SANTA ANA, California – The owner of PRB Logics Corporation, an Orange County-based seller of electronic components, was sentenced today to more than three years in federal prison for selling counterfeit integrated circuits he obtained from China, some of which were purchased by defense contractors for military use.
Rogelio Vasquez, 44, a.k.a. “James Harrison,” of Orange, was sentenced by United States District Judge Josephine L. Staton, who said, “Simply put, the scheme was endangering lives for the sake of illicit profit.” Judge Staton also ordered Vasquez to pay $144,000 in restitution.
On January 17, Vasquez pleaded guilty to four felonies: one count of wire fraud, two counts of trafficking in counterfeit goods, and one count of trafficking in counterfeit military goods.
From July 2009 until May 2016, Vasquez acquired old, used and/or discarded integrated circuits from Chinese suppliers that had been repainted and remarked with counterfeit logos. The devices were further remarked with altered date codes, lot codes or countries of origin to deceive customers and end users into thinking the integrated circuits were new, according to court documents. Vasquez knew that the integrated circuits he sold were old, used or discarded and that his Chinese suppliers had pulled the circuits off of discarded circuit boards in China, sanded off all of the markings, and then remarked them in a process commonly referred to as “blacktopping.” Vasquez then sold the counterfeit electronics to appear as new parts made by manufacturers such as Xilinx, Analog Devices and Intel.
In furtherance of the scheme, in August 2012, Vasquez purchased counterfeit circuits from China and sold them to a defense subcontractor located in the United States, which, in turn, supplied the parts to a defense contractor. The counterfeit parts ended up in a classified weapon system used by the U.S. Air Force.
Between November 2015 and May 2016, Vasquez, using the alias “James Harrison,” sold a total of 106 counterfeit integrated circuits to an undercover federal agent. Vasquez admitted in his plea agreement that in April 2016, he sold eight counterfeit integrated circuits that he believed would be used by the United States military in the B-1 Lancer Bomber military aircraft.
Vasquez admitted he instructed his Chinese suppliers to remark ICs and also instructed a testing laboratory in China to provide two versions of its report – one of which accurately showed integrated circuit test results and the second of which was a “sanitized version” that did not contain results of “any visual inspection and permanency or other marking tests, which would have revealed that the ICs were used, remarked and/or in poor condition.”
Vasquez has agreed to forfeit $97,362 in cash and 169,148 counterfeit integrated circuits that were seized during the investigation, according to the government’s forfeiture brief. Vasquez also admitted that over the course of seven years, he trafficked more than 9,000 integrated circuits with a total infringement value of $894,218.
“This defendant obtained and sold counterfeit integrated circuits which ended up in systems used by the United States military,” said United States Attorney Nick Hanna. “The sentence imposed today is the direct result of Mr. Vasquez’s conduct, which was designed to line his pockets while potentially exposing members of our armed services to unnecessary risk from counterfeit electronic parts.”
“America’s warfighters depend upon the reliability of Department of Defense weapons systems. The intentional substitution of counterfeit and defective parts in these systems impacts our national security, and places our military at risk,” said Special Agent in Charge, Michael Mentavlos, Defense Criminal Investigative Service, Southwest Field Office. “We will not tolerate this criminal behavior, and will aggressively bring to justice all those who would perpetrate these acts on our nation. Today’s sentencing serves as a stark reminder to those who would endanger our national security that DCIS, in concert with our partner agencies, HSI and NRO-OIG, will remain vigilant; ready at a moment’s notice to protect our warfighters.”
“The National Reconnaissance Office, Office of Inspector General is committed to keeping counterfeit parts out of sensitive, high-technology systems relied upon by the NRO and other government agencies in support of national security priorities. Detecting counterfeit parts and bringing their producers to justice remains a priority for the NRO-OIG in light of the potential harm caused by this type of fraud,” said Eric Beatty, Assistant Inspector General for Investigations, National Reconnaissance Office, Office of Inspector General.
“As this sentence makes clear, military procurement fraud is a serious crime that extends far beyond the financial losses to the DOD and U.S. taxpayers,” said Joseph Macias, Special Agent in Charge for U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Los Angeles. “This defendant committed a crime that seriously threatens the safety and readiness of our nation’s warfighters simply to line his own pockets. HSI will continue to aggressively target and investigate those who knowingly jeopardize our nation’s security or the welfare of those devoted to protecting it.”
The investigation into Vasquez and PRB Logics was conducted by U.S. Department of Defense, Office of Inspector General – Defense Criminal Investigative Service; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; and the National Reconnaissance Office, Office of Inspector General.
This matter is being prosecuted by Assistant United States Attorneys Lisa E. Feldman of the Cyber & Intellectual Property Crimes Section and Steven R. Welk, Chief of the Asset Forfeiture Section.