Inside a Counterfeiting Investigation

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 {complink 5218|STMicroelectronics NV}. 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.

13 comments on “Inside a Counterfeiting Investigation

  1. Barbara Jorgensen
    July 16, 2012

    Fantastic blog. Although we talk about the negative effects of counterfeiting in the abstract, this puts a human face on many of the people behind it. We can relate to Foxconn's abuse of workers, but we seem to think it doesn't happen here in the US. Given all of the wrongs outlined here, it appears to me the conspirators got off lightly, although there is a difference between what is seen and what can be proven. At least the governmetn went after these folks and some justice has been done.

  2. bolaji ojo
    July 16, 2012

    The two cases you cited are the only ones that have been repeatedly cited in the media. Did the conference mention any other cases? If not, does this mean investigators haven't been able to prosecute anyone else?

  3. Ariella
    July 16, 2012

    The drugs and counterfeiting connection is intriguing.

  4. Eldredge
    July 16, 2012

    It seems hard to imagine that it is worth the effort to counterfeit a part that goes into a vacuum cleaner, but apparently it is. It also is interesting that it was complaints about a relatively simple appliance that lead to the discovery, rather than a more complex circuit card assembly, for instance.

  5. Tam Harbert
    July 16, 2012

    Good question, Bolaji! No, they didn't cite any other cases. However, the DOJ press release on at least on of these cases said that it was part of what seemed to be a broader effort – something called “Operation Chain Reaction.” More on that in an upcoming blog . . .


  6. Taimoor Zubar
    July 17, 2012

    It seems hard to imagine that it is worth the effort to counterfeit a part that goes into a vacuum cleaner”

    @Eldredge: I think counterfeiters will go for anything that seems profitable. There may be a large number of vacuum cleaners that will get the counterfeit part so the volume may justify the effort.

  7. Taimoor Zubar
    July 17, 2012

    “At least the government went after these folks and some justice has been done.”

    @Barbara: I think the punishment should be enough so it acts as a deterrent to other people. The potential damage caused by counterfeiting could have been very severe since it involves the military and that has to be taken into account when the penalty is being decided.

  8. Barbara Jorgensen
    July 17, 2012

    @taimoor: I definitely agree that the penalties aren't severe in this case, particularly in view of the mission-critical nature of military and aerospace. My guess is part of this has to do with plea ageements. Anecdotally — and I hear a lot of this stuff second hand — very few of these cases are even prosecuted because they are so difficult to prove. There are still many gaps between catching these folks and putting them away. The fact that this case started with vacuum cleaners and escalated to mil/aero is a real testament to the thinking behind this case–really, really well done. It's probably the exception, though.

  9. Eldredge
    July 17, 2012

    @TaimoorZ – Apparently so….and I am sure the counterfeiters didn't target vacuum clearner as end products either – that probably just happens to be where the technology ended up. I guess all they really need to know id that someone is willing to buy the product from them.

  10. prabhakar_deosthali
    July 17, 2012

    It is good that the govt went right uoto the source of the counterfeit production.  But it will also be interesting to know how the remaining supply chain got fooled by these counterfeiters – was it knowlngly or unknowingly.

    Without  some involvement at each link in the supply chain it is not pssoible for such parts to reach at leat the military and space related products

    If the forged certification paperwork cannot be detected then how can one detect the part to be a counterfeit?

  11. Taimoor Zubar
    July 18, 2012

    @Eldredge: Or may be the vacuum cleaner was a choice because it would be difficult to trace a counterfeit part inside a vacuum cleaner as compared to a commonly used industrial machine.

  12. Tam Harbert
    July 26, 2012

    It's very surprising where these parts end up. A spokesman for the U.S. Missile Defense Agency recently talked about how counterfeits from Vision Tech ended up in its supply chain. As part of the investigation, the government got a list of customers from MVP and Vision Tech.  The MDA spokesman said the Vision Tech list of domestic customers included a broad swath of the industry. More detail in an upcoming blog post.


  13. errricwillson
    August 4, 2013

    While talking about electronics its quiet difficult to understand mechanism on which they works its a good idea to bring the things more closer to it. Like once in past i try to figure out how samsung cooking range are different from other different ranges. On investing i found some extra process to control the mechanism make it worthy. 

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