: To you, Lou! Big man Jack: How does it feel to see him as a married man?

A surveillance photo of Willon Kow Szeto, who's pleaded guilty to several charges and awaits sentencing.

The next morning, two limos were ordered to arrive at the Taj Mahal hotel, where about a half-dozen smugglers awaited rides to the ceremony. Agents impersonating drivers sat behind the wheel, arrayed in full tuxedo. As the limos pulled away, the agents told the guests they had to make one more unexpected stop: to be booked.

Meanwhile, across the United States, authorities in other cities were springing into action. All in all that weekend, some 59 targets were arrested in 11 cities during the sweep, including Szeto, Li, Wu, and Chen in California. (Several other targets, including Cheng Ming Hsu and Giashian Lin — overseas in China — were never captured.)

The case had ended. But not without a certain poignancy. A few days before the arrests, Horng and Tang took Calvarese aside to present him with a gift: two gold Rolex watches for himself and his bride. As they watched his face expectantly, Calvarese tried to laugh. “Keith — these aren’t counterfeit, are they?” he asked. “No,” Tang replied soberly, “these are the real deal.”

“It was really nice,” said Calvarese, looking back. “You could see in their faces that this was something they really wanted to do for us. In a way, it was sad.”

A “Classy, Classy Woman”

This past August, sitting in his living room in San Gabriel, Keith Tang was at first reluctant to talk. While Tang had pleaded guilty, along with many of the 87 charged on both coasts in connection with “Smoking Dragon” and “Royal Charm,” his sentence had not yet been issued. But when his words finally did tumble out, they emerged in a rush.

“We didn’t hurt people,” he said. “We don’t kill people. We just try to bring cigarettes over and make some money. Everyone was doing cigarettes to survive. We’re just Asians trying to help each other, and they’re calling us a gang.” The tattoos on his back, he said, aren’t gang-related — they were inscribed on him as a teenager by a Buddhist monk.

“All I wanted to do was cigarettes, to make a living for my kid,” Tang said. Across the room, a Guitar Hero game rests on the floor, near a red-lit family shrine festooned with incense and green mangoes. “I told [the agents], ‘I don’t want to get involved with weapons and counterfeit money, I’m not that kind of guy,’” he said. “But they kept pushing me.”

“It’s a game,” he said. “We’re all just chips in the game. And I lost.” (In September, Tang was sentenced to six years in prison.)

So far, Dong Jie Li, Jyimin Horng, and Charles Liu have also all pleaded guilty, with Li and Horng sentenced to three-and-a-half and four years, respectively. Charles will be released in 2017. Charges were dropped against May Liu, who suffered a massive stroke in 2004 that paralyzed her entire left side.

Looking back, on some level, Zyckowski said, he does feel bad about what happened to all of them. “You get to like certain people,” he said. “You know, they’re not monsters — they’re businessmen.”

For the other agents, a fondness for the smugglers likewise lingers. Garcia, in particular, recalls May as a “classy, classy woman,” — gracious, always with a matching pocketbook and immaculately made up. “They were almost like someone’s grandparents,” he said of the Lius.

“But that’s how it was with all of them,” he said. “You’d never suspect that they were big-time smugglers. Not in a million years.”

“Bill?” It was the local Chase representative on the line: “I have some bad news for you.”

For months, like financial aid administrators around the country, Spiers had braced himself for the fallout of the sub-prime mortgage crisis, waiting for it to impact the student loan industry. “There was almost this level of panic,” Spiers remembers. “People thinking, ‘What’s going to happen to us?’”

Now he had the beginning of an answer. Chase was cutting off federal loans to his school, refusing to lend its students money. In the weeks to come, Wells Fargo, Key Bank, SunTrust, and Citibank would all follow suit.

