Category Archives: Penalties

Chinese man to serve U.S. prison term for military hacking

A Chinese businessman who pleaded guilty in March to conspiring to hack into the computer networks of Boeing (BA.N) and other major U.S. defense contractors was sentenced on Wednesday to nearly four years in prison, prosecutors said. …

More at Reuters

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Massachusetts Man Sentenced to 37 Months in Prison for Trafficking Counterfeit Military Goods

A Massachusetts man was sentenced today to 37 months in prison for importing thousands of counterfeit integrated circuits (ICs) from China and Hong Kong and reselling them to U.S. customers, including contractors supplying them to the U.S. Navy for use in nuclear submarines. …

More at Department of Justice

Chip Supplier Pleads Diminished Capacity to Avoid Imprisonment after Selling Counterfeit Parts to the U.S. Navy and Others — ERAI Blog

Chip Supplier Pleads Diminished Capacity to Avoid Imprisonment after Selling Counterfeit Parts to the U.S. Navy and Others …

“The government is concerned that thousands of the parts he sold may already be installed on critical equipment, including the military, or warehoused as spares or replacement parts. To mitigate this risk, the U.S. States Attorney’s office has released a list of companies that purchased parts from Picone. All of the customers named in this report placed orders which specifically prohibited parts from China. Releasing this report allows Picone’s customers and any of their customers to check their inventories for counterfeit ICs.”

More at ERAI Blog.

KC Business Owner Among Three Sentenced For $1 Million Scheme To Defraud The Army — USDOJ: US Attorney’s Office – Western District of MO

KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that three co-defendants were sentenced in federal court today for their roles in a $1 million wire fraud scheme to sell counterfeit and modified computer equipment to the U.S. Army.

More at USDOJ: US Attorney’s Office – Western District of MO

Court Decision Expands Scope of Customs Penalty Provisions for Individuals Who ‘Introduce’ Goods into US Commerce

The following article is one of many ‘alerts’ describing a recent court decision that could have significant impact on “the trade community, compliance officers, business owners, and others”.

Compliance Officers Beware: Court Decision Expands Scope of Customs Penalty Provisions for Individuals Who ‘Introduce’ Goods into US Commerce (Arent Fox, 22 Sep 2014)

The author advises …

“Importers will also have to consider how to address the potential effect of this decision in other customs proceedings, such as customs enforcement actions and focused assessments (audits), and the implications under other laws, such as the False Claims Act (FCA).”

Massachusetts Man Pleads Guilty to Importing and Selling Counterfeit Intergrated Circuits from China and Hong Kong – USDOJ

Peter Picone, 41, of Methuen, Massachusetts, pleaded guilty today in U.S. District Court in Hartford, Connecticut to importing thousands of counterfeit integrated circuits (ICs) from China and Hong Kong and then reselling them to U.S. customers, including contractors supplying them to the U.S. Navy for use in nuclear submarines.

More at USDOJ

Markup of H.R. 1960 (NDAA for FY2014) Includes Exemption From Strict Counterfeit Parts Financial Liability Associated with Obsolescence Issues

En Bloc Amendments to H.R. 1960, National Defense Authorization Act for Fiscal Year 2014 (Wednesday, June 5, 2013)

Log #: 002r1
Sponsor: Bridenstine
Description: Expands conditions under which covered contractors can qualify for exemption from strict financial liability associated with rework and corrective action of counterfeit or suspected counterfeit electronic parts including identified obsolete parts in certain circumstances.

The proposal establishes three criteria to provide a safe harbor from liability when using obsolete parts:

1. A contractor would need to identify obsolete parts necessary to meet requirements contained in a DOD contract solicitation and provide a plan to ensure trusted suppliers for those parts or offer design modifications as part of their proposal;

2. The government, in response to these options, would elect not to fund them and instead proceed with the original requirements to include the obsolete parts;

3. The contractor would apply inspections and tests to detect counterfeits when buying from other than the original equipment manufacturer or their authorized dealers.

If all three criteria can be demonstrated by the contractor, then the contractor would be able to submit the remedy costs of a counterfeit part as an allowable expense.

See “Full Committee En Bloc Package #1” added 06/06/2013 at 01:39 PM

For rationale associated with this proposal, my earlier essay.

A paper on “Contractor Responsibility: Toward An Integrated Approach To Legal Risk Management”

In recent essays, I have discussed how counterfeit parts avoidance and detection has emerged as an area of business and legal risk that aerospace and defense (A&D) contractors should incorporate into compliance programs. The following article describes the current landscape of heightened US Government demands for contractor responsibility and provides a backdrop for issues I have described about the imbalanced approach to counterfeit prevention described within the proposed DFARS rule on “Detection and Avoidance of Counterfeit Electronic Parts”….

Contractor Responsibility: Toward An Integrated Approach To Legal Risk Management” By Steven A. Shaw, Mike Wagner, and Robert Nichols (March 2013)

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Counterfeit Prevention Clauses and Potential False Claims Act Exposure

In an earlier essay, I described how the pace and exuberance of counterfeit prevention requirements flow down activity on the part of prime and upper tier contractors has accelerated with the introduction of NDAA2012§818. Many observe that it has become commonplace for a number of prime and upper tier contractors to include overly broad counterfeit parts clauses in their purchase order term and conditions, largely due to speculation on the details of forthcoming regulations.

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Sentencing Guidelines for United States Courts re “counterfeit military good or service”

Sentencing Guidelines for United States Courts have been amended to respond to changes to section 2320 made by the National Defense Authorization Act for Fiscal Year 2012, Pub. L. 112B81 (enacted December 31, 2011).

More at the Federal Register