Man Pleads Guilty To Selling Fake Chips To US Navy 327
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."
we still make vacumm cleaners? (Score:5, Funny)
That sucks ;)
Re: (Score:2, Funny)
Not only that, I read it as an unarmed vacumm manufacturer...
Unnamed vacuum maker? (Score:3, Funny)
Did anybody else catch the reference to NCIS? Life imitates art.
Re: (Score:3, Informative)
Microsoft didn't invent that: it was invented by Goldtouch Technologies, from whom Microsoft simply ripped off the design which Goldtouch had shown them under a non-disclosure agreement to get Microsoft to license the mouse design. I actually used to have one of the old Goldtouch mice: the design was very similar. Check out http://news.zdnet.co.uk/hardware/0,1000000091,2070243,00.htm [zdnet.co.uk] to see my point.
Re:we still make vacumm cleaners? (Score:5, Funny)
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.
Re: (Score:3, Funny)
Re:we still make vacumm cleaners? (Score:5, Funny)
Re: (Score:2)
At least a vacuum cleaner that dies won't kill anybody.
Re:we still make vacumm cleaners? (Score:4, Funny)
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.
Re:we still make vacumm cleaners? (Score:5, Interesting)
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.
Re:we still make vacumm cleaners? (Score:5, Informative)
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)
Amusement du jour: (Score:5, Funny)
I'm imagining someone selling the Navy fake ships.
Re:Amusement du jour: (Score:5, Funny)
Re:Amusement du jour: (Score:4, Funny)
Latest US Navy project: Mega Maid. [youtube.com]
Re:Amusement du jour: (Score:4, Funny)
I'm imagining someone selling the Navy fake ships.
I was thinking that someone had sold them Pringles.
Re: (Score:3, Funny)
come on guys, it had Obi Wan it it!!!
Re:Amusement du jour: (Score:5, Insightful)
Yep I suppose we're gonna get a whole bunch of these 'Counterfeit Goods' stories hitting the media in the next year or so to make people think we absolutely positively must pass the ACTA treaty the RIAA/MPAA have been working on in secret.
Treason (Score:2, Insightful)
You know the penalty.
Re:Treason (Score:5, Insightful)
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)
Re:Treason (Score:4, Insightful)
What "enemy"?
Re: (Score:2, Funny)
Why, all of them, whoever they are!
Re:Treason (Score:4, Informative)
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)
Industrial setting. Alright, if you say so, I won't argue that comparison.
But, I have yet to see the industrial setting that I experienced in the winter of 1978 in the North Atlantic, the North Sea, and various bodies of water in and around Ireland, Scotland, Norway, etc. Everything was lashed down, to prevent it from becoming a missile hazard. Even a navsup pub can be hazardous, when the ship is tossing, bucking, and rolling violently in stormy seas. We lashed ourselves into our bunks, because being th
Re: (Score:3, Insightful)
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)
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)
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)
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)
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)
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)
Selling fake/incorrect components should be prosecuted as sabotage, because defective components can degrade vital systems and cause casualties.
Re: (Score:2)
I would say selling fake chips used in military vehicles is aiding the enemy.
Seriously? (Score:2)
You thought you could get away with fraud while dealing with the government?
Might as well as try robbing a police station.
Re:Seriously? (Score:5, Funny)
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.
Re: (Score:2)
They should have been suspicious when they were offered the option of barbeque or sour cream.
Re: (Score:2)
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.
Re: (Score:2)
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.
Can someone please explain the crossover here? (Score:5, Funny)
Has our Navy gone from suck to blow?
Re: (Score:2)
Re: (Score:3, Insightful)
That's a typo. I'm sure they've meant "UNMANNED vacuum-cleaner" like the Roomba.
Re: (Score:2)
"Has our Navy gone from suck to blow?"
Don't ask, don't tell!
Balls (Score:3, Interesting)
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.
Re: (Score:2)
Unless said counterfeiters were actually conspiring with our "enemy du jour", then this doesn't fit the Constitutional definition of treason.