Throughout the spring, stung by investor wariness over the sub-prime mortgage meltdown, sales of asset-backed securities — the source of liquidity for many student lenders — contracted. As a consequence, some student lenders were “completely unable to obtain capital to make loans,” says Bob Murray, spokesman for USA Funds, the largest guarantor of federal student loans. “Or they were having to pay significantly more than they were used to.” Factor in the $19 billion industry-subsidy cut Congress approved in September 2007 — after the discovery that lenders were bribing financial aid officers sparked national outrage — and the ranks of lenders participating in the Federal Family Education Loan (FFEL) program, through which lenders like Chase provide capital for federally backed loans, were thinning. Hence the ensuing fear of a student loan “crisis” — which, as it turns out, was more of a lender-inflated narrative (picked up by overly breathy media) than it was a real threat to students nationwide.

What angered Spiers was that lenders like Chase weren’t cutting off FFEL loans to students at all schools – just ones attending those they deemed a special risk, such as community colleges like his. “These are government-backed lenders conducting discriminatory practices,” he says. “I was very disappointed.”

But today, he’s also relieved. Even as some lenders are spurning community colleges and for-profit and less competitive universities — or have stopped making loans entirely — others have picked up the slack. While 130 lenders have exited the FFEL program, those lenders were responsible for only 12.3 percent of Stafford and PLUS loans. Roughly 2,000 lenders continue to participate (though the top 50 originate 83.5 percent of all loans). At this point, says Murray, while students may have to juggle lenders, “it looks like anyone who’s eligible and wants to take out a federal student loan will be served this academic year.”

That includes students at Tallahassee Community College, where Spiers reports that though the school’s federal lender list has shrunk in half, no students have experienced trouble getting loans.

Given talk of a student loan “crisis” that proliferated this spring, the current response on campuses is, overall, remarkably staid. “We really haven’t heard anything unusual from students,” says Cathy Simoneaux, financial aid director at Loyola University-New Orleans. While some lenders have cut back, she reports, others have stepped in to fill the void.

In Arizona, asked what kind of reaction students at community colleges in Maricopa county have had, Ellen Neel, who directs financial aid at Glendale Community College, sounds nonplussed. “None at all,” says Neel, who recently stepped down from her position as head of the Arizona Assoc. of Student Financial Aid Administrators. “They say, ‘Okay, fine, I have to choose a different lender — that’s all.”

That’s because the idea of a student loan ‘crisis’ was always a fabrication, says USPIRG’s Luke Swarthout.

“Our student loan structure is built on an extensive network of safeguards and built-in alternatives,” explains Swarthout. To begin with, Swarthout notes, should a serious number of lenders leave FFEL — which serves about 80 percent of students receiving federal loans — schools can opt to get loans directly from the U.S. Treasury through the Direct Loan program (this year, 348 schools have switched from FFEL to DL). According to the Department of Education, the DL program is currently prepared to double its lending capacity; senators like Edward Kennedy are pushing for its expansion.

Federal loans are enough to bear the brunt of tuition for nearly 90 percent of students who borrow to finance their education. Nationally, over 75 percent of students attend either public four-year institutions (at an average annual $13,600) or community colleges ($2,300). Apart even from grants, any student — regardless of income — can receive up to $31,000 during undergraduate study in unsubsidized Stafford loans. Families also have the option of parental PLUS loans, which can cover up to the full tuition cost at any accredited school. If a parent is denied a PLUS, a student’s overall Stafford limit rises to $57,500.

That doesn’t mean there isn’t a student loan access problem. It just exists for a narrower population — namely, students who attend schools with the highest tuition bills and are used to depending on private loans. Typically, these are students attending costly proprietary schools or private universities, where about 16 percent of students seek out private along with federal loans. “Those loans are harder to get now, and more expensive,” says Maureen Budetti, student aid policy director for the National Association of Independent Colleges and Universities. Many lenders who make private loans, like Sallie Mae, have imposed tighter credit checks, while others have ceased such lending altogether. Nevertheless, Budetti reports that only a “small percentage” of borrowers have been affected. Mark Kantrowitz, who publishes FinAid.org, puts that estimate at 1 to 2 percent, or about 100,000 students.

But even students having trouble with private loans may have other options, like getting a co-signer to help obtain a loan, which will also, typically, net better interest rates as well. And then there’s the fact that — as Robert Shireman, director of the Project on Student Debt, points out — about 75 percent of private borrowers never max out on their federal options in the first place.

