The dust has settled from the US government’s prosecution of VisionTech for selling counterfeit electronics, but the ramifications of the crime will continue to reverberate through the supply chain for quite a while.
In 2010 the government charged Shannon Wren, VisionTech's owner, and Stephanie McCloskey, an employee, with selling more than $15 million worth of counterfeits over five years. McCloskey pleaded guilty and was sentenced to 38 months in prison. Wren died before he could be sentenced.
Although the company has been shut down, many of the components it sold are still out there somewhere. The McCloskey sentencing memo notes that VisionTech sold parts to 1,101 separate buyers. “Sales by VisionTech were to virtually every industry sector and to numerous chip distributors,” according to the memo.
Included with the memo are two lists of VisionTech customers -- one of US buyers and one of international buyers. Among the more familiar names on the US buyer list are GE Healthcare, Hughes Electronics, Jabil Global Services, L3 Communications, and Micron Corp. Even if you did not buy from VisionTech, your supplier or the supplier of your supplier may have.
“A downstream buyer would not likely know that parts it acquired or systems it acquired from an intermediary source contained counterfeit devices that were imported and sold by VisionTech,” said the memo.
“The chance that you had somebody on your approved supplier list that did buy from VisionTech is probably 100 percent,” according to Fred Schipp, an electrical engineer within the Missile Defense Agency (MDA) Quality and Safety Organization’s Part and Materials Advisory Group, who spoke on a panel at a conference on counterfeit electronics this summer. (The MDA was one of the government agencies found by the Senate Armed Service investigation to have included counterfeit components in a missile system. In this case, it was counterfeit memory chips in computers for Terminal High Altitude Area Defense missiles.)
The list of domestic VisionTech customers includes 84 percent of members of the Independent Distributors of Electronics Association (IDEA) and 44 percent of the members of ERAI, says Schipp. MDA has issued an advisory to determine potential usage of VisionTech parts either directly or indirectly by its suppliers. Small suppliers, in particular, still don’t believe they could possibly get a counterfeit or that if they do it would be easily detected and replaced. Some 42 percent of MDA contractors are Tier 4 or lower suppliers, notes Schipp.
In the memo, the government admits that “there is no way to know where those [VisionTech parts] have ended up.” It goes on to describe a disturbing photo found during the investigation of a young boy, believed to be Wren’s son, seated at a work table equipped with tools for “refurbishing,” including a toothbrush, an eraser, and Armor All (presumably to make the parts look clean and shiny).
“One must wonder which defense contractor, medical device manufacturer or other manufacturing sector received from VisionTech counterfeit integrated circuits ‘refurbed’ by a child,” the memo cautions.
Antifake, EBN is not the right forum for this discussion. Please take it up with legal authorities if you believe a company is involved in counterfeiting activities. EBN cannot judge who is or is not involved in such activities and these discussions have veered into accusations we cannot condone. Thank you.
I will remove your post on this subject and any other posts on the subject.
Thank you all for the conversation on this issue. I am ending this issue on the pages of EBN immediately. We cannot adequately judge the issues involved and EBN is not set up for this goal. If anyone has any allegations about counterfeiting involving any other company please contact legal authorities. I will also be taking down any future comments that directly accuses any company of counterfeiting activities. The proper forum is the legal space and not EBN.
Your comment about "a need for continued vigilance" is honorable but, to me, is an understatement.
The number of companies who have entered the independent distribution industry in the last 10 years that appear to be motived by greed and profit for their own benefit and at the cost of our Armed Forces members and legimate United States Military and commercial manuacturing companies, is mind staggering.
There are hundreds of high quality, ethical independent distributors throughtout the world. Unfortunately, I fear there are more who have gotten into the business for many of the wrong reasons.
It has been suggested there are hundreds of companies in this industry who knowing have bought products that are coming from the China Scrap piles and hide behind independent test house reports, ISO9000 certifications, and association memberships.
And there is no evidence proving this is not true.
EXAMPLE : http://circuitsassembly.com/cms/news/13240-us-court-renders-guilty-verdict-on-components-counterfeiter
I am not the sharpest tool in the shed but why do you think we have had only 2 RMAs in the last 4 years, that were because the components were counterfeit? (NOTE: All customer were informed of the potential risk before accepting their orders)
The reason is because we choose not to pass high risk product to any of our customers for a quick buck.
Because we take the time to know who we are buying from and advise our customers of their options and the risks involved, then let them make an informed decision.
While we may deliver electronic components to our customers, what we actually provide is a service and our expertise.
We do not own any test equipment, x-ray machines, die libraries and have not processed 1 escrow agreement in the last 4+ years
If you send scrap parts to an independent test house, that does not make them new and does not assure that the part will magically meet it's designed specification. While some testing can clearly show whether a parts meets basic functionality it does not guarentee it will perform to full specification.
It all starts with knowing who you are dealing with.
My dad taught me, If it looks to good to be true ... It probaby is. When a company who has only been in business for a year, claims to have components available that no other company does, and those components have a 40+ week lead time or are obsolete ... some red flags should be raised and more questions need to be asked.
In my opinion, there are hundreds of companies that are either too incompetent to know this or are willing to roll the dice and see if they get caught no matter how this may endanger the US public or men and women serving our armed forces.
In reference to Tam's comment, it is my understanding that every company on the Visiontech list received a written letter, from the prosecution, in the mail. The letter informed each company that they had purchased electronic components from a indicted counterfeiter. I believe the reason the government submitted the list of companies that bought from Visiontech, during the prosecution as evidence ... was just that, it is evidence.
The list of companies that purchased from Visiontech is only the first step in identifying the root cause of the problem according to the ISO9000:2008 standard. Any company that has not notified their customers, determined where those parts were used, and taken corrective action to prevent this from happening again is part of the ongoing problem.
Think about this ... Visiontech had over $15.8 million in shipments and just over $1 million in refunds.
There are over $14+ million worth of components still out there.
Counterfeit components have been found in the Military & Aerospace supply chains. Countefeit components cost commercial manufacturers and consumers billions of dollars a year.
Preventive actions are great but ... Just like Cancer, Counterfeiters and traffickers will not go away on their own, you must identify and remove them first.
Should we really wait until human life is lost before continuing to investigate the root cause and taking corrective action to prevent any more harm or lose?
Tam, Thank you for that clarification. I think some companies were beginning to feel that the appearance of their names on this list was evidence they colluded with counterfeiters. That's not necessarily the case. The real culprits here are the counterfeiters and the illegal supply chain they've set up to move their illegal products.
I just want to add that the government included the lists of US and international buyers with the court docs because it wanted to make sure that companies realized that they had indeed bought Counterfeit parts. The court docs implied that some buyers may not know that, and the government wants them to be aware of those sales and notify its partners down the supply chain. I don't think it was intended to punish the buyers that were duped.
Barbara, The fact that a company, especially a manufacturer intending to use the parts, buys counterfeit components from a seller doesn't necessarily mean the company is guilty. What they need to do is remain vigilant but even then they can be fooled repeatedly by a determined counterfeiter. On the other hand, when a firm appears on a negative list it takes a lot to clean up.
DanMatis, I believe what this indicates is the need for continued vigilance on the part of everyone. I like your quote about "Fool me once" but the fact is that despite our best efforts it is still possible to be tricked by a professional trickster more than once. People who do this will change their methods, change the name of their company, change location, market actively and do whatever they can to win.
Qualcomm has launched a big push to spread its cellular technology, and thus increase its royalty income, not to mention chip sales, beyond mobile phones.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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