Zdi Blog

Arrow buys Nu Horizons for its Asia-Pac presence

2010-09-20T10:47:00.000-07:00

Arrow is buying Nu Horizons in an all cash deal which values the latter at more than $100million.

"This acquisition builds on our strategy to expand our global capabilities, especially in the fast growing Asia-Pacific region," said Arrow's president and ceo Michael Long.

Nu Horizons has sales facilities in more than 50 locations across North America, Asia, and Europe and regional logistics centers throughout the globe, serving markets ranging from industrial and military to data communications.
Martin Kent, Nu Horizon's recently appointed ceo and president, said: "To compete successfully in today's global marketplace, size and scale are very important. We are pleased to become part of a leading global company with enhanced resources. Arrow's world class operational capabilities and supply chain will enable Nu Horizons to continue to deliver industry leading value to our customers."
Nu Horizons' sales in its last fiscal year were $671m.

Author
Graham Pitcher

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http://www.nuhorizons.com

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Counterfeit business part of a global problem

2010-09-15T17:00:00.000-07:00

By Anna Tataris, Reporter Last Updated: Wednesday, September 15, 2010 PINELLAS COUNTY -- Counterfeit electronics have become a big business and a dangerous one, according to the federal government. On Tuesday, several federal agencies raided Vision Tech Components in Pinellas Park. Shannon Wren, 42, and 38-year old Stephanie McCloskey were arrested on conspiracy, trafficking counterfeit goods and mail fraud charges. The U.S. Department of Justice say they were counterfeiting integrated circuits from China and Hong Kong. The Feds say the counterfeit circuits were then sold to the U.S. Navy and Defense Contractors. The U.S. Department of Justice says they pose a risk because it's unknown whether the parts will fail. It's a global problem according to the CEO of Equality Process, a company based in Largo that inspects circuits and tests for fraudulent devices. "What's happening is they are reclaiming old material from printed circuit boards," said Equality Process CEO Craig Zurman. Zurman says the old materials are coming from Asia. "Some of this material may function today," said Zurman, "but in the future they have a great concern that the material due to lack of chain of custody of where the material came from that it would fail." Integrated circuits are used in anything ranging from airplanes to medical devices. "They could be used in radar systems, they could be used in a missile guidance system," said John Robinson, who inspects circuits." Pretty much anything military or commercial that would use this type of circuitry." Wren will appear in federal court on Thursday. McCloskey bonded out of jail, but did not answer the door at her Clearwater home.

Owner and Employee of Florida-based Company Indicted in Connection With Sales of Counterfeit High Tech Devices