One reason is lack of awareness about those choices. “I didn’t understand the difference between federal and private loans, and my counselor never really explained it to me,” says Blaine LaBron, who attended Pepperdine University without fully using his federal loan eligibility, graduating in 2006 with $95,000 in private debt. Since graduating, combining high variable interest rates, origination and late fees, that figure has ballooned to $125,000.

According to Harris Miller, director of the Career College Association, the complexity of the FAFSA application is another factor. At least some of the spike in federal aid requests over the past year — applications have jumped 17 percent — is likely because “since the online private approval process is harder now, people are finally using their full range of options,” says Miller.

Even in Massachusetts, where the Massachusetts Educational Financing Authority suspended private loans to 40,000 students in July, officials sound fairly sanguine. “The vast majority of our schools report a very small number of students who still need loans at this time,” says Richard Doherty, who heads the Association of Independent Colleges and Universities in Massachusetts. According to an August AICUM poll, 70 percent of their members have had less than 15 students experience difficulties in obtaining private loans. Only a “tiny percent” reported over 50 students with similar problems.

To be honest, says Doherty, the notion of a student loan “crisis” was “perhaps overplayed” by the media.

Michael Dannenberg, Senior Fellow at the New America Foundation, agrees. “People were running around, saying the sky is falling, that kids are going to go without federal student loans, but the DOE never said that,” says Dannenberg. “Quite the opposite. Because, in truth, there never was a real crisis for students when it came to federal student loans.”

“There was, however, a real crisis for some lenders who weren’t able to access capital at the same low rates they’d been used to,” he adds.

In many ways, the long-standing political tension between the FFEL and DL programs is what undergirded talk of “crisis” this spring. Because the DL program, unlike FFEL, makes its loans directly from the U.S. Treasury, it isn’t subject to the vagaries of the asset-backed security market. Meanwhile, because it cuts out the middleman, for taxpayers, the DL program is less costly as well — about five times cheaper per loan, according to the Government Accountability Office. But for lenders like Chase and Sallie Mae, who profit heavily from low-risk, government-guaranteed loans, it means lost business. And for lenders, it was easier to hype up talk of a crisis (with the hope of reinstating past subsidies) than allow for renewed attention to the DL program.

Certainly lenders had a role in contributing to a mood of panic. This spring, for example, Sallie Mae (which was fully privatized in 2004) warned it might leave the FFEL loan program altogether — a gesture Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admission Officers, dismisses as an obvious stunt. “Sallie Mae threatening to give up their student lending business is about as credible as Starbucks threatening to leave the coffee business,” says Nassirian.

“It may not have been credible, but it certainly was effective,” says the Project on Student Debt’s Shireman. In May, after state agencies in Michigan, Massachusetts, and Pennsylvania announced plans to temporarily suspend federal loan-making, Congress passed the Ensuring Continued Access to Student Loans Act, which — among other moves — authorized an industry rescue plan offering lenders low-interest lines of credit and the chance to sell their loans to the government at an above face-value rate.

For lenders, says Alan Collinge, founder of Student Loan Justice, the credit crunch was “convenient,” to say the least. “It helped change the debate away from the more predatory nature of the industry,” he says, citing how lenders have in the past won exemptions from the Fair Debt Collection Practices Act and in 2005 persuaded Congress to remove private loan bankruptcy protections.

Shireman, however, is measured in his appraisal of Congress’ overall response. “I thought it was about right,” he says. Apart from the Act’s efforts to cushion lenders, it also authorized PLUS loan payments deferrals and expanded the Stafford loan limit. “It protected the federal fiscal interest without heaping a lot of additional subsidies on lenders, which was a real danger,” he says. “And students are getting their federal loans.”

As for the private loan crunch, LaBron — whose monthly debt payments total $1,200 — says that had he known how much private debt would cost him in the end, he would’ve made other educational choices. “I haven’t even framed my diploma yet, because all I see is a $125,000 IOU,” he says. “I think those kids are lucky. Think of the alternative — they could end up like me.”

Originally published by The American Prospect.