Forgot your password?
typodupeerror
The Military Hardware

Man Pleads Guilty To Selling Fake Chips To US Navy 327

Posted by timothy
from the vinegar-was-ersatz-too dept.
itwbennett writes "Neil Felahy of Newport Coast, California, has pleaded guilty to conspiracy and counterfeit-goods trafficking for his role in a chip-counterfeiting scam. Felahy, along with his wife and her brother, operated several microchip brokerage companies under a variety of names, including MVP Micro, Red Hat Distributors, Force-One Electronics and Pentagon Components. 'They would buy counterfeit chips from China or else take legitimate chips, sand off the brand markings and melt the plastic casings with acid to make them appear to be of higher quality or a different brand,' the US Department of Justice said in a press release. The chips were then sold to Naval Sea Systems Command, the Washington, DC group responsible for maintaining the US Navy's ships and systems, as well as to an unnamed vacuum-cleaner manufacturer in the Midwest."
This discussion has been archived. No new comments can be posted.

Man Pleads Guilty To Selling Fake Chips To US Navy

Comments Filter:
  • by Shakrai (717556) on Wednesday November 25, 2009 @04:04PM (#30229854) Journal

    That sucks ;)

    • Re: (Score:2, Funny)

      by Anonymous Coward

      Not only that, I read it as an unarmed vacumm manufacturer...

    • by Monkeedude1212 (1560403) on Wednesday November 25, 2009 @04:13PM (#30229982) Journal

      The chips were then sold to Naval Sea Systems Command, the Washington, D.C., group responsible for maintaining the US Navy's ships and systems, as well as an unnamed vacuum-cleaner manufacturer in the Midwest.

      Wait wait wait...

      Were the chips sold to both the NSSC and a Vacuum-cleaner manufacturer -

      Or is the NSSC responsible for maintaining the US Navy's ships, as well as a Vacuum-cleaner manufacturer?

      I think the ambiguity is amusing.

    • by Z00L00K (682162)

      At least a vacuum cleaner that dies won't kill anybody.

      • by Naturalis Philosopho (1160697) on Wednesday November 25, 2009 @05:02PM (#30230532)

        At least a vacuum cleaner that dies won't kill anybody.

        Yeah, if our targeting information was off and missile fell into the sea instead of hitting a house somewhere...oh, wait.

        Really, how many did the Navy buy? When we take deliveries we don't pay until we've tested that we've gotten what we've paid for and that's written into our purchase contracts.

        • by Beardo the Bearded (321478) on Wednesday November 25, 2009 @05:52PM (#30230988)

          The problem is that the chips will work, but they won't work as well.

          Let's look at two amplifiers, a 741 and a 5534. They are both pin-compatible op-amps that do the same job. The LM is $0.56 ($0.13 in bulk) and the 5534 is $1.73 ($0.80 in bulk). The 5534 is a high-performance, low-noise amplifier.

          Now, these are both CONSUMER grade chips and two that I just happened to know off the top of my head. Frankly, chips don't get much cheaper than that but you can already see a large price discrepancy. ($670 per 1000 chips.)

          Performance under ideal conditions isn't the biggest issue here. They aren't subject to the military or aerospace standards for robustness. Hell, they're probably not even "industrial" grade. Will they withstand a 200G shock? How about extreme temperatures or humidity? Are these chips RoHS or not and marked differently?

          Systems using these fraudulent chips would be plagued by problems and would cause the vendors, contractors, and the Navy a huge amount of anguish. It puts people at risk, and the motherfucker should be tried for sedition.

          I have to ask, "why bother"? It's not like they wouldn't be making tons of cash from the contract in the first place.

          • by danlip (737336) on Wednesday November 25, 2009 @09:27PM (#30232690)

            It puts people at risk, and the motherfucker should be tried for sedition.

            I think you mean treason. Sedition is encouraging insurrection. Treason is acts of disloyalty to one's nation. But in the US treason is narrowly defined by the constitution (to prevent abuses), so unfortunately they probably can't be prosecuted for treason.

      • Re: (Score:3, Insightful)

        by nomorecwrd (1193329)
        So... nobody else thought that the so called "Midwest vacuum cleaner manufacturer" could be a cover for the CIA or NHS?
  • by migla (1099771) on Wednesday November 25, 2009 @04:06PM (#30229876)

    I'm imagining someone selling the Navy fake ships.

  • Treason (Score:2, Insightful)

    by koan (80826)

    You know the penalty.

