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Intellectual Property Rights
04/17/2014

Pennsylvania man who sold counterfeit military goods sentenced to prison

Imported counterfeit merchandise from China

BALTIMORE — A Bloomsburg, Pa., man was sentenced Thursday to 21 months in prison for conspiring to traffic in counterfeit goods and counterfeit military goods.

Hao Yang, 25, was sentenced by U.S. District Judge J. Frederick Motz, who also entered an order that Yang forfeit five bank accounts worth more than $59,000, a 2010 Acura purchased with proceeds of the crime, and counterfeit computer software, DVDs, sports jerseys and other items valued at approximately $280,720.

The sentencing follows an investigation led by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI).

"This investigation, conducted by HSI special agents in Baltimore, Tampa and Harrisburg, Pa., identified Chinese national Hao Yang as a co-conspirator in an overall scheme to traffic in counterfeit goods to include military grade integrated circuits and defense goods into the United States from China," said HSI Baltimore Special Agent in Charge William Winter. "These counterfeit military goods pose a threat to our national security as they could end up in the wrong hands and legitimate manufacturing and high technology businesses may believe they are receiving authentic goods. HSI and our partners at U.S. Customs and Border Protection will continue to protect the American public and America's warfighters from the introduction of counterfeit, non-conforming, and substandard materials and goods from entering the United States."

"The defendant imported counterfeit goods from China and fraudulently sold them as legitimate merchandise," said U.S. Attorney for the District of Maryland Rod J. Rosenstein. "Counterfeit integrated circuits from China were falsely represented to be legitimate American-made parts."

According to his plea agreement, from 2010 until his arrest June 19, 2013, Yang and his co-conspirators created and operated several companies in Maryland, Pennsylvania, and elsewhere, including MS Technologies and Aone Electronics in Baltimore; Abest Technologies in China; and Arrcord Group, SMC Group and Smooth LLC. The latter three companies were operated by Yang at his residence in Bloomsburg. Yang used his residence to warehouse the counterfeit goods, including counterfeit military goods, sent to him by his co-conspirators in China. He then shipped items to buyers in the United States based on the order information provided by his co-conspirators. Yang maintained numerous bank accounts to deposit his illegal commissions and make payments associated with his counterfeit activities. He also used the commissions he received from his co-conspirators to pay for living expenses and other purchases, including a 2010 Acura TSX sedan.

Yang received counterfeit circuits, a number of which were military-grade, from a co-conspirator in China. This co-conspirator sold, or attempted to sell, the circuits to individuals, companies and government agencies in the United States. Yang then distributed the counterfeit circuits, using his domestic businesses, to the buyers in the United States, sometimes in repackaged form. The co-conspirator paid Yang a commission of $500 per month for his distribution services. Yang and his co-conspirator formed Aarcord Group to conceal the fact that the counterfeit circuits were being imported from China. The counterfeit circuits that Yang redistributed could likely have caused serious bodily injury or impaired military operations, personnel or national security.

Yang also obtained other counterfeit goods, including computer software, DVDs, and sports jerseys, from other co-conspirators in China and Hong Kong, which he then distributed in the United States. Yang received commissions from these co-conspirators of $1,000 to $2,000 per month for his distribution services. Between March 2011 and April 2013, Yang used several false identities to receive hundreds of shipments from China and Hong Kong, including shipments involving integrated circuits.

The case was prosecuted by Assistant U.S. Attorney Christine Manuelian in the District of Maryland and is part of an ongoing initiative called Operation Chain Reaction (OCR) coordinated by the National Intellectual Property Rights Coordination Center (IPR Center) in Washington, D.C. OCR targets and facilitates the seizure and investigation of counterfeit and substandard parts infiltrating the military and government supply chain. The HSI-led IPR Center has 21-member agencies who share information, develop initiatives, coordinate enforcement actions – most of whom participate in OCR.