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Taskforce seizes $76 Million in counterfeit Cisco network hardware

By Layer 8 on Fri, 02/29/08 - 10:08am.

An international law enforcement task force today said they have made over 400 seizures of counterfeit Cisco network hardware being trafficked between the US, Canada and China with an estimated retail value of more than $76 million.

The initiative targeted the illegal importation and sale of counterfeit network hardware, in particular network routers, switches, network cards and modules manufactured by Cisco. By intercepting the counterfeit hardware at ports of entry and dismantling illegal supply chains in the US, the operation has achieved significant successes in protecting the public from the risk of network infrastructure failures associated with these counterfeits, officials said in a release.

Behind the confiscations are a variety of agencies including the FBI’s cyber group, U.S. Immigration and Customs Enforcement (ICE), US Customs and Border Protection (CBP), and the  Royal Canadian Mounted Police (RCMP).The FBI in a release named its portion of this ongoing initiative Operation Cisco Raider-an international, coordinated investigation of 15 cases involving nine FBI field offices.

The FBI worked closely with law enforcement partners including ICE, Defense Criminal Investigative Service, General Services Administration, Department of the Interior, Internal Revenue Service, and the RCMP. Over the last two years, Operation Cisco Raider has resulted in 36 search warrants that identified approximately 3,500 counterfeit network components with an estimated retail value of over $3.5 million, and has led to a total of ten convictions and $1.7 million in restitution.

ICE and CBP opened a total of 28 investigations in 17 separate field offices since 2005; eight of those investigations were worked jointly with the FBI and several with the RCMP. ICE agents have conducted 115 seizures of counterfeit Cisco products having an estimated retail value of $20.4 million. ICE investigations have led to six indictments and four felony convictions to date. CBP has made 373 seizures of counterfeit Cisco network hardware since 2005, and 40 seizures of Cisco labels for counterfeit products. All together, ICE and CBP seized more than 74,000 counterfeit Cisco network components and labels with a total estimated retail value of more than $73 million, according to the US States Attorney's Office in the Eastern District of Virginia. 

"Counterfeit network hardware entering the marketplace raises significant public safety concerns and must be stopped. This initiative shows that through collaboration among law enforcement agencies and prosecutors worldwide, we can achieve dramatic enforcement results and protect public safety," said Assistant Attorney General Alice Fisher of the Criminal Division said in a release. "It is critically important that network administrators in both private sector and government perform due diligence in order to prevent counterfeit hardware from being installed on their networks.

"Some of the cases involved with this initiative include: 

·          On February 14, 2008, Todd Richard, 33, was sentenced to 36 months' imprisonment and ordered to pay $208,440 in restitution to Cisco, as a result of his conviction for trafficking in counterfeit Cisco computer products. From late 2003 until early 2007, Richard imported shipments of counterfeit Cisco computer components from China, and separate shipments of counterfeit Cisco labels. He then affixed the fake labels to the fake components and sold the products on eBay, claiming that they were legitimate Cisco items. Richard sold over $1 million worth of counterfeit Cisco products in this manner. This case was investigated by ICE and prosecuted by the US Attorney's Office for the Northern District of Georgia.

·          On January 4, 2008, a federal grand jury returned an indictment charging Michael Edman, 36, and his brother Robert Edman, 28, with trafficking in counterfeit Cisco products. The indictment alleges that the Edmans purchased and imported the counterfeit computer network hardware from an individual in China. They later sold the counterfeit Cisco products to retailers of computer network products throughout the United States. According to the indictment, the Edmans shipped some of the counterfeit hardware directly to the Marine Corps, Air Force, Federal Aviation Administration, FBI, defense contractors, universities and financial institutions. These entities had purchased the product from a computer retailer serving as a middleman, which in turn purchased the products from the Edmans (a process known as "drop shipping"). The case was investigated by ICE and is being prosecuted by the US Attorney's Office for the Southern District of Texas.

·          On April 17, 2007, Mark Thomas Geis, 37, was sentenced to five years in prison and ordered to pay $1.5 million in restitution to Cisco as a result of his conviction for conspiracy to traffic in counterfeit network hardware. The court found that Geis, doing business as VARGlobal and conducting business via eBay, conspired to traffic in approximately $4.2 million of counterfeit Cisco hardware. This case was investigated by the FBI. Geis had previously been convicted and sentenced to 46 months imprisonment in 2001 for conspiracy to defraud Microsoft. The case was investigated by the FBI and prosecuted by the US Attorney's Office for the Northern District of Texas.

·          Today in Toronto, Canada, the RCMP charged two individuals and a company with distributing large quantities of counterfeit network components to companies in the United States via the Internet. The RCMP seized approximately 1,600 pieces of counterfeit network hardware with an estimated value of $2 million. This prosecution resulted from a joint initiative between the RCMP, FBI, ICE, and CBP that was aimed at disrupting the flow of counterfeit Cisco networking components in North America. 

The problem of trafficking in counterfeit computer components is a global problem, as reflected by last week's announcement by the European Union (EU) and U.S. officials of the first EU-U.S. customs joint operation resulting in the seizure of more than 360,000 counterfeit computer parts and integrated circuits.

The joint initiative between the European Commission Tax and Customs Directorate and CBP took place during a three-week period in November and December of 2007. A probe in five countries uncovered a pattern of trade in counterfeit networking equipment and integrated circuits passed off as products from 40 of the world's largest European, U.S., Japanese, and Korean technology companies. Most arrived via air shipment from China, but some were also shipped from Taiwan and Hong Kong, the groups said in a release. 

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