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Counterfeiting case reveals defense system flaws

Posted: 01 Nov 2011 ?? ?Print Version ?Bookmark and Share

Keywords:chip counterfeiting? IC trafficking? counterfeit shipments?

Last September, the FBI shut down VisionTech Components and arrested the component broker's owner, Shannon Wren and administrative manager Stephanie McCloskey. The pair was charged with conspiracy, trafficking in counterfeit goods and mail fraud for knowingly importing more than 3,200 shipments of suspected or confirmed counterfeit semiconductors into the United States. The company marketed some of the products as "military grade" and selling them to customers that included the U.S. Navy and defense contractors.

�McCloskey pleaded guilty to the conspiracy charge in the U.S. District Court for the District of Columbia and cooperated with the government. Wren died of an apparent drug overdose in May.

Damage done by VisionTech

Last month, details of the case against McCloskey were revealed in the 78-page "memorandum in aid of sentencing" that the government filed with the district court. The memorandum offers a rare glimpse into how a rogue broker operating out of a house on a quiet residential street in Clearwater, Florida, was able to dupe the system, put countless innocents at risk and compromise national security for nearly five years.

Poison in the veins
"Due to the type of counterfeit goods sold, the industries to which sales were made, and the multitude of military, commercial and industrial applications into which these devices may be placed, defendant McCloskey did her part to set a ticking time bomb of incalculable damage and harm to the U.S. military, U.S. servicemen and -women, the government, all of the industries to which VisionTech sold goods, and consumers. She has effectively helped to release a poison into the veins of interstate and international commerce," U.S. Attorney Ronald Machen wrote in the memorandum.

The memorandum recommended McCloskey serve a four-and-a-half-year prison sentence and pay restitution to the trademark owners for damages estimated at close to $600,000. The trademark owners named in the memorandum are a veritable who's who of the semiconductor industry.

Of the estimated 3,263 shipments of semiconductors imported by VisionTech between December 2006 and September 2010, only 35 were confirmed as containing counterfeits and seized at the border by U.S. Customs agents. Those 35 shipments contained a total of nearly 60,000 counterfeit ICs, according to the government's memorandum.

The 3,228 shipments that were not seized made their way into the U.S. electronics supply chain through sales VisionTech made to more than 1,100 buyers in virtually every industry sector. Many of VisionTech's customers were other brokers, who resold the parts. While some of the counterfeits were caught during manufacturer testing, hundreds of thousands, if not millions, of counterfeit parts are potentially still floating around in the supply chain or, worse yet, inside equipment that's being used today.

One of the counterfeit shipments contained fake parts sold to BAE Systems, which makes identification friend-or-foe (IFF) systems for the Naval Air Warfare Center's Aircraft Division. BAE purchased 75 devices from a broker who had bought the parts from VisionTech. The contractor had the chips tested at a third-party testing facility, which identified them as counterfeits. If those chips had found their way into an IFF system on board a Navy vessel and the system had failed, the ship's defenses would have been seriously compromised.


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