2010-09-15T08:15:00.000-07:00

U.S. Department of Justice
Ronald C. Machen Jr.
United States Attorney for the
District of Columbia
Judiciary Center
555 Fourth St. N.W.
Washington, D.C. 20530
PRESS RELEASE
FOR IMMEDIATE RELEASE For Information Contact:
Tuesday, September 14, 2010 Public Affairs
(202) 514-6933
http://www.usdoj.gov/usao/dc/Press_Releases/index.html
Owner and Employee of Florida-based Company
Indicted in Connection With Sales of Counterfeit High Tech Devices
Destined to the U.S. Military and Other Industries
Counterfeit Integrated Circuits Sold to U.S. Navy and Defense Contractors
WASHINGTON - A 10-count indictment was unsealed today in U.S. District Court for the
District of Columbia charging Shannon L. Wren, 42, and Stephanie A. McCloskey, 38, with
conspiracy, trafficking in counterfeit goods, and mail fraud. The indictment alleges that Wren,
McCloskey and others imported counterfeit integrated circuits from China and Hong Kong and
sold them to the U.S. Navy, defense contractors and others, marketing some of these products as
“military-grade.”
The charges were announced by U.S. Attorney Ronald C. Machen Jr., John P. Torres,
Special Agent in Charge of U.S. Immigration and Customs Enforcement, Office of Homeland
Security Investigations (HSI) in Washington, D.C., and Sandy Macisaac, Special Agent in Charge
of the Washington, D.C. office of the Naval Criminal Investigative Service. Other agencies
assisting in the investigation include the U.S. Postal Inspection Service, the Internal Revenue
Service - Criminal Investigation, the Office of the Inspector General for the U.S. Department of
Transportation, and the Office of Inspector General for the U.S. General Services Administration.
Wren, of Treasure Island, Fla., and McCloskey, of Clearwater, Fla., were arrested today
in Florida on bench warrants issued by the U.S. District Court for the District of Columbia.
Government agents executed search warrants for two locations and 17 seizure warrants for certain
proceeds of criminal activity, including a Showhauler Motor home, a Ferrari Spider, a Bentley
Arnage, a Mercedes Benz, motorcycles, and funds in several bank accounts.
According to the indictment, Shannon L. Wren is the owner of VisionTech Components, a
business for which Stephanie A. McCloskey is in charge of administration and for which she was
Page -2-
a co-signatory on bank accounts owned by Wren. The indictment alleges that Wren, McCloskey,
and others ran an integrated circuits counterfeiting operation from the VisionTech Components
address at 5120 110th Avenue North, Clearwater, Florida. Companies related to VisionTech are
Infuture, Inc., Infuture Electronics, and Carz, Inc.
The defendants are alleged to have advertised name-brand, trademark-protected Integrated
Circuits (“ICs”) for sale on a website, www.visiontechcomponents.com after acquiring ICs
bearing counterfeit markings from China and Hong Kong and importing them into the United
States through various ports of entry.
“Product counterfeiting, particularly of the sophisticated kind of equipment used by our
armed forces, puts lives and property at risk,” said U.S. Attorney Machen. “This case shows our
determination to work in coordination with our law enforcement partners and the private sector to
aggressively prosecute those who traffic in counterfeit parts.”
An integrated circuit is a high-tech device that controls the flow of electricity. Such
devices are used in a variety of applications including consumer electronics, transportation,
medical, spacecraft, and military. Counterfeit integrated circuits can result in product or system
failure or malfunction, and can result in costly system repairs, property damage, and serious
bodily injury, including death. Such counterfeits also raise national security concerns because the
history of the device is unknown, including who has handled it and what has been done to it. The
devices can also be altered and certain devices can be preprogrammed. Counterfeits can contain
malicious code or hidden “back doors” enabling systems disablement, communications
interception, and computer network intrusion.
According to the indictment, from about Jan. 1, 2007 through Dec. 31, 2009, Wren,
McCloskey and others generated approximately $15,868,009.62 in gross receipts through
VisionTech Components from the sales of counterfeit integrated circuits. Between Dec. 6, 2006
and Aug. 18, 2010, Wren, McCloskey and others imported from China and Hong Kong, on 31
separate occasions, approximately 59,540 integrated circuits bearing counterfeit marks, including
military-grade markings, valued at approximately $425,293. “Military-grade” integrated circuits
are sold at a higher price than those of commercial- or industrial-grade, because of the special
manufacturing techniques and additional testing required by legitimate manufacturers. Such
devices are tested to function at extreme temperatures (hot and cold) and/or withstand extreme
vibration.
Also, according to the indictment, there were numerous customer complaints regarding the
counterfeit integrated circuits sold by VisionTech, the defendants and others, including the
following:
- An August 2007 sale of 75 counterfeit National Semiconductor Corporation ICs to a
company in California that was fulfilling a joint contract with BAE Systems Technology
Solutions & Services and the Naval Air Warfare Center Aircraft Division (“NAWCAD”),
Page -3-
Detection and Surveillance Branch, Integrated Logistics Engineering. The ICs were intended to
be used for production of ship-based antenna equipment, the Identification Friend Foe (“IFF”)
system, which is used to determine an airplane’s identification and intentions while in flight.
- An April 2008 sale of 1,500 counterfeit Intel ICs to a company in California. The ICs
were in fulfillment of a purchase by Raytheon Missile Systems to support production and repairs
of A9 (missile) circuit card assemblies (“CCAs”) for a classified application.
- A January 2009 sale in which the defendants and others engaged in “bait-and-switch”
fraud with a company in New York, involving 2,000 (13 authentic and 1,987 counterfeit)
Motorola ICs. The devices were for fulfillment of a contract with Alstom, for an application in
the controllers in high-speed trains. According to the indictment, Wren was advised by a
representative of the buyer that the devices being ordered would be used in a “life critical
application.” Thereafter, the defendants and others sent the buyer 13 devices that were in
conformance with expected product specifications. But on Jan. 16, 2009, the defendants and
others sent the New York company 1,987 counterfeit devices.
- A June 2009 sale of one Texas Instruments, military-grade counterfeit device to MVP
Micro, Inc. According to the search warrant affidavit in connection with the VisionTech business
location, which was also unsealed today, MVP sold that device to a government undercover agent
as part of a criminal investigation of MVP Micro. Last year, Mustafa Abdul Aljaff, the owner of
MVP Micro, and Neil Felahy, the operations manager, pleaded guilty to charges in connection
with the sale of that device and other counterfeiting activity. Aljaff and Felahy are cooperating
with law enforcement authorities.
- A December 2009 sale of 350 counterfeit Cypress Semiconductor ICs to a company in
New York in fulfilment of a contract with Northrup Grumman for integration into a beam steering
control module board within the multiple sub-array of the testable antenna for the U.S. Navy
Cobra Replacement Program (ballistic missile defense).
The indictment does not suggest that any of the counterfeit ICs forming the basis of
customer complaints actually made their way into weapons systems.
As alleged in the indictment, there were also two undercover buys of counterfeit ICs from
VisionTech Components, one in June 2009 and one in July 2010. The defendants and others are
alleged to have sent Certificates of Conformance in connection with those sales, which certified
that all items in the shipment were inspected and conformed with specifications and requirements.
The conspiracy charge carries a potential statutory penalty of up to five years of
incarceration, a fine of $250,000, a three-year term of supervised release, and an order of
restitution. Trafficking in counterfeit goods carries a potential statutory penalty of up to 10 years
incarceration, a fine of $2 million, a three-year term of supervised release, an order of restitution,
and an order of forfeiture and destruction for articles bearing or consisting of counterfeit marks
and for any property used to commit or facilitate the commission of the offense. Mail fraud
Page -4-
carries a potential statutory penalty of up to 20 years incarceration, a fine of $250,000, a five-year
term of supervised release, and an order of restitution.
The indictment also includes a forfeiture allegation for approximately $16 million, which
constitutes proceeds of the crimes.
The case is being prosecuted by Assistant U.S. Attorney Sherri L. Schornstein. Assistant
U.S. Attorney Diane Lucas is working on the forfeiture component of the case.
Today’s charges reflect the importance of a larger effort led by the Department of Justice
Task Force on Intellectual Property (IP Task Force). Attorney General Eric Holder created the IP
Task Force to combat the growing number of domestic and international intellectual property
crimes, protect the health and safety of American consumers, and safeguard the nation’s economic
security against those who seek to profit illegally from American creativity, innovation and hard
work. The IP Task Force seeks to strengthen intellectual property rights protection through
heightened criminal and civil enforcement, greater coordination among federal, state and local law
enforcement partners, and increased focus on international enforcement efforts, including
reinforcing relationships with key foreign partners and U.S. industry leaders. To learn more about
the IP Task Force, go to http://www.justice.gov/dag/iptaskforce/
The public is reminded that an indictment is merely a formal charge that a defendant has
committed a violation of criminal laws and every defendant is presumed innocent until, and
unless, proven guilty.

Two Florida residents have been indicted for a scheme selling counterfeit integrated circuits imported from China to the U.S.

2010-09-14T16:47:00.000-07:00

Two Florida residents have been indicted for a scheme selling counterfeit integrated circuits imported from China to the U.S.

Navy and defense contractors, U.S. prosecutors said on Tuesday. Shannon Wren, 42, and Stephanie McCloskey, 38, were arrested in Florida earlier on Tuesday on the 10-count indictment which included charges of conspiracy, trafficking in counterfeit goods and mail fraud. Through Wren's company, VisionTech Components, they were accused of selling some $15.9 million worth of counterfeit integrated circuits, which are used to control the flow of electricity in devices like consumer electronics and military hardware. From late 2006 until last month, they were accused of importing nearly 60,000 integrated circuits from China and Hong Kong that had counterfeit marks, and selling some of them to defense contractors and the U.S. military. "Product counterfeiting, particularly of the sophisticated kind of equipment used by our armed forces, puts lives and property at risk," U.S.

