Electronics counterfeiting is a pretty seedy business, even right here in the United States. That's the conclusion that could be drawn from the details of two of the highest-profile busts of counterfeiting operations in recent times.
Assistant US Attorney Sherri Schornstein was a chief investigator in the cases, which the Justice Department brought against MVP Micro and VisionTech Components. Speaking at a conference at the University of Maryland in June, Schornstein offered colorful details the government discovered in the course of investigating these operations.
The MVP Micro investigation started with a tip from someone at STMicroelectronics NV (NYSE: STM). The IC company had been getting complaints about the failure of high-voltage AC power switches that were used in a vacuum cleaner. The manufacturer had purchased the devices from Labra Electronics. When Labra refused to make good on the faulty parts, the manufacturer complained to STMicroelectronics, which found that the parts were counterfeit.
"I wondered if these crooks were selling this junk to the military, and that's how this investigation began," said Schornstein. As the government investigated Labra, it discovered other companies (including MVP Micro) operated by the same man, Mustafa Abdul Aljaff, at the same address in Irvine, Calif.
The government combed through the finances of the various companies and watched the activity at a nondescript Irvine office park. Workers were remarking packaged chips and drilling semiconductor die out of their original packages. The semiconductor die were then sent to Taiwan to be repackaged and marked. In the course of the investigation, the government also found widespread drug use. Workers were "smoking reefer" and "snorting cocaine off of toilet seats," Schornstein said. One guy's job appeared to be nothing more than forging certificates of conformance, and he smoked dope while doing it.
The company was essentially operating a sweatshop. Charles Irvin, a former employee, gave the government information about the operation. "Most of the operators were hired on Craigslist, some still in high school," he said in an interview published on Sensible Micro Corp.'s blog. "The owners of MVP treated workers like dirt -- under constant pressure to perform harvesting tasks, taking verbal abuse, and constantly firing those who under-performed."
Schornstein said working conditions were dangerous, and they were about to get more so. The company was gearing up for in-house manufacturing. It had purchased an industrial oven and several pieces of heavy industrial semiconductor equipment.
It all ended when the Justice Department moved in and arrested Aljaff and Neil Felahy, MVP Micro's operations manager, in October 2009. Both pleaded guilty and struck plea bargains. They were sentenced in February 2012 to 30 months and 20 months in prison, respectively, for conspiring to sell counterfeit ICs. The government said MVP and Aljaff's related companies distributed the parts to about 420 buyers in the United States and abroad, including the US Department of the Navy and defense contractors.
In court documents, Aljaff made reference to the drugs. "Before my arrest, nearly everything I did was motivated by my addiction to drugs and alcohol," he said in a document cited in news reports:
I didn't steal to get high, but because I was high, I stole since I could. I became convinced that I was smarter than everyone else, and that my superior intelligence entitled me to anything I could get away with. The sheer complexity of the fraud I orchestrated was its own form of intoxication, and I believed that I would never get caught. I am grateful that I did.
Drugs were also apparently a factor in the VisionTech case. The government charged Shannon Wren, VisionTech's owner, and Stephanie McCloskey, an employee, with 10 counts related to counterfeiting. They were accused of selling $16 million of counterfeits over five years. McCloskey struck a plea agreement and was sentenced to 38 months in prison. Wren died of an apparent drug overdose in May 2011.