Re: (Score:2)
Chips..? (Score:5, Funny)
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)
Value Added Reseller (Score:5, Informative)
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: (Score:3, Interesting)
Except the only people that it helps are worthless middlemen that know how to game the system.
In my experience I would split the companies into a few groups. First there are the ones that provide services - printing PCBs, building custom cables, assembling and testing racks of equipment, etc. These folks do good work and we would use them regardless of the rules - custom jobs are best done my small companies and even if there were only chains/franchises doing this sort of stuff, we would still choose betwee
Re:HOW??? (Score:5, Informative)
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.
Re: (Score:2)
with the voters.
... some voters.
Re: (Score:2)
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)
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)
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
Why does the military buy from minor distributors? (Score:3, Interesting)
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.
Re:Why does the military buy from minor distributo (Score:2)
Re: (Score:2)
...Unless the reason the vacuum cleaner manufacturer is unnamed is they were working on some sort of super powerful "Stealth" Vacuum cleaner.
Re: (Score:2)
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)
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.
Military spec vs commercial (Score:2, Interesting)
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)
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)
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)
Re:Wait! (Score:5, Funny)
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...
since the summary was a little vague (Score:5, Funny)
Re: (Score:3, Funny)
Re:since the summary was a little vague (Score:5, Funny)
you forgot anal leakage.
No, but God knows, I have tried.
What does counterfeit mean? (Score:2, Interesting)
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)
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
We do that? (Score:2)
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
Horrible Food (Score:2, Funny)
Wayback whoring (Score:2)
www.labrainc.com/ [archive.org]
www.rhdistributors.com [archive.org]
Must be one hell of a vacuum cleaner... (Score:3, Funny)
I wonder how many of these quasi-mil spec... (Score:3, Interesting)
... 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.
Re:I wonder how many of these quasi-mil spec... (Score:5, Informative)
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.
Submarine semantics (Score:2)
Not what they expected when the navy asked for "sub-standard" chips
Mission Accomplished (Score:5, Funny)
We were burnt as well (Score:5, Interesting)
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
Re:uuuh (Score:5, Informative)
whats wrong with sony, samsung, or intel. I'm sure they could produce chips for government related applications, not some shady business no ones heard of before.
Are you familiar with efforts to foster American small businesses in the United States by the government [barackobama.com] (note this is nothing specific to Obama)? If you want to get into government contracts, I suggest you start a small business owned by a woman who is a minority. You'd be amazed at how easily you can land contracts and subcontracts as the government and big contractors strive to make quotas.
Re:uuuh (Score:4, Insightful)
I suggest you start a small business owned by a woman who is a minority.
Why is it (properly, IMHO) called racism and/or sexism if someone gives favoritism to a white male but doing the inverse is just fine and dandy?
Re: (Score:3, Funny)
Re:uuuh (Score:4, Insightful)
Why is it (properly, IMHO) called racism and/or sexism if someone gives favoritism to a white male but doing the inverse is just fine and dandy?
2 generations ago: negros were riding on the back of the bus (1949)
3 generations ago: women hadn't yet been given the right to vote (1919)
The short version is: because we say so.
The full version might have something to do with the long and storied
history of racism, sexism, and exploitation throughout human history.
Re: (Score:3, Insightful)
The full version might have something to do with the long and storied
history of racism, sexism, and exploitation throughout human history.
I see, so this is just history repeating itself.
For a moment there I thought two wrongs don't make a right.
Re:uuuh (Score:4, Insightful)
What were white men doing two or three generations ago?
While some of them were probably benefiting greatly from institutionalized sexism and racism, others were part of the poor, downtrodden masses.
Even today, there are places that are very white and very poor, where there is little opportunity, and crime and poverty runs rampant.
So why do we assume all white men don't need any additional help?
Is it because of the color of their skin and their gender?
