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October 6, 2015Hartford, CT, United StatesIntellectual Property Rights and Commercial Fraud, Counter Proliferation Investigation Unit

Massachusetts man sentenced to 37 months for dealing counterfeit military goods

HARTFORD, Conn. — A Massachusetts man was sentenced in federal court Tuesday to 37 months in prison for importing thousands of counterfeit integrated circuits and reselling them to U.S. customers, including contractors supplying the U.S. Navy’s submarine fleet.

This sentenced resulted from an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), the Defense Criminal Investigative Service (DCIS) and the Naval Criminal Investigative Service (NCIS).

Peter Picone, 42, of Methuen, Massachusetts, pleaded guilty on June 3, 2014, to conspiracy to traffic in counterfeit military goods.  In addition to his prison term, Picone must pay $352,076 in restitution to the 31 companies whose circuitry he counterfeited, and to forfeit $70,050 and 12,960 counterfeit integrated circuits.

“Counterfeit electrical components intended for use in U.S. military equipment put our service members in harm’s way, and our national security at great risk,” said Special Agent in Charge Matthew Etre of HSI Boston.  “HSI will continue to aggressively target individuals and companies engaged in this type of criminal act.”

“Picone risked undermining our national security so that he could turn a profit,” said Assistant Attorney General Leslie R. Caldwell.  “He sold counterfeit integrated circuits knowing that the parts were intended for use in nuclear submarines by the U.S. Navy, and that malfunction or failure of the parts could have catastrophic consequences.” 

“Supplying counterfeit electronic components to the U.S. Military is a serious crime,” said U.S. Attorney Deirdre M. Daly, of the District of Connecticut.  “Individuals who choose profit over the health and safety of the men and women of our armed services will be prosecuted.”

“The sentencing today demonstrates the continued efforts of the Defense Criminal Investigative Service and our fellow law enforcement partners to protect the integrity of the Department of Defense's infrastructure,” said Special Agent in Charge Craig W. Rupert of the DCIS Northeast Field Office.  “Distributors who opt for financial gain by introducing counterfeit circuitry into the supply chain of mission critical equipment create an environment ripe for potential failures.  Such disregard puts the warfighter at an unnecessary risk, ultimately impacting the mission readiness of our military that the nation depends on.  DCIS will continue to shield America's investment in Defense by addressing all attempts to disrupt the reliability of our military's equipment and processes.”

“The U.S. Navy submarine force is a critical component of our national security,” said Special Agent in Charge Leo Lamont, of the NCIS Northeast Field Office.  “Protecting the Sailors who make up that force and their supply lines are top priorities for NCIS, to ensure our strategic deterrent remains effective.”

Picone founded Tytronix Inc., and served as its president and director until August 2010, when the company was dissolved.  In addition, from August 2009 through December 2012, Picone owned and operated Epic International Electronics (Epic) and served as its president and director. 

In connection with his guilty plea, Picone admitted that, from February 2007 through April 2012, first through Titronix and later through Epic, he purchased millions of dollars’ worth of integrated circuits bearing counterfeit markings of approximately 35 major electronics manufacturers, including Motorola, Xilinx and National Semiconductor, from suppliers in China and Hong Kong.  Picone admitted he resold the counterfeit integrated circuits to customers both in the United States and abroad, including to defense contractors that Picone knew intended to supply the to the U.S. Navy for use in nuclear submarines, among other things.  Picone further admitted that he knew that malfunction or failure of the integrated circuits likely would cause impairment of combat operations and other significant harm to national security.

On April 24, 2012, federal agents searched Picone’s business and residence, and recovered 12,960 counterfeit integrated circuits.  In connection with his guilty plea, Picone admitted that he intended to sell the seized counterfeit integrated circuits to defense contractors doing business with the Navy for use in military applications.