    • Re:Treason (Score:5, Insightful)

      by NiceGeek (126629) on Wednesday November 25, 2009 @04:12PM (#30229956)

      http://caselaw.lp.findlaw.com/data/constitution/article03/ [findlaw.com]

      "Treason against the United States, shall consist only in levying War against them, or in adhering to their Enemies, giving them Aid and Comfort"

      Ripping them off isn't treason.

      • Re:Treason (Score:4, Interesting)

        by TheRealMindChild (743925) on Wednesday November 25, 2009 @04:19PM (#30230042) Homepage Journal
        I don't know. Knowing selling the Navy computer components you KNOW would fail, to me, would fall into "giving aid to the enemy". We could argue intention/motivation, but a crime is a crime, regardless what you meant.
        • Re:Treason (Score:4, Insightful)

          by NiceGeek (126629) on Wednesday November 25, 2009 @04:34PM (#30230210)

          What "enemy"?

          • Re: (Score:2, Funny)

            by hrimhari (1241292)

            Why, all of them, whoever they are!

          • Re:Treason (Score:4, Informative)

            by Runaway1956 (1322357) * on Wednesday November 25, 2009 @04:55PM (#30230454) Homepage Journal

            Old destroyer man here. Nature and the elements are one enemy that sailors battle every day. Not to mention Al Queda and assorted terrorists such as the ones who attacked the USS Cole. Pointing out that Iran is already geared up for war in the Strait of Hormuz, The Persian Guf, and the Sea of Oman is probably redundant.

            No, treason is probably not an appropriate charge against these idiots, but I felt it necessary to point out that the US Navy is never at "peace". There are always operations taking place in which men's lives are in peril. Some of the most dangerous things pulled of by destroyers and small craft never make the news at all. Shipboard equipment is tested to it's limits daily, and lives depend on that equipment operating properly.

            Care to step aboard an aircraft carrier? During flight operations, no matter how peaceful, there is more danger in one 24 hour day than most people can imagine.

        • Re: (Score:3, Insightful)

          by Darkness404 (1287218)
          For one, you didn't know that it was going to fail. This would be equivalent to me selling a VIA C7 as a Celeron D. Fraud, yes. But a VIA CPU is not more likely to fail than an Intel CPU. Its a cheaper, lower performance CPU, but I wouldn't call it treason to sell to the Navy.

          And for the other, who is the "enemy"? It doesn't give aid to the non-existent "enemy", it simply gives you more money. They should be prosecuted for fraud, not treason.
          • Re:Treason (Score:5, Insightful)

            by QuoteMstr (55051) <dan.colascione@gmail.com> on Wednesday November 25, 2009 @04:57PM (#30230484)

            First of all, the charge of treason is obviously inappropriate. Fraud it is.

            But to your other point, using a low-spec chip can certainly lead to lower reliability. What if the ersatz chip has less forgiving temperature than the real thing? What if the software running on it assumes it can respond within 50us to an external input, but because the ersatz chip is running at a lower clock speed, the response time is 100us? That could be the difference between your anti-ship-killer-missile cannon hitting the target and you surviving, or it missing and you dying.

            This is serious.

          • Re: (Score:3, Insightful)

            by Nyall (646782)

            huh?

            I do embedded real time programming and guess what? lower performance = fail. e.g. if a system is spec'd to be able to track/extrapolate position of 100 moving objects and it only tracks 80 because someone slapped in a lower performing cpu then you are failing to track 20.

        • Re: (Score:3, Interesting)

          by TooMuchToDo (882796)

          We could argue intention/motivation, but a crime is a crime, regardless what you meant.

          You are aware that laws are based on intention, right? Like how manslaughter and murder are different based on intention?

          • Re: (Score:3, Insightful)

            by Kral_Blbec (1201285)
            That is a ridiculous comparison. Manslaughter, IMO, should not be a crime. Either it was murder or it was an accident, and accidents shouldn't be punished.

            Note that I consider accidents to be those things that you could not control, ie someone jumps in front of your car. Not your fault. If you were drunk and hit someone, however, then you made the intentional choice to get drunk. The consequences of getting drunk involved killing someone. You might not have intended to kill them, but you intended to get yo
        • Re: (Score:3, Insightful)

          Knowing selling the Navy computer components you KNOW would fail, to me, would fall into "giving aid to the enemy"

          Unless he acquired chips specifically designed to fail in combat, no, it's just a ripoff.

          We could argue intention/motivation, but a crime is a crime, regardless what you meant.

          The consequences are measured by motivation. Trust me, you do not want the definition of treason to get fuzzy, unless you want to fear what you post on public forums.

        • Re: (Score:3, Insightful)

          by DragonWriter (970822)

          don't know. Knowing selling the Navy computer components you KNOW would fail, to me, would fall into "giving aid to the enemy". We could argue intention/motivation, but a crime is a crime, regardless what you meant.

