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Man Pleads Guilty To Selling Fake Chips To US Navy

Posted by timothy on from the vinegar-was-ersatz-too dept.

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."

7 of 327 comments (clear)

  1. HOW??? by frozentier · · Score: 5, Interesting

    HOW does a man and his family sell ANYTHING to the Navy? Is the Navy getting their parts from eBay or Craig's List?

    1. Re:HOW??? by Artraze · · Score: 4, 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

  2. Re:Treason by TheRealMindChild · · Score: 3, Interesting

    I don't know. Knowing selling the Navy computer components you KNOW would fail, to me, would fall into "giving aid to the enemy". We could argue intention/motivation, but a crime is a crime, regardless what you meant.

    --

    "When life gives you lemons, don't make lemonade. Make life take the lemons back!" -- Cave Johnson
  3. Why does the military buy from minor distributors? by reporter · · Score: 3, Interesting
    This story is surprising. Why does the military buy critical electronic components from minor distributors?

    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.

  4. Re:Treason by couchslug · · Score: 5, Interesting

    Selling fake/incorrect components should be prosecuted as sabotage, because defective components can degrade vital systems and cause casualties.

    --
    "This post is an artistic work of fiction and falsehood. Only a fool would take anything posted here as fact."
  5. Re:we still make vacumm cleaners? by Beardo+the+Bearded · · 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.

    --

    ---
    ECHELON is a government program to find words like bomb, jihad, plutonium, assassinate, and anarchy.
  6. We were burnt as well by aspelling · · 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