Undercover Thieves: Anti-counterfeiting News and Insights

Selling their souls: the trail of those who sold counterfeit microchips to the U.S. military

Two days ago, two high-profile U.S. Senators, John McCain and Carl Levin attempted to visit the notorious China Shenzen area, as part of their investigation of counterfeit microchip sales to the U.S. military. The Chinese government refused them a visa, and Levin was not happy, saying  that counterfeit electronic parts, usually from China, posed a serious and growing problem for the U.S. military

Scary, indeed. But a credible threat? Is all this, in other words, a scare tactic, a political ploy, or, in an increasingly audible accusation,  a fiction of some “cyber military-industrial complex?”  (UK Globe and Mail, among numerous examples)

Levin had a straight answer yesterday, saying  counterfeit parts are indeed making it into some of America's most crucial weapons systems. He cited “counterfeit microprocessors that were purchased by the Air Force for use on the F-15 operational flight control computers," and revealed that counterfeit microcircuits have been found on Missile Defense Agency hardware.

Other officials support these facts.  The Defense Criminal Investigative Service, an agency of the Defense Department Inspector General’s office, has 45 active probes of counterfeit goods, according to James Ives, responsible for the Service investigative operations.

Ives said the DCIS is also looking into over two hundred allegations of substandard or non-conforming parts in the military supply chain that do not meet military specifications.

These revelations shouldn’t surprise anyone that has been following the trail of counterfeit chip seizures and arrests of company officials discovered selling fake microchips:

  • On June 6, nearly $1 million dollars of counterfeit microchips were discovered and seized by federal agents at the Port of Long Beach/Los Angeles, site of 40% of counterfeit good seizures in the entire country.    Agents from U.S. Customs and Border Protection said the chips were hidden inside hundreds of karaoke machines, shipped from China in containers through the port.
     
  • In September, 2010, the two owners of a company called VisionTech were indicted by a federal grand jury in Washington on charges that they sold $16 million worth of counterfeit computer chips to the U.S. Navy and some of its weapons contractors.  VisionTech's website says it began operations in 2002 and carries a multimillion dollar inventory, with more than 4,000 line items and a specialty in obsolete and hard-to-find parts.
     
  • In January 2010, a Saudi national living in Texas was found guilty of trafficking in counterfeit Cisco Systems Inc. “Gigabit Interface Converters” for a Marine Corps contract in Iraq.  The man bought 200 converters online from a Hong Kong-based Chinese vendor for $25 each. He billed the Marines $595 apiece before he was caught.
     
  • This summer, two men, Mustafa Abdul Aljaff and Neil Felahy will be sentenced  for buying counterfeit semiconductors and selling them to the Navy as military-grade components. Seized were $140,835 worth of counterfeit circuits imported from factories in the Shenzen region, fraudulently marked with known brands: Fujitsu, Atmel, Intel and Altera.

By any standards, a formidable list.  And non-fictional.

 

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