          No, actually, its not. Crimes general have a required mental state, and "what you meant" specifically is very often an essential component of the crime. What you meant (and when and why you came to mean it) can make the difference between Murder, Voluntary Manslaughter, Involuntary Manslaughter,

      • Re:Treason (Score:5, Interesting)

        by couchslug (175151) on Wednesday November 25, 2009 @04:36PM (#30230246)

        Selling fake/incorrect components should be prosecuted as sabotage, because defective components can degrade vital systems and cause casualties.

      • by geekoid (135745)

        I would say selling fake chips used in military vehicles is aiding the enemy.

  • You thought you could get away with fraud while dealing with the government?

    Might as well as try robbing a police station.

    • by elzurawka (671029) on Wednesday November 25, 2009 @04:12PM (#30229962)

      You can get away with fraud when dealing with the government. It's the Vacuum company that got them in trouble. The government would have probably went on for a few more years buying them if it wasn't for these people getting greedy and going after the lucrative vacuum market.

      • They should have been suspicious when they were offered the option of barbeque or sour cream.

    • by Lally Singh (3427)

      I've heard some pretty amazing government fraud stories. The best so far is a guy just making a bill in Excel and sending it to the Navy. They ended up paying $3 mil before catching him.

    • by Applekid (993327)

      You thought you could get away with fraud while dealing with the government?

      Might as well as try robbing a police station.

      The trick was that not enough of the ill-gotten gains was winding up lining the pockets of government officials.

  • by xpuppykickerx (1290760) on Wednesday November 25, 2009 @04:12PM (#30229950)
    The chips were then sold to Naval Sea Systems Command, the Washington, D.C., group responsible for maintaining the US Navy's ships and systems, as well as an unnamed vacuum-cleaner manufacturer in the Midwest.

    Has our Navy gone from suck to blow?
    • Nah, they're just the only two who fell for it (why else would the fakers keep needing new aliases?) In truth, the vacuum-cleaner manufacturer probably did know they were fake and didn't care.
    • Re: (Score:3, Insightful)

      by chord.wav (599850)

      That's a typo. I'm sure they've meant "UNMANNED vacuum-cleaner" like the Roomba.

    • by couchslug (175151)

      "Has our Navy gone from suck to blow?"

      Don't ask, don't tell!

  • Balls (Score:3, Interesting)

    by SmallFurryCreature (593017) on Wednesday November 25, 2009 @04:12PM (#30229954) Journal

    Scamming someone who can answer the question, "you and what army". Oh okay, so their answer is "not army, marines" but still. Takes guts.

    And with the US being involved in two wars, I think the sentence for this might actually be a cigarette, against a nice sunny wall. Blindfold optional.

  • Chips..? (Score:5, Funny)

    by Burning1 (204959) on Wednesday November 25, 2009 @04:14PM (#30229984) Homepage

    Chips? Chips!?

    Common, this is Slashdot. Chips? The technical jargon in the summary is horribly confusing.

    For clarity, could we please use a more generic term, such as 'computer thingamajiggy?'

  • HOW??? (Score:5, Interesting)

    by frozentier (1542099) on Wednesday November 25, 2009 @04:18PM (#30230028)
    HOW does a man and his family sell ANYTHING to the Navy? Is the Navy getting their parts from eBay or Craig's List?
    • Value Added Reseller (Score:5, Informative)

      by pavon (30274) on Wednesday November 25, 2009 @04:28PM (#30230142)

      Government procurement is a bureaucratic mess, and a royal pain in the ass for both buyers and sellers. Because of this (and because of rules preferring "small" and "minority-owned" businesses), it is very common for government entities to buy though a middle man that knows how their procurement systems work, rather than getting product directly from a manufacturer, especially for low-cost COTS products.

    • Re:HOW??? (Score:5, Informative)

      by Chris Mattern (191822) on Wednesday November 25, 2009 @04:31PM (#30230190)

      Here's how. [navy.mil] All government procurement has special programs for buying from small business, and in fact are required to spend a certain percentage at small businesses. Congress mandates it, 'cause it makes good press with the voters.

    • The answer is pretty simple.

      The Department of Defense has what is called the "DOD E-Mall".

      If you're a registered vendor with it, you list your products, ARO times, costs, minimum order, etc.

      Included in there is if you're a minority owned company, small business, and a couple other equal opportunity things.