Attorney Ronald Machen said in a statement. The indictment did not say that any of the counterfeit circuits actually were used in weapons systems, according to Machen's office. Wren owned the company VisionTech and McCloskey was in charge of administration there. McCloskey was released on a $25,000 bond and restricted from certain travel while a judge ordered Wren held pending receipt of additional information, according to prosecutors. It was not immediately clear if they had retained lawyers. The counterfeit circuits were passed off as the real thing from manufacturers including Intel Corp, National Semiconductor Corp and Texas Instruments, according to U.S. prosecutors. Some of the counterfeit circuits were purchased for a joint project by a unit of BAE Systems Plc and the Naval Air Warfare Center Aircraft Division to produce equipment that identified friendly and enemy aircraft. Other circuits were sold for U.S. defense projects by Northrop Grumman Corp and Raytheon, among others, according to prosecutors. Additionally, Wren's firm sold 13 legitimate circuits and 1,987 fake circuits to Alstom for use in controllers in high-speed trains. Fake circuits can cause various system failures or contain malicious code that could disable the hardware or allow hacking attacks, Machen's office said. Authorities also seized goods and money that prosecutors said were proceeds of the alleged illegal conduct, including a Ferrari Spider, a Bentley Arnage, and funds in several bank accounts.

Two indicted over fake circuits sold for US defense

2010-09-14T16:45:00.000-07:00

Prosecutors say no fakes made it into weapons systems

*Authorities seize Ferrari, Bentley, bank accounts

* Some 60,000 circuits imported from China, Hong Kong

* Authorities seize Ferrari, Bentley, bank accounts

By Jeremy Pelofsky
WASHINGTON, Sept 14 (Reuters) - Two Florida residents have been indicted for a scheme selling counterfeit integrated circuits imported from China to the U.S. Navy and defense contractors, U.S. prosecutors said on Tuesday.

Shannon Wren, 42, and Stephanie McCloskey, 38, were arrested in Florida earlier on Tuesday on the 10-count indictment which included charges of conspiracy, trafficking in counterfeit goods and mail fraud.

Through Wren's company, VisionTech Components, they were accused of selling some $15.9 million worth of counterfeit integrated circuits, which are used to control the flow of electricity in devices like consumer electronics and military hardware.

From late 2006 until last month, they were accused of importing nearly 60,000 integrated circuits from China and Hong Kong that had counterfeit marks, and selling some of them to defense contractors and the U.S. military.

"Product counterfeiting, particularly of the sophisticated kind of equipment used by our armed forces, puts lives and property at risk," U.S. Attorney Ronald Machen said in a statement.

The indictment did not say that any of the counterfeit circuits actually were used in weapons systems, according to Machen's office. Wren owned the company VisionTech and McCloskey was in charge of administration there.

McCloskey was released on a $25,000 bond and restricted from certain travel while a judge ordered Wren held pending receipt of additional information, according to prosecutors. It was not immediately clear if they had retained lawyers.

The counterfeit circuits were passed off as the real thing from manufacturers including Intel Corp (INTC.O), National Semiconductor Corp (NSM.N) and Texas Instruments (TXN.N), according to U.S. prosecutors.

Some of the counterfeit circuits were purchased for a joint project by a unit of BAE Systems Plc (BAES.L) and the Naval Air Warfare Center Aircraft Division to produce equipment that identified friendly and enemy aircraft.

Other circuits were sold for U.S. defense projects by Northrop Grumman Corp (NOC.N) and Raytheon (RTN.N), among others, according to prosecutors.

Additionally, Wren's firm sold 13 legitimate circuits and 1,987 fake circuits to Alstom (ALSO.PA) for use in controllers in high-speed trains.

Fake circuits can cause various system failures or contain malicious code that could disable the hardware or allow hacking attacks, Machen's office said.

Authorities also seized goods and money that prosecutors said were proceeds of the alleged illegal conduct, including a Ferrari Spider, a Bentley Arnage, and funds in several bank accounts. (Reporting by Jeremy Pelofsky; Editing by Eric Walsh)

Federal Agents swarmed the Vision Tech Components Business on 110th Avenue in Pinellas County on Tuesday.

2010-09-14T16:34:00.000-07:00

Federal Agents swarmed the Vision Tech Components Business on 110th Avenue in Pinellas County on Tuesday.

Agents from NCIS, Inspector General's Office, The U.S. Department of Transportation, and other federal agencies could be seen going in and out of the Electronics Business.

The U.S. Department of Justice unsealed a 10 count indictment charging 42-year-old Shannon Wren and 38-year-old Stephanie McCloskey with conspiracy, trafficking counterfeit goods and mail fraud.

The two were arrested for importing counterfeit integrated circuits from China and Hong Kong and allegedly selling them to the U.S. Navy and Defense Contractors.

Here's a portion of the indictment released by the U.S. Department of Justice:

"The devices are used in a variety of applications including consumer electronics, transportation, medical, spacecraft, and military. Counterfeit integrated circuits can result in product or system failure or malfunction, and can result in costly system repairs, property damage, and serious bodily injury, including death. Such counterfeits also raise national security concerns because the history of the device is unknown, including who has handled it and what has been done to it."

"Product counterfeiting, particularly of the sophisticated kind of equipment used by our armed forces, puts lives and property at risk," said U.S. Attorney Machen. "This case shows our determination to work in coordination with our law enforcement partners and the private sector to aggressively prosecute those who traffic in counterfeit parts."

Workers at neighboring businesses watched as luxury items were taken away.

"I saw a lot of cars roll up, a lot of flat bed trucks, a lot of tow trucks, " said Joey Lenz who works nearby," and a lot of cars, motorcycles, and a motor home all being removed."

More than a dozen motorcycles and more than 20 cars were seized from three locations, including Wren's Treasure Island home.

Someone from inside the business covered his head as he was led away by agents.

According to the indictment, Wren and McCloskey generated more than $15 million in gross receipts in two years.

