BUFFALO, N.Y. (AP) – Federal authorities said they dismantled a criminal operation that smuggled hundreds of thousands of pairs of counterfeit Nike sneakers from China into the United States, where they were sold at fire-sale prices on street corners in several cities.

A four-count indictment returned by a grand jury in Buffalo charged 21 people in New York, Pennsylvania, Georgia, Rhode Island, Texas, Wisconsin and Illinois with conspiracy to traffic in counterfeit goods. Most of the suspects had been arrested by Wednesday afternoon, U.S. Attorney Terrance Flynn said.

In an investigation that began in April, authorities traced the path of fake Nikes sold in Niagara Falls back to a Chinese supplier and identified the operation’s New York City-based importers and distributors. The sneakers arrived in New York in shipping containers.

“Typically … manifests are falsified, goods are secured in a way that they can’t be easily discovered or identified. They were mislabeled or imported illegally through some mechanism,” said Lev Kubiak, special agent-in-charge of Immigration and Customs Enforcement’s investigations office in Buffalo.

The sneakers were sold in Buffalo, Niagara Falls and Rochester, New York, as well as Milwaukee; Chicago; Pittsburgh; Dallas; Pawtucket, R.I., and the state of Georgia, according to the indictment.

None of the fake sneakers – which at $40 to $60 a pair sold for about half the retail value of the true product – were sold by licensed Nike retailers, authorities said.

“The advice we give to consumers is the point of purchase,” Nike’s security director, David Simpson, said. “That’s the key not only with our goods but with many counterfeit goods. Neither Nike nor most brands sell out of trucks on street corners.”

While executing eight search warrants in raids Wednesday, local, state and federal law enforcement agents seized hundreds of thousands of dollars believed to be proceeds from the sales, Kubiak said. In one New York City location searched, agents seized 20,000 pairs of suspected counterfeit sneakers.

Industry and trade associations estimate that counterfeiting and piracy cost the U.S. economy as much as $250 billion a year, according to ICE.

“This is really a triple threat to the United Sates,” Kubiak said. “It poses a risk to the consumer who is buying goods they may or may not be aware are counterfeit and subsequently substandard, it hurts the American industry and it jeopardizes our national security because it facilitates an illegal operation that’s circumventing border security as it comes into the country.”

Although some Nike shoes are manufactured in China, the sneakers targeted Wednesday were made outside of the Oregon company’s supply chain, Kubiak said. The indictment identified the importers as Wang He Bin, Huang Yue Feng and Xu Hang Wang.

In 2006, U.S. agents involved in stopping phony goods at U.S. borders made more than 14,000 seizures worth at least $155 million, according to figures released by the Homeland Security Department. China was the source of 81 percent of all phony goods seized in 2006, Immigration and Customs Enforcement figures showed. Of the bogus items confiscated last year, 41 percent were shoes – the largest category of fakes.

AP-ES-09-12-07 1842EDT