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Intellectual Property Rights and Commercial Fraud


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California business owner sentenced for conspiring to sell counterfeit microelectronics to the US military

Counterfeit integrated circuits sold to US Navy, numerous industry sectors

WASHINGTON — A business owner from Newport Coast,Calif., was sentenced Wednesday to 30 months in prison for conspiring to sell counterfeitintegrated circuits to the U.S. military, defense contractors and others.

The case was investigated by U.S. Immigration and Customs Enforcement's Homeland Security Investigations and the Naval Criminal Investigative Service.

Mustafa Abdul Aljaff, 32, pleaded guilty in January 2010 to federal charges of conspiracy to traffic in counterfeit goods and defraud the United States, and trafficking in counterfeit goods.

Upon completion of his prison term, Aljaff will be placed on three years of supervised release and be required to perform 250 hours of community service.

"Counterfeit electrical components destined for use by our military service members put those troops, and our national security, at great risk," said John P. Torres, special agent in charge, HSI Washington. "That is why HSI will continue to prioritize the investigation of companies and individuals who attempt to engage in this type of criminal act."

As part of the plea agreement, Aljaff agreed to forfeit industrial machinery which is designed to be used in the examination, testing, packaging, de-marking and marking of integrated circuits; computers and computer network servers; and his integrated circuit inventory. These items were seized from his business in connection with the execution of a search warrant on Oct. 8, 2009.

Aljaff also must pay $177,862 in restitution to the semiconductor companies whose trademarks were infringed as a result of his criminal conduct.

Co-defendant Neil Felahy, 34, the operations manager for Aljaff's company and his brother-in-law, is awaiting sentencing on Feb. 22 after pleading guilty to charges in the case.

"Today's prison sentence sends a message to the unscrupulous counterfeiters who put us all at risk by selling phony integrated circuits that end up in our military systems, medical devices and consumer products," said U.S. Attorney Ronald C. Machen, Jr., for the District of Columbia. "We will continue to prosecute, convict and seek prison sentences for the criminals who threaten our health, safety and national security with their greed."

"Counterfeit parts pose a grave threat to both the operational readiness and safety of our military forces," said John F. Wagner, special agent in charge of the Washington, D.C. office of NCIS. "These prosecution results embody the effectiveness of interagency law enforcement cooperation."

Aljaff pleaded guilty soon after his arrest and cooperated with authorities as the investigation continued. He owned MVP Micro and a host of other companies operating from the same location in Irvine, Calif. According to the government's evidence, he was the mastermind and leader of the highly sophisticated fraud scheme to import, sell, manufacture and distribute, in interstate and international commerce, counterfeit integrated circuits. The conspiracy took place between September 2007 and August 2009.

An integrated circuit is a high-tech device, incorporated into a computer board, which acts as a switch. Integrated circuits control the flow of electricity in the goods or systems into which they are incorporated. They are used in a variety of applications, including industrial, consumer electronics, transportation, infrastructure, medical devices and systems, spacecraft, and military.

Counterfeit integrated circuits can result in product or system failure or malfunction, and can lead to costly system repairs, property damage and serious bodily injury, including death. They also raise national security concerns because their history is unknown, including who has handled them and what has been done to them. In addition, the devices can be altered and certain devices can be preprogrammed. Counterfeits can contain malicious code or hidden "back doors" enabling systems disablement, communications interception and computer network intrusion.

Markings on integrated circuits indicate a part is "commercial-grade,""industrial-grade," or "military-grade." Military-grade markings signify that the part has been specially tested to withstand extreme temperature ranges and high rates of vibration.

According to the government's evidence, Aljaff and others sold the counterfeit devices, which included military-grade parts, through a cleverly designed web of corporations to unsuspecting customers in the United States and abroad. MVP and related companies sold and distributed counterfeit integrated circuits to approximately 420 buyers in the United States and abroad, including the U.S. Department of the Navy, defense contractors, other broker/distributors and numerous industry sectors, including transportation, medical services and aerospace.

During his guilty plea, Aljaff agreed that on more than 20 separate occasions, he and others imported into the United States from China and Hong Kong, approximately 13,073 integrated circuits bearing counterfeit trademarks, including military-grade markings, valued at about $140,835. Those counterfeit integrated circuits bore the purported trademarks of a number of legitimate semiconductor manufacturers.

One of the two counts to which Aljaff pleaded guilty involved a counterfeit, military-grade integrated circuit that he had purchased from a Florida-based company, Vision Tech Components, LLC. The owner of Vision Tech, Shannon Wren, was indicted in the U.S. District Court for the

District of Columbia on conspiracy and other charges related to the firm's own sales of counterfeit integrated circuits. Also indicted in that case was Stephanie McCloskey, Vision Tech's administrative manager. Wren died pending trial. McCloskey pled guilty in November 2010 to charges of conspiracy to traffic in counterfeit goods and to commit mail fraud and was sentenced in October 2011 to a prison term of 38 months.

This case is part of the National Intellectual Property Rights Coordination Center's Operation Chain Reaction. Operation Chain Reaction is a comprehensive initiative targeting counterfeit items entering the supply chains of the Department of Defense and other U.S. government agencies. Ten of the 20 IPR Center task force members are participating in Operation Chain Reaction, including HSI; U.S. Customs and Border Protection; Federal Bureau of Investigation; Naval Criminal Investigative Service; Defense Criminal Investigative Service; U.S. Army Criminal Investigative Command, Major Procurement Fraud Unit; General Services Administration, Office of Inspector General; Defense Logistics Agency, Office of Inspector General; U.S. Air Force, Office of Special Investigations; and National Aeronautics and Space Administration, Office of Inspector General.


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Last Reviewed/Updated: 09/23/2014