Zd Integrated Circuits Announces agreement with Alliance Memory

2010-08-30T11:25:00.001-07:00

Zd Integrated Circuits Announces agreement with Alliance Memory
Alliance Memory provides access to cost effective SRAM solutions

Largo, FL.- August 24, 2010 – Zd Integrated Circuits, Inc, (ZDI, www.zdi.com) a unique ecommerce marketplace geared toward meeting the end-of-life components and parts shortage needs of customers, today announced agreements to provide Alliance Memory (www.alliancememory.com) products, a leading provider of SRAM memory chips. This partnership will provide Alliance Memory access to a larger customer reach, while allowing ZDI to provide pipelined supply. “This partnership between ZDI and Alliance Memory allows comprehensive services across the entire product lifecycle for our customers,” said Craig Zurman, president of Zd Integrated Circuits. “ZDI’s access to over 64,000 global customers is very exciting to us,” said David Bagby CEO of Alliance, and “we are looking forward to working with ZDI to extend our product reach in the SRAM space.”Alliance MemoryAlliance Memory, Inc (http://www.alliancememory.com/index.htm ) is a fabless semiconductor company; Alliance Memory, Inc. acquired the Fast Asynchronous Product line from Alliance Semiconductor. Alliance Memory is a worldwide provider of legacy memory products for the communications, computing, industrial and consumer markets. Alliance supports the full range of 3.3V and 5V asynchronous SRAMs used with mainstream digital signal processors (DSPs) and microcontrollers. Alliance Memory is headquartered in San Carlos, CA, and has offices in Singapore and Taiwan.

Zd Integrated Circuits, Inc
Zd Integrated Circuits, Inc (www.zdi.com) is. an independent supply chain, distribution and electronics fulfillment company headquartered in Largo, FL, and has offices in TN, Hong Kong and Shenzhen China, ZDI is uniquely positioned with a patent pending anti-counterfeit detection process with its sister company, EQuality Process Inc. (www.counterfeitdetection.com), that allows both product traceability and assurance of component supply. ZDI provides supply chain solutions, inventory management and 3PL logistics services.

Contacts
Zd Integrated Circuits, Inc
Craig Zurman, President
craig.zurman@zdi.com
Office: (727) 586-6288 Ext. 224

EQuality Process Announces Patent Pending Process for Anti-Counterfeit Detection

2010-08-26T07:59:00.000-07:00

EQuality Process Announces Patent Pending Process for Anti-Counterfeit Detection
EQuality provides anti-counterfeiting process to combat rampant fraudulent electronic components

Largo, FL.- August 24, 2010 –
EQuality Process, Inc. (EQuality, www.equalityprocess.com) provides a reliable mechanism to ascertain the integrity of components through its newly patent-pending authenticity process, including a stringent visual inspection followed by documented testing and physical analysis. EQuality’s inspection process is designed to detect component conformance / counterfeit issues prior to receiving into inventory or release to manufacturing. Specifically, components are subjected to a rigorous processs involving physical inspection, digital microscopy, EDXRF Spectrometer analysis (to determine RoHS compliance), and decapsulation analysis to verify die level integrity and compliance (or combination or requested services). The EQuality process finds evidence of alteration and known authentic component indicator, and these services exceed Mil-STD-883TM2015, JESD22-B107C and Mil-PRF-38535H standards while being performed in an ANSI/ESD-S20.20-2007 certified facility. Equality provides a detailed Quality Report, including 3-D digital photographs, and a Certificate of Conformance. The patent pending process is now available to all military, aerospace, and electronics manufacturers, as well as component distributors and original component manufacturers who want to validate their own RMA’ed devices. Equality’s patent pending process is the industry leader in standardizing anti-counterfeiting processes to eliminate fake components throughout the electronics value chain.

EQuality Process
EQuality Process (www.equallityprocess.com) is an independent testing company headquartered in Largo, FL, EQuality is uniquely positioned with a newly patent-pending anti-counterfeit detection process that provides both product traceability and assurance of component supply. EQuality Process provides inspection, counterfeit detection and environmentally controlled storage for electronic components. Further, EQuality Process assists entities in the electronic component supply chains that focus on quality and long-term component viability. Performing to standards exceeding military and IPC/JEDEC specifications, EQuality Process will ensure that your electronic components are authentic and environmentally protected for up to 20 years.

Contacts
EQuality Process, Inc
Craig Zurman, President
craig.zurman@equalityprocess.com Office: (727) 586-6288 Ext. 224

Two Chinese Nationals Convicted of Illegally Exporting Electronics Components Used in Military Radar & Electronic Warfare

2010-05-20T09:20:00.000-07:00

Zhen Zhou Wu aka Alex Wu, owner of Chitron Electronics Inc. (Chitron-US), was found guilty of illegally conspiring to violate U.S. export laws and illegally exporting electronic equipment from the United States to China.

Source: United States Department of Justice - http://www.justice.gov/opa/pr/2010/May/10-nsd-580.html

Two Chinese Nationals Convicted of Illegally Exporting Electronics Components Used in Military Radar & Electronic Warfare

Following a five-week trial, a federal jury in Massachusetts found two Chinese nationals, one of whom resided in the United States, guilty of illegally conspiring to violate U.S. export laws and illegally exporting electronic equipment from the United States to China, the Justice Department announced today. Several Chinese military entities were among those receiving the exported equipment.

The jury also convicted a Waltham, Mass., corporation, owned by one of the defendants, which procured the equipment from U.S. suppliers and then exported the goods to China through Hong Kong. The exported equipment is used in electronic warfare, military radar, fire control, military guidance and control equipment and satellite communications, including global positioning systems.

Zhen Zhou Wu aka Alex Wu, Yufeng Wei aka Annie Wei and Chitron Electronics Inc. (Chitron-US), were convicted of unlawfully exporting defense articles and Commerce controlled goods to China on numerous occasions between 2004 and 2007 and conspiring to violate U.S. export laws over a period of ten years. Wu and Wei were also both convicted of filing false shipping documents with the Commerce Department. In addition, Wei was convicted of immigration fraud for presenting a U.S. Permanent Resident Card, which she knew had been procured by making false and fraudulent statements to immigration officials, to enter the country.

"Today’s convictions demonstrate the importance of safeguarding America’s sensitive technology against illicit foreign procurement efforts. They also serve as a warning to those who seek to covertly obtain technological materials from the U.S. in order to advance military systems of their own. I applaud the many agents, analysts and prosecutors who helped bring about this successful outcome," said David Kris, Assistant Attorney General for National Security.