Re: (Score:3, Interesting)
The full version might have something to do with the long and storied history of racism, sexism, and exploitation throughout human history.
Interesting. So I'm being punished because of the crimes of my fathers.
Actually, scratch that. My family came to the states from Germany in the 1930s and laid down roots in the Northeast. So they had nothing to do with slavery, Jim Crow or the lack of female voting rights. So, I'm actually being punished for the crimes of dead people just because I have roughly the same melanin levels that they did.
Yeah, that's totally fair and just.
Re: (Score:2)
Re: (Score:2)
Hitler had a foreign accent.
To most Americans (I am an American, by the way), anything stated in a foreign accent (especially British, for some reason) automatically has a better chance at being accepted as true.
:)
Re:Ron Paul!!! (Score:5, Insightful)
Because it was the free market and private enterprise that was doing the scamming?
And if they are willing to pull this on the gov't then it really doesn't bode well for the rest of us peons.
Re:Ron Paul!!! (Score:4, Insightful)
Isn't there some confusion here? This is the free market at work; if it wasn't, the Navy would have their own fabs and employ wafer process techs as well as sailors and airplane mechanics. This is outside the brief of the government, especially the Navy, hence the government buying the fake chips from a private contractor. They didn't do enough due diligence and got burned -- isn't that what's supposed to happen when there's an information imbalance in a market?
Re: (Score:2, Insightful)
What happened is that they went with the cheapest (lowest bid) contractor. The other guys who bid on the contract probably had legit chips to sell and couldn't compete with the cheaters.
This is why the government's practice of having to accept the lowest bid is just fucking dumb. They always get ripped off.
Look at any of your local construction projects. The lowest bidder got that job. Now the job is over budget and behind schedule.
They rarely go with the best, most qualified bidder.
Re: (Score:2)
I wouldn't say it's "how the free market is supposed to work" as that implies something positive and normative to be pursued; it's just an aspect of the free market (and many less-than-free market
Re:Ron Paul!!! (Score:4, Insightful)
I don't think this is an issue of Due Diligence - blame the goverment blah blah blah - it's an issue of THEY LIED. They stated the chips were one thing / one grade and turned out they were another grade entirely.
It's reasonable to expect regular consumers in the marketplace to perform due diligence but when a person claims the product is the product and it appears that way then the person has performed due deligence. Requiring the person to inspect fab plants and everything else for every manufacturer is not due diligence - it's a hassle.
Let's get out of this blame the government mantra - the politico talking heads are having enough fun as it is. This is a criminal issue for which the company should be nailed pretty harshly. The goverment should get it's retribution through whatever means are most expedient.
Re: (Score:2)
Since when did they need real money from us? They either print their own or borrow it from China.
Re: (Score:2)
Was it not a private enterprise that sold these fake chips?
Re:Ron Paul!!! (Score:5, Insightful)
The government is not at fault. The owner of those businesses is. The government looked for a seller within our free market, and that seller conspired to fool the government.
If anything, this says more negative about the free market, and the willingness of people to do illegal things out of selfish greed.
The government is the people. It is for the people, by the people. If the government is so "fucked up" as you say it is, than perhaps its just a reflection of our citizens.
We need to be BETTER PEOPLE for ourselves, and our fellow Americans.
Re:Unconstitutional (Score:5, Insightful)
In other words the right to regulate chip counterfeiting belongs to your local State government, until you expand the Constitution with an amendment
Wrong. This is actually a proper use of the Interstate Commerce Clause. Now arresting some poor bastard for growing pot for his own personal use on the other hand.......
Re: (Score:2)
Depending on what era Radio Shack those parts came from, I'd probably *prefer* the military using the Radio Shack kit.
Re: (Score:2)
Plenty of stuff, I'm sure.
With all the efforts at security, why did people with obviously Muslim names make it into the bidding process without triggering immediate investigation?
Re: (Score:2)
So security = racism?
Also useless security because if I was a terrorist I sure as hell would be changing my name to John Smith ASAP.