The FBI is freaking out over the fact that the U.S. Department of Defense has been sold counterfeit Cisco gear. The concern isn't so much over whether Cisco is getting the 
revenue it deserves - it's more about the possibility that hackers could be embedding backdoors into the counterfeit gear to allow them access into U.S. military networks at a later date. In a leaked PowerPoint presentation, the FBI indicates that it has discovered counterfeit Cisco 1000 and 2000 Series routers, Catalyst 4000 Series switches, Gigabit Interface Converters and WAN interface cards that have been sold to the DoD.
The counterfeit products are marred by "dirty welding" (gasp!), but the FBI maintains the parts also have a higher failure rate - and duplicate MAC addresses in counterfeit gear can cause networks to shut down.
The government already uses Cisco Gold and Silver Partners for procurement, but the FBI says some of those partners are selling counterfeit gear to the government.
Can the government control the supply chain? Critics say no. What do you think?
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Counterfeit products
This is nothing new. It's amazing that they are so incompetent that they're only now finding this stuff.
Years ago Huwaei stole Cisco's IOS and used it. Cisco and many other corporations have expanded operations overseas. It's no surprise that equipment gets cloned. Did they think only handbags and watches were being cloned?
For decades it has been well known that industrial espionage exists. Now that we're on more of a global scale, I think it's only reasonable to assume that the same kind of behavior happens. Especially in China, where they actually have government support.
I've been in the telecom industry for years and I've been warning people for years - seeming appropriate people - that this, and more, was an eventuality. They always told me that I was paranoid, or called me a xenophobe, or told me that it was "being handled" and to drop the subject.
These bogus "products" may already have backdoors being planted in their firmware. See "Vendor: Cisco IOS server backdoor may have been planted"
http://www.networkworld.com/community/?q=node/15181&nlhtc=0514ciscoalert2&
There is virtually no security in any of the large telecom manufacturers. Employees have full access to all source code, and can easily steal it. I believe that as a result, we will continue to see more of this same problem.