Evidence presented at trial proved that the defendants illegally exported military electronic components, which are designated on the U.S. Munitions List, to mainland China, through Hong Kong, between April 2004 and June 2006. The defense articles the defendants illegally exported are primarily used in military phased array radar, electronic warfare, military guidance systems, and military satellite communications. Since 1990 the U.S. government has maintained an arms embargo against China that prohibits the export, re-export, or re-transfer of any defense article to China.

"For more than 10 years, this corporation and these defendants conspired to procure U.S. military products and other controlled electronic components for use in mainland China – for military radar, military satellite communications, and military guidance systems," said U.S. Attorney Ortiz. "In doing so, these defendants violated U.S. export laws and compromised our national security. The result in this case was achieved through the exemplary investigative efforts of dedicated agents and prosecutors working with various law enforcement and other government agencies."

The defendants also illegally exported Commerce Department-controlled electronics components to China that could be used in military applications in electronic warfare, military radar, satellite communications systems and space applications. These items could make a direct and significant contribution to weapons systems and war-fighting capabilities of U.S. adversaries, and cannot be exported to China without an export license from the U.S. Department of Commerce.

Wu founded and controlled Chitron, including its headquarters in Shenzhen, China, and its U.S. office located in Waltham, Mass. While Wu resided in China, Wei served as the manager of the U.S. office. Using Chitron, Wu targeted Chinese military factories and military research institutes as customers of Chitron, including numerous institutes of the China Electronics Technology Group Corporation, which is responsible for the procurement, development and manufacture of electronics for the Chinese military. Indeed, Wu referred to Chinese military entities as Chitron’s major customer since as early as 2002. Wu hired an engineer at Chitron’s Shenzhen office to work with Chinese military customers. By 2007, 25% of Chitron’s sales were to Chinese military entities.

Correspondence between Wu, Wei and other Chitron employees showed knowledge that U.S. export restricted parts were being shipped overseas to Chinese customers without having first obtained an export license. Wu instructed Wei and employees of Chitron-US on numerous occasions to never tell U.S. companies that parts were going overseas. At Wu and Wei’s direction, U.S. companies were told to ship all ordered products to the Chitron-US office located in Waltham, Mass.

Upon receipt by Chitron-US of the ordered products, the U.S. commodities were inspected by Chitron-US employees and consolidated into packages, which were then exported to the company’s Shenzhen office (located in Mainland China) using freight forwarders in Hong Kong, without the required export licenses from the Department of State and Department of Commerce.

"Today’s convictions represent an outstanding collaborative investigation and prosecution to bring to justice those who flout our export control laws and endanger our national security," said John McKenna, Special Agent in Charge of the Commerce Department’s Boston Office of Export Enforcement. "Preventing dangerous U.S.-origin items from falling into the wrong hands is one of our top priorities at the Commerce Department," he said.

"Today’s verdicts underscore the importance of ICE’s global investigative efforts aimed at disrupting and dismantling criminal organizations that profit from the illegal exportation of sensitive U.S. technology that threatens our national security," said "Matthew J. Etre, Acting Special Agent in Charge of U.S. Immigration and Customs Enforcement Office of Investigations in Boston.

"This was a significant verdict in a joint investigation with ICE, Commerce, DCIS, and the U.S. Attorney’s Office," said Warren Bamford, Special Agent in Charge of FBI’s Boston Field Office. "The illegal export of U.S. defense technology to foreign countries is harmful to the national security of the United States. These types of violations will continue to be aggressively investigated because this conduct cannot and will not be tolerated."

"The convictions in this case are the end result of a joint investigation conducted by the Defense Criminal Investigative Service and its partner federal law enforcement agencies," said Resident Agent In Charge Leigh-Alistair Barzey. "This investigation demonstrates the commitment DCIS has to ensuring that sensitive military equipment and technology are not illegally exported to restricted countries, which could put America’s war fighters and the Nation at considerable risk."

Wu and Wei both face up to 20 years in prison to be followed by three years supervised release and a $1 million fine. After serving their sentence, both will face deportation to China.

Chitron-US faces up to a $1 million fine for each count in the Indictment charging the company with illegal export of U.S. Munitions List items and $500,000 for each count in the Indictment charging them with illegal export of Commerce Department-controlled electronics. Sentencing is scheduled for August 17, 2010.

Shenzhen Chitron Electronics Company Limited, the Chinese company owned by Wu which received the U.S. electronics and delivered the parts to Chinese end-users, was also indicted for the same crimes. The court has entered a contempt order against Chitron-Shenzhen for refusing to appear for trial and fined the corporation $1.9 million dollars.

Co-defendant Bo Li, aka Eric Lee, previously pleaded guilty to making false statements on shipping documents, and faces five years in prison to be followed by three years supervised release and a $1 million fine. Sentencing is scheduled for July 22, 2010, in Boston.

The case was investigated by the Department of Commerce’s Office of Export Enforcement; Immigration and Customs Enforcement; FBI; and Defense Criminal Investigative Service. It is being prosecuted by Assistant U.S. Attorneys B. Stephanie Siegmann and John A. Capin of Office Anti-Terrorism and National Security Unit for the District of Massachusetts.

10-580
National Security Division

NAVPROP 11-19 PREVENTION OF COUNTERFEITING ELECTRONIC COMPONENTS

2010-03-15T07:28:00.000-07:00

NAVPROP 11-19 PREVENTION OF COUNTERFEITING ELECTRONIC COMPONENTS
GIDEP Management Meeting
February 2, 2010
John Butler
NAVSEA 04P

PREVENTION OF COUNTERFEITING OF ELECTRONIC
COMPONENTS
• In general.—Chapter 25 of title 18, United States Code, is amended
• Department of Defense or the National Aeronautics and Space
Administration (NASA)

Counterfeit Electronic Part
• A part that is an imitation or otherwise not genuine, or that is
substituted for, or otherwise misrepresented to be, the genuine part
required by the Government, or required, on behalf of the
Government, by any party to a Government contract, grant, other
transaction, cooperative agreement, or other instrument establishing
Government requirements.
• A ‘counterfeit electronic part’ can be a part originally manufactured
to specifications or other Government requirement that has been
deliberately altered or tampered with so as to no longer represent
the original part but to give the appearance of being the original part
• Flow down of requirements - to its subcontractors, vendors, and
other entities at all tiers

