Arik Hesseldahl

Recent Posts by Arik Hesseldahl

One More Reason Not to Sell Fake Chips: Prison

To the list of things including handbags, booze and pharmaceuticals that you can go to jail for counterfeiting, you can now add silicon chips. Today a federal judge in Florida sentenced a woman to three years in prison and fined her $166,000 for selling counterfeit chips around the world to more than 1,000 buyers, among them companies selling equipment to the U.S. Navy. It’s being described as the first federal sentence for selling counterfeit chips.

Stephanie A. McCloskey of Clearwater, Fla., pleaded guilty last November to a federal charge of conspiracy to traffic in counterfeit goods and to commit mail fraud, and ultimately cooperated with authorities. She was charged alongside Shannon L. Wren, now deceased, and together, they were accused of running a company called VisionTech Components LLC that between 2006 and 2010 advertised name-brand, trademark-protected chips on the Web. The chips were imported from China and Hong Kong and were improperly labeled as “military grade.”

The DOJ says that on more than 35 separate occasions, they sold some 59,540 chips worth about $425,000. When customers who bought them complained that the chips were fakes — they didn’t work — McCloskey and Wren took no action.

Fake chips aren’t trivial. The thrust of the problem is that depending on the chip, lives can be at risk. If the fake chip in question is used inside a system that’s supposed to, say, deploy an airbag during a car accident or warn a fighter pilot that a missile has just been fired at his plane, people die.

The charges rang a bell and reminded me of a BusinessWeek story on the subject from 2008. The story, Dangerous Fakes, traces chips that had been taken out of discarded motherboards in China and relabeled and ultimately sold to the defense contractor BAE systems. Some of the companies selling the chips were operated out of residential addresses, which you’d think would have triggered alarm bells somewhere within the Defense Department’s procurement apparatus.

Meanwhile, the DOJ thanked the Semiconductor Industry Association and a bunch of chip companies for helping out with the investigation: STMicroelectronics, Texas Instruments, Analog Devices, Intel, National Semiconductor, ON Semiconductor, Freescale Semiconductor, BAE Systems and Raytheon.

(Art via the Museum of Counterfeiting in Paris, which exists.)

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