ALBUQUERQUE, N.M. (KRQE) – At western New Mexico’s Zuni Pueblo, craftsman Todd Westika is hard at work on his latest masterpiece. Todd’s award-winning stone carvings are sought by art collectors worldwide. But today, there’s a dark cloud hanging over Todd.

And in Santa Fe, Navajo artist Liz Wallace handcrafts her latest creation. Liz’s unique designs have earned her an international reputation. But her livelihood is also at risk. “I feel defeated… it’s so overwhelming,” Liz Wallace said.

Interactive: Photo slider shows real vs counterfeit Calvin Begay jewelry

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We’re talking about Native American art, everything from Navajo turquoise and silver to Zuni inlay. It’s a huge tourist draw and one of New Mexico’s most important industries. But today, con artists are flooding the Indian jewelry marketplace with cleverly disguised counterfeits, cheating consumers out of millions of dollars.

“You’re talking about stealing people’s livelihoods,” says Santa Fe Gallery owner Mark Bahti. “You’re talking about stealing their cultural heritage; you’re talking about deceiving vast swaths of the American public,” Bahti said.

Counterfeiting Native American art is a federal crime. After fake jewelry showed up in Albuquerque’s Old Town and Santa Fe’s Plaza, federal law enforcement agents launched a major undercover investigation dubbed Operation Al-Zuni.

“It was a very big deal,” former U.S. Attorney John Anderson says. “This crime spanned all the way from the Philippines across the western United States,” Anderson said.

The mastermind behind this scheme was Albuquerque businessman Jawad Khalaf. Together with several co-conspirators, they orchestrated a criminal enterprise involving tens of millions of dollars of phony Native American art. Ground zero for the con game was the Philippines. Hidden behind massive gates on a nondescript street in Cebu City was the nerve center of the illicit operation, a Filipino sweatshop called Fashion Accessories 4 U.

Video of Fashion Accessories 4 U Factory in Cebu City, Philippines

“Its primary business, maybe exclusive business was to make counterfeit Native American style jewelry to be imported to the United States,” says Assistant U.S. Attorney Sean Sullivan. “They were obtaining genuine Native American jewelry and artwork and copying it, creating molds so that they could duplicate artwork on the cheap overseas in the Philippines with the design of passing it off to American consumers as real works of art. The fakes were pretty good,” Sullivan says.

Fashion Accessories 4 U churned out hundreds of thousands of Native American knock-offs. For example, some of the imitations manufactured in the Philippines were copies of jewelry handcrafted by a well-known Navajo craftsman Edison Yazzie. Navajo jeweler Calvin Begay also had some of his designs duplicated in the Philippines.

The counterfeit jewelry manufactured in Cebu City was shipped to an Albuquerque business called Sterling Islands on Menaul, NE. Sterling Islands was owned by Jawad Khalaf. “We’re talking about hundreds of thousands of pieces of jewelry, bracelets, earrings, necklaces of that sort.” Federal Prosecutor Sean Sullivan says. “What they had on them were stickers that said ‘Made in the Philippines’. But (the stickers) could be easily removed by an unscrupulous jewelry store owner who wanted to deceive a customer,” Sullivan said.

Counterfeit Native American art in Fashion Accessories 4 U Factory

Over the course of the investigation, Sterling Islands received truckloads of counterfeit jewelry with a wholesale value of $11,800,000. From Albuquerque, the knock-offs were sent to a Gallup wholesale distributor, Al-Zuni Global Jewelry, owned by Jawad Khalaf’s brother, Nash Khalaf.

“Al-Zuni Global Jewelry (is) the wholesale business that received thousands of pieces of counterfeit Native American style jewelry and other arts and crafts and sold it at the wholesale level,” Sean Sullivan said.

From Gallup, the fakes were distributed to retail outlets all over the West. Federal documents show undercover agents located counterfeit merchandise manufactured in the Philippines offered for sale in Galleria Azul (Albuquerque), Gallery 8 (Albuquerque), Sundancer Gallery (Albuquerque), Momeni’s Gallery (Santa Fe), Gold House (Santa Fe), Silver Coyote (Santa Fe), and Bullion Jewelers (Breckenridge, Colorado).

“Undercover agents posing as jewelry customers went in (New Mexico stores) and someone lied to them and told them that this was Native American when it wasn’t, it was traceable back to a factory in the Philippines,” Sean Sullivan said.

Federal Agents caught jewelry peddler Mohammad Manasra at an Albuquerque Flea Market hawking the Filipino fakes as authentic Native American art. At one point, in a recorded conversation with Federal Agents, Manasra represented manufactured jewelry as “Navajo” and “Zuni”.

Slideshow of people involved in counterfeit Native American art investigation

When the Federal Agents visited Gallery 8 in Albuquerque’s Old Town, the sales clerk represented jewelry made in the Philippines as authentic Native American art. Gallery 8 owner Nael Ali later admitted in court documents that he instructed his staff to lie about the Sterling Islands imitations.

‘Operation Al-Zuni’ spanned nine years. Federal agents seized 350,000 pieces of counterfeit jewelry valued at more than $35,000,000. “This was the biggest fraud scheme involving Native American jewelry and arts and crafts may be in the entire United States,” according to Sean Sullivan.

“The criminal offenses were really twofold,” Former U.S. Attorney John Anderson said. “One was marketing as Native American jewelry items that were, in fact, manufactured in the Philippines. The other was unlawfully importing those items into the United States without the appropriate markings,” Anderson says.

Photos of real vs counterfeit Edison Yazzie jewelry

In U.S. District Court documents, Muhammad Manasra admitted misrepresenting merchandise he sold at the Albuquerque Flea Market. “The jewelry I sold to the (Undercover Agent) was Native-American in style, but I knew it was actually made in the Philippines and not by Indians,” Manasra admitted. “I intentionally told the (Undercover Agent) the Kokopelli set was ‘Zuni’ and that the rings, bracelet, and cluster set were ‘Navajo,'” Manasra told the Court. Manasra was sentenced to one-year probation and forfeited more than 5000 pieces of counterfeit jewelry. He was also ordered to pay a $500 judgment.

Gallery 8 owner Nael Ali pleaded guilty to violations of the Federal Indian Arts and Crafts Act. “I knew that many of the pieces of Native American-style jewelry I displayed for sale were not made by Indians but rather made by laborers in the Philippines,” Ali said in Court documents. He was sentenced to serve six months in a Federal Penitentiary.

Jawad and Nash Khalaf pleaded guilty and were sentenced to 2 year’s probation. The Khalaf brothers forfeited $290,000 in cash as well as the counterfeit jewelry. They were ordered to each pay a $300,000 fine.

The Sterling Islands scheme has been shut down. But don’t think the problem of fake Native American art has gone away. As long as there are big profits to be made, the crooks will always be there.

“I think it’s a bigger problem now than it was 50 years ago,” Santa Fe Gallery owner Mark Bahti says. “It makes me very, very sad, discouraged for the artists. It makes me angry… I know these people and this is their livelihood, and these fakes are directly impacting them,” says Keshi gallery owner Bronwyn Fox.

“The federal government is going to be very, very aggressive in rooting out counterfeits from the market, protecting Native American cultural patrimony and cultural heritage,” Federal Prosecutor Sean Sullivan says. “If you’re a business who wants to cheat people, we’re going to find you, and we’re going to shut you down,” Sullivan said.

New Mexico Indian Art Search Warrant

The Indian Arts and Crafts Act (IACA) of 1990