Counterfeit electronic parts causing loss of life
• Whoever knowingly, under a contract, grant, other transaction,
cooperative agreement, or other instrument establishing
Government requirements with the Department of Defense or the
National Aeronautics and Space Administration,
• delivers an end item, component, or part containing or consisting of
a counterfeit electronic part for use in
• any national security system, weapons system, vessel, or vehicle,
• which after delivery causes the system, vessel, or vehicle to fail, or
causes a disruption of performance, and that failure or disruption
results in the loss of life, shall be punished,
• in the case of a corporation, partnership, business trust, association,
or other organization, by a fine under this title and, in the case of an
individual, by a fine under this title, or imprisonment for not more
than 25 years, or both

Counterfeit electronic parts without loss of life
• Whoever knowingly, under a contract, grant, other transaction,
cooperative agreement, or other instrument establishing
Government requirements with the Department of Defense or the
National Aeronautics and Space Administration, delivers an end
item, component, or part containing or consisting of a counterfeit
electronic part for use in any national security system, weapons
system, vessel, or vehicle, which after delivery causes the system,
vessel, or vehicle to fail, or causes a disruption of performance, and
where it is not established that the failure or disruption resulted in
the loss of life, shall be punished, in the case of a corporation,
partnership, business trust, association, or other organization, by a
fine under this title and, in the case of an individual, by a fine under
this title, or imprisonment for not more than 10 years, or both.

Seizure and forfeiture of counterfeit electronic
• Any end item, component, or part containing or consisting of a
counterfeit electronic part purchased either for direct delivery, or for
incorporation into supplies to be delivered, in performance of a
contract, grant, other transaction, cooperative agreement, or other
instrument establishing Government requirements with the
Department of Defense or the National Aeronautics and Space
Administration that is determined to be counterfeit shall be
• subject to seizure and forfeiture to the United States to prevent
such items from re-entering the stream of commerce.
• The supplier of end items ….. that are determined, in accordance
with agency regulations, to be counterfeit shall forfeit all right to
payment for such electronic end items, components, or parts

Exports of populated scrap circuit boards prohibited
• Whoever knowingly —
– sells, gives, or otherwise transfers a populated scrap circuit board
outside of the United States; or
– receives, conceals, or retains a populated scrap circuit board with the
intent to transfer the same outside of the United States,
• shall be punished, in the case of a corporation, partnership, business
trust, association, or other organization, by a fine under this title and, in
the case of an individual, by a fine under this title, imprisonment for not
more than 10 years, or both.
• Populated scrap circuit board - a used circuit board that contains
microchips and other electronic items needed to make it functional

Acceptance of Counterfeit Items
• Any Government acceptance of supplies later found to contain
counterfeit material shall be null and void and
• delivery of such material shall not constitute a valid basis for
payment of a contractor’s invoice
• If the United States …. or that party shall be entitled to recover the
payment. The United States may recover interest on any such
payment computed at the rate of interest established by the
Secretary of the Treasury ….

Responsibility to Retain and Preserve
• It shall be the responsibility of any party … who uncovers or ascertains
that an electronic end item, … is counterfeit or contains counterfeit
parts to retain and preserve such counterfeit material as evidence and
to
• report within five business days such counterfeit material to the
Government contracting officer.
• In addition, such party is responsible for submitting a ‘suspect
counterfeit report’ to the Government Industry Data Exchange
Program for
– incorporation into the Program’s database and
– transmission of an alert notification to other government agencies.
• A ‘suspect counterfeit report’ shall include
– a description of the counterfeit material, including its current condition, the
location of the counterfeit material, and the party’s point of contact for the
counterfeit material

Responsibility of Contracting Officer
• It shall be the responsibility of the Department of Defense or National
Aeronautics and Space Administration contracting officer who receives
a report of counterfeit material from a contractor to
– submit that report, within five business days of receipt, to the appropriate
investigative service and
– the Inspector General of the Department of Defense, National Aeronautics
and Space Administration, the military department, or the component

Contractor certifications and testing data
• Certifying or Signing Official
–When a contractor is required to execute a certification or to sign testing
data in performance of a Government contract with the DoD or NASA,
– whether or not such certifications or such testing data is submitted to the
Government,
– the contractor shall ensure that the certifying or signing official is clearly
identified on the certification or testing data in accordance with agency
regulations
• Lack of Compliance
– Any certification or any testing data that is not in compliance … shall be
invalid and there shall be no valid basis for acceptance of the supplies to
which such certification or testing data relates

Legislation Current Status
• Sent to OMB week of 25 January 2010

Intel, Newegg Investigate Sale Of Fake Chips

2010-03-09T10:20:00.001-08:00

By Edward J. Correia, Scott Campbell, ChannelWeb
9:23 PM EST Mon. Mar. 08, 2010
-->
-->--> --> -->Newegg and Intel (NSDQ:INTC) said they are investigating how the company could have received, and then sold, counterfeit Intel processors to customers, according to the company.
Late last week, the first claims surfaced that Newegg had sold fake Intel processors after at least one customer posted photos and other information of the allegedly fake products, to the Internet.
The "CPUs" in question were purchased between Mar. 1, and Mar. 4, according to a Newegg statement, and have FPO/BATCH# 3938B006 printed on the packaging. "Additionally, the Part Number on the heat sink will read CNFN936612 and there will be no wiring on the heat sink itself," according to the statement.
In an initial statement, Newegg also referred to a shipping error with certain recent orders involving one of its partners mistakenly sending "a small number of demo boxes instead of functional units." While feasible on its face, photos of the pretend processor packaging [http://www.overclockers.com/forums/showthread.php?p=6422351#post6422351] told a different story. The demo units were counterfeit.
Newegg subsequently released another statement Monday night naming Ipex Infotech of Fremont, Calif., as the supplier from which it received the fake processors. Newegg was told by Ipex that Ipex mistakely shipped demo units, according to Newegg.
"We have since come to discover the CPUs were counterfeit and are terminating our relationship with this supplier," according to Newegg.
D&H Distributing Co. Inc., a Harrisburg, Pa.-based distributor, was initially " and incorrectly " reported in some accounts to be the supplier of the counterfeit processors. Newegg confirmed that D&H had nothing to do with the fake CPUs.
"Contrary to any speculation, D&H Distributing is not the vendor that supplied us with the Intel Core i7-920 CPUs in question," Newegg said in the latter statement.
In a statement issued to CRN, a senior D&H executive said "D&H takes this issue very seriously, as does the entire online and IT community, and we are anxious to see it resolved to the satisfaction of everyone involved. D&H has never bought anything other than genuine Intel product, sourced directly from Intel, and were very concerned that our name was inadvertently involved. We are very proud of the integrity we've built over our 92 years, and we are glad to see that the D&H name has been vindicated."
Meanwhile, a spokesperson at Ipex Infotech Inc., a Fremont, Calif.-based distributor, said the company is "still looking for legal consulting" and could not offer any further comment on the issue.
Newegg said it is reaching out to all customers who may have been received the fake processors.
"We have already sent out a number of replacement units and are doing everything in our power to resolve the matter promptly and with the least amount of inconvenience to our customers," Newegg said in a statement.
Intel said it was also investigating the matter. "Intel is getting samples to inspect and until then we can say that everything in the package appears fake," Daniel Snyder, an Intel spokesman, said in a statement, according to The Wall Street Journal.