      Then, when a DoD user (who has taken and passed the necessary training) needs something, they can log into it, and if armed with the right search criteria (the search there is crap, unless you have a manuf

    • Re:HOW??? (Score:5, Interesting)

      by Artraze (600366) on Wednesday November 25, 2009 @05:02PM (#30230542)

      You seem to be assuming that these parts are readily available. Most likely, they have been long obsolete are almost impossible to find, if not truly so. As replacing legacy systems is often very expensive (esp. for the military, where it often isn't an option), such chips can easily go for hundreds of dollars, if not thousands and are only purchased in small quantities. I worked for a small business that needed such replacements for maintenance on a military project, and we got fakes for approx $350 each. Luckily we knew about these scams, tested them, and then got the credit card company to do a charge back.

      So, this is rather unsurprising to me, at least for the Navy. Why a vacuum cleaner manufacturer would need such parts I don't know. However, I'm fairly certain these weren't $10 chips that are currently available by the thousand from the manufacturer

      • Re: (Score:3, Interesting)

        by Eil (82413)

        Yep, I have experience with this. I did autopilot repair in the Air Force and most of the systems I worked on were decades old. Most airplanes have a few non-essential parts that fail literally every few weeks because the manufacturing run was contracted out to some company that did a godawful job at re-engineering and manufacturing the part which was originally designed sometime in the 60's.

        Around 2000, we had a navigation system test bench that was controlled by a rackmount IBM 8086 PC. (The navigation sy

  • by reporter (666905) on Wednesday November 25, 2009 @04:22PM (#30230074) Homepage
    This story is surprising. Why does the military buy critical electronic components from minor distributors?

    The military spends billions of dollars and has the money to buy directly from known, reputable firms like AMD, Siemens, Mitsubishi, NEC, Toshiba, etc. Doing so would ensure the quality of the electronic components.

    Why is the military dealing with relatively unknown distributors of suspicious origin? This story is fishy.

    The military probably did not intend to use anything "purchased" from unknown distributors. This "purchase", from the onset, was intended to be a honey pot attracting unscrupulous businesses connected to hostile governments like Beijing. The purchased components were never intended to be used. The aim was to find such unscrupulous businesses, to determine the network that Beijing has established in the USA, and to shutdown American traitors who participate in such a network.

    • Yeah, or the minor distributors put in a lower bid. One or the other.
    • For that matter, how can we even be certain they're even being used for critical applications? Maybe they had some piddling alt system or prototype to develop and they just wanted to save some money? I mean, if the other (known) purchaser of these electronics is a vacuum cleaner manufacturer, We couldn't exactly be talking high-performance electronics to start with...

      ...Unless the reason the vacuum cleaner manufacturer is unnamed is they were working on some sort of super powerful "Stealth" Vacuum cleaner.
    • Because everyone knows all smaller distributors are untrustworthy. Come on.

      Huge Corporate-think is really seeded deeply now, isn't it.

    • Re: (Score:3, Interesting)

      by geekoid (135745)

      The military doesn't call people up and buy things. They announce a need and people bid. UIf a company doesn't bid then there isn't much they can do about it.

      Some larger companies won't deal with smaller contracts.

      This story isn't fishy, nore is the use of small companies unusual.

      It would be cool if it's a honeyu pot, but the odds of that is really low, and it would need to involve other agencies.

  • The funny thing is that the chip manufacturers commit this same fraud daily. The same silicon is packaged in one package and labeled mil grade, and another labeled commercial grade. The price is often more than a magnitude different. Sometimes it is even the same package, just different print.

    Of course sometimes there is different silicone, sometimes it is different temperature bin.

    Funny that this is perfectly legal for the mfg. and when some clever reseller does the same it is fraud.

    BTW. Companies with mil

    • Re: (Score:3, Insightful)

      by epine (68316)

      The funny thing is that the chip manufacturers commit this same fraud daily.

      This is the strangest definition of fraud. Smacks of a mail order degree in popular economics with hand typed training materials.

      What a company is selling is a chip that conforms to its spec. sheet. If the military version has a different spec. sheet, they can charge any price they like for putting into effect the QC process which allows them to stand behind those claims.

      It's not even in the military's interest to squeeze these ve

      • Re: (Score:3, Informative)

        by viking80 (697716)

        Argumentum ad hominem abusive does not belong in civilized discussion. I thought this was taught in elementary school. Since you bring up, I am curious as to where you got your education? It appears you neither understand my comment, and you also do not understand the marketplace.