Zdi partners with Finisar to globally represent and distribute its products.

2010-02-16T07:56:00.000-08:00

For Immediate Release:
Zdi partners with Finisar to globally represent and distribute its products.
Largo, FL, February 16, 2010

ZD Integrated Circuits, Inc., with 18 years of experience in electronic component distribution, and Finisar Corporation, a Manufacturer of Optic Components and Sub Systems, have entered into an agreement allowing Zdi to represent and sell it’s products globally that will provide a suite of material management services for customers who build, maintain and upgrade high reliability data switching systems. The relationship capitalizes on the experience gained by both companies working in technology for 2 decades.

“Zdi has matured as a global leader in Supply Chain Services in the market place. Our global footprint, market knowledge and unrivaled quality process makes us a distributor of choice. We are the preferred supply chain partner of technology companies,” stated Craig Zurman, founder and CEO of ZD Integrated Circuits, Inc. “We have developed the expertise to verify the quality of incoming products and the facilities to store and distribute those products in a controlled environment for periods of time exceeding 10 years”, said Zurman.

“The ability of ZD Integrated Circuits material management and distribution capabilities with Finisar’s leading optic products create a distribution partnership that is uniquely positioned to provide services to the Original Equipment Manufacturers and Electronic Manufacturing Services companies” said Gavin Blackett of Finisar. Blackett explained that “we recognize the value of how Zdi can provide relationships with their Military Prime Contract customer base and can assist us with open item returns and re-distribute these items to the market place with their Technology Remarketing Programs.”

About ZD Integrated Circuits, Inc.
ZD Integrated Circuits, Inc. operates as an electronic component distributor to a large customer base of contract electronic manufacturers and original equipment manufacturers. With offices in Florida, Tennessee, Hong Kong and Shenzhen, China, ZD Integrated Circuits offers purchasing services as well as third party logistics, warehousing and supply chain management programs. ZD Integrated Circuits, Inc. has been in the electronics industry for 18 years with an exemplary record of sales and service to thousands of customers around the world.

About Finisar Corporation Internet video, high-definition television, Voice over Internet (VoIP), and the exploding volume and growth of enterprise data - these factors drive a global explosion in the world's need for information and bandwidth. Optical communications are the foundation. For more than 20 years, Finisar has provided optical components and modules that enable high-speed voice, video and data communications for networking, storage, wireless, and cable TV applications.

2010-02-01T10:58:00.000-08:00

California MVP Micro, Inc. Owner Pleads Guilty in Connection with Sales of Counterfeit High Tech Parts to the U.S. Military

Source: United States Attorney’s Office
District of Columbia
Channing D. Phillips
United States Attorney

PRESS RELEASE

FOR IMMEDIATE RELEASE USAO Public Affairs

Wednesday, January 13, 2010 (202) 514-6933

www.usdoj.gov/usao/dc

–Counterfeit integrated circuits sold to the United States Navy–

Washington, D.C. - Mustafa Abdul Aljaff, 30, of Newport Coast, California, pleaded guilty today to Counts One and Six of an Indictment charging him and others with Conspiracy to Traffic in Counterfeit Goods and to Defraud the United States, and Trafficking in Counterfeit Goods, announced U.S. Attorney Channing D. Phillips, Special Agent in Charge John Torres, Immigration Customs Enforcement (ICE), Washington, D.C., Special Agent in Charge Sandy Macisaac, Naval Criminal Investigative Service (NCIS), Washington, D.C., Special Agent in Charge C. André Martin, Internal Revenue Service (IRS), Criminal Investigation, Washington, D.C. Field Office, and Special Agent in Charge, Washington Regional Office, Kathryn Jones, U.S. Department of Transportation, Office of Inspector General (DOT OIG).

The guilty plea was entered before U.S. Magistrate Judge Deborah Robinson. Aljaff faces a statutory sentence for the crime of Conspiracy of up to 5 years’ incarceration, a fine of $250,000, a one-year term of supervised release, and an order of restitution. For the crime of Trafficking in Counterfeit Goods, he faces up to 10 years’ incarceration, a fine of $2,000,000, a three-year term of supervised release, an order of restitution, and an order of forfeiture and destruction for articles bearing or consisting of counterfeit marks and for any property used to commit or facilitate the commission of the offense.

As part of the plea agreement, Aljaff agreed to forfeit to the United States industrial machinery which is designed to be used in the examination, testing, packaging, de-marking, and marking of integrated circuits, computer network servers, and his integrated circuit inventory, all of which was seized from his business location in connection with the execution of a search warrant on October 8, 2009. Under the U.S. Sentencing Guidelines, Aljaff faces a sentence of as much as 46 to 57 months’ incarceration, depending on certain factual issues to be decided by the sentencing court. Aljaff’s sentencing will likely occur in the Summer of 2010, before the Honorable Emmet G. Sullivan, U.S. District Court Judge, before whom the case is pending.

The guilty plea arises in connection with an eleven-count Indictment, unsealed on October 8, 2009, which charges Mustafa Abdul Aljaff, 30, his sister, Marwah Felahy (formerly Aljaff), 32, and her husband, Neil Felahy, 32, all of Newport Coast, California, with Conspiracy, Trafficking in Counterfeit Goods or Services, and Mail Fraud, in connection with their sale of counterfeit integrated circuits to the United States Navy.

As described in the Indictment and other pleadings filed with the court, integrated circuits are a type of semiconductor that function as amplifiers, oscillators, timers, counters, computer memory, and microprocessors. Integrated circuits are used in a wide array of modern electronic products including consumer electronics and transportation, medical, aircraft, spacecraft, and military applications. The use of counterfeit integrated circuits can result in product malfunction or failure, and can also cause serious bodily injury from electrocution and, in some circumstances, death. Markings on integrated circuits indicate a part is “commercial-grade,” “industrial-grade,” or “military grade.” Military grade markings signify that the part has been specially manufactured, among other things, to withstand extreme temperature ranges and high rates of vibration. Legitimate manufacturers subject such parts to specialized testing not used in the production of differently graded parts. Military grade integrated circuits are sold to the U.S. Military at a higher price than commercial or industrial grade parts because of the special manufacture and testing required.

According to the Indictment and other documents filed with the court, Aljaff and others engaged in the interstate trafficking of counterfeit integrated circuits, in a variety of ways. First, they acquired counterfeit integrated circuits from supply sources in China, imported them into the United States, and sold them via the Internet. Second, they acquired counterfeit integrated circuits from other distributors within the United States. Third, they obtained integrated circuits then sent them to another entity where the original markings were removed and the devices were remarked with that or another trademark and other markings thereby fraudulently indicating, among other things, that the devices were of a certain brand, and were newer, higher quality or of a certain grade, including military grade. Fourth, the defendants “harvested” dies from integrated circuits then sent them to another entity where they were repackaged to appear new, including trademarks and other markings indicating that the devices were of a certain brand, higher quality or were of a certain grade.

Aljaff and others are alleged to have operated the conspiracy through a number of California companies: MVP Micro, Inc., BeBe Starr, Consulting, Inc., Red Hat Distributors, Inc. (also known as “RH Distributors,” and “Red Hot Distributors”), Force-One Electronics, Inc., Labra, Inc., subsequently renamed Labra Electronics, Inc., then Becker Components, Inc., and Pentagon Components, Inc. They also operated websites related to those companies, including: www.mvpmicro.com, www.labrainc.com, www.rhdistributors.com, and www.pentagoncomponents.com.

The Indictment charged that on March 3, 2009, June 26, 2009, and July 14, 2009, Aljaff and others entered into contracts with the U.S. Navy and other government agencies for the sales of integrated circuits. Subsequently, they shipped integrated circuits bearing false, counterfeit trademarks to the U.S. Navy, in Washington, D.C. During the proceedings today, Aljaff agreed that on 23 separate occasions, that he and others imported into the United States from China and Hong Kong, approximately 13,073 integrated circuits bearing counterfeit trade marks, including military-grade markings, valued at approximately $140,835.50. Those counterfeit integrated circuits bore the purported trademarks of a number of legitimate companies, including: Fujitsu, Analog Devices, Inc., Atmel Corporation, ST Microelectronics, Inc., Altera Corporation, Intel Corporation, Elantec Semiconductor, Inc., TDK Corporation, National Semiconductor, Inc., and VIA Technologies, Inc.

“Product counterfeiting, particularly of items for use by our armed forces, creates a risk to public safety and national security. There is also a concomitant harm to the economy and to those trademark holders whose creativity, investment of resources, and hard work brought the goods to market, said U.S. Attorney Phillips. “We will aggressively prosecute those who engage in product counterfeiting and who expose our military, other industry sectors, and the public to harm.”

“This investigation demonstrates the successes that can be achieved through the collaborative efforts of the private sector and the federal government to halt the importation and distribution of counterfeit commodities,” said John P. Torres, Special Agent in Charge for U.S. Immigration and Customs Enforcement (ICE), Washington Field Office. “ICE remains committed to aggressively pursuing individuals and organizations engaging in intellectual property rights crimes that threaten the safety of the American public.” Kathryn Jones, Special Agent in Charge with the U.S. Department of Transportation's Office of Inspector General, added, "Working with our law enforcement colleagues and the Department of Justice, we are committed to preventing, detecting and prosecuting transportation fraud and corruption. We will continue our efforts to uncover suspect unapproved parts, prevent their use, and punish those who seek to compromise the integrity of DOT’s safety program.”

“NCIS continues to aggressively pursue individuals who sell counterfeit goods to the Department of the Navy, as it undermines the Navy's ability to defend the nation. The integrity of the war fighting capabilities of our country is dependent upon ensuring the highest possible quality of the systems, machines and technology used by our service members. This case represents how close coordination and partnership between NCIS, ICE and the Department of Justice can achieve success in thwarting defective material from entering the Navy's supply chain,” said Sandy MacIsaac, Special Agent in Charge, NCIS, Washington Field Office, Washington D.C.

In announcing the guilty plea today, U.S. Attorney Phillips, Special Agent in Charge Macisaac, Special Agent in Charge Torres, Special Agent in Charge Jones, and Special Agent in Charge Martin commended the work of ICE Special Agent Misty Price, NCIS Assistant Program and Operations Director for Economic Crimes, Marie R. Acevedo, NCIS Special Agents Erin Michaels and Stewart Thompson (Ret.), NCIS Forensic Auditor Stephen Green, IRS Special Agent Troy Burrus, US DOT Special Agent Jameel Bagby, and the staff of the U.S. Attorney’s Office, including Paralegals Carolyn Cody, Diane Hayes, Sarah Reis, Sierra Tate, Mary Treanor, Maggie McCabe, and Assistant U.S. Attorney Sherri L. Schornstein, who is prosecuting the case. They also acknowledged the Semiconductor Industry Association, STMicroelectronics, Inc., Texas Instruments, Inc., Analog Devices, Inc., and National Semiconductor, Inc. for their cooperation and assistance. Also acknowledged were the Customs and Border Protection Officers who prevented counterfeit goods from entering the United States via stops of certain shipments at the U.S. ports of entry.

Zdi Releases New Website

2010-01-25T16:09:00.001-08:00

After several years of development we have finally released our new website.