        It is common, and well documented that early production of ICs often have few chips in the highest performance bin. These chips are then sold at a high premium. Later the process matures, and often all chips go into the highest per

  • Wait! (Score:5, Funny)

    by Shrike82 (1471633) on Wednesday November 25, 2009 @04:28PM (#30230156)
    Fuck the Navy, you mean my vacuum cleaner might have sub-standard chips in it?! THIS IS AN OUTRAGE!
    • Re:Wait! (Score:5, Funny)

      by AioKits (1235070) on Wednesday November 25, 2009 @05:01PM (#30230526)

      Fuck the Navy, you mean my vacuum cleaner might have sub-standard chips in it?! THIS IS AN OUTRAGE!

      Are you a vacuum cleaner overclocker as well? Oh man, I thought I was the only one! I'm going to go home right this moment and make sure my Nortech N552BC-NED Dual Venturi 55G doesn't have these chips on it! And after all the time I spent adding that extra fine filtration with carbon and pin striping to it... Damnit all...

  • by Z1NG (953122) on Wednesday November 25, 2009 @04:31PM (#30230182)
    apparently the fake chips are made with less than 50% potato, have a weird taste and are sold in a can.
  • Is this like "counterfeit" copies of MS Windows? Where these chips that acted and functioned the same (shadow shift production runs)? Seems like we need a better word as counterfeit implies that it looks the same but does not act the same. Maybe we should just be saying "copies produced without authorization?"

    • Re: (Score:3, Informative)

      by DragonWriter (970822)

      Is this like "counterfeit" copies of MS Windows? Where these chips that acted and functioned the same (shadow shift production runs)? Seems like we need a better word as counterfeit implies that it looks the same but does not act the same.

      No, it doesn't. A counterfeit is something that has been made or altered to appear to be something other than what it is, it may well act the same (indeed, "acting" the same under various tests is a key part of counterfeiting some things.)

      A counterfeit chip may well be on

  • The chips were then sold to Naval Sea Systems Command, the Washington, D.C., group responsible for maintaining the US Navy's ships and systems, as well as an unnamed vacuum-cleaner manufacturer in the Midwest.

    Naval Sea Command is an unnamed vacuum cleaner manufacturer? You learn something new every day here on SlashDot.

    Isn't it a bit hard to sell something without a name, though? How could you ask the salesperson for it? "I want one of those vacuums that don't have a name." "The Midwest one or the African o

  • by murpium (1310525)
    I knew those couldn't have been real Doritos
  • Two of his websites is in the wayback machine

    www.labrainc.com/ [archive.org]

    www.rhdistributors.com [archive.org]

  • by ewhenn (647989) on Wednesday November 25, 2009 @04:39PM (#30230272)
    because the only chips in my vacuum cleaner are doritos that fell on the floor.
  • by AmazingRuss (555076) on Wednesday November 25, 2009 @04:45PM (#30230338)

    ... devices found themselves in things like reactor control systems, missile systems, and other catastrophically lethal stuff?

    Maybe the military should be making it's OWN components, instead of buying them from the people they have their guns pointed at.

    • by NecroPuppy (222648) on Wednesday November 25, 2009 @05:06PM (#30230586) Homepage

      They can't, unless certain, very specific criteria are met.

      And even if they are, it's usually cheaper to have purchased the data rights to an end of line product, and turn around and find another vendor who will make them to those specs.

      The US Military doesn't own large scale fabrication plants to "just make" whatever they need. And even if they did, Congress wouldn't let them use them, because it would be taking money away from US corporations.

      Let me give an example: There's a base that has SEABEE units. Naval Construction Battalions (CB -> SeaBee). It is not unknown that such a navy base might need, at some point, a new pier. This is the sort of thing that, when the SeaBees are sent overseas, that they build. But they can't do this at the base, even if they label it a "training exercise", because statutorally, the money has to go to contracted construction companies.

  • Not what they expected when the navy asked for "sub-standard" chips

  • by fluidbyte (1663117) on Wednesday November 25, 2009 @05:22PM (#30230724)
    What about that guy that sold them the fake "Mission Accomplished" banner for their aircraft carrier?
  • by aspelling (610672) on Wednesday November 25, 2009 @07:52PM (#30231920)

    In 2006-2007 it was a problem to get many parts in the reasonable quality - flash, op-amps, multiplexors.
    So we bought a few reels from the second-hand distributor.
    As a result flash marked as 32Mb was 2Mb inside, op-amps weren't up to the specs (manufacturer confirm that they were made of written-off dyes), multiplexors were sold as a particular brand with advanced features while indeed were jelly beans for $0.10 a piece.
    Thankfully we were able to rework boards before products hit the consumer market.
    That was a good lesson for us to never use Chinese distributors for parts

FORTUNE'S FUN FACTS TO KNOW AND TELL: A black panther is really a leopard that has a solid black coat rather then a spotted one.

Working...