Man Pleads Guilty To Selling $3.5M In Counterfeit And Deficient Electronics For Use In Military Systems

The U.S. Justice Department released the below information:

A California man pleaded guilty yesterday to a scheme to defraud the Department of Defense’s (DoD) Defense Logistics Agency (DLA) by selling over $3.5 million worth of fan assemblies to the DLA that were either counterfeit or misrepresented to be new.

“The defendant sold counterfeit and deficient fan assemblies for use in military systems to increase his profit,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “Criminals who cheat the U.S. military by selling deficient or counterfeit goods put our national security at risk. This case demonstrates the Justice Department’s commitment to protecting the military supply chain and Americans’ security.”

“Through his company, Kim delivered counterfeit products to our armed services and tried to pass off non-conforming products with fake invoices,” said U.S. Attorney Ismail Ramsey for the Northern District of California. “Swindling our military is a sure way to find oneself in jail. This office is always on the lookout for fraudsters and will prosecute anyone caught cheating our military by providing products that endanger our service people or compromise our readiness.”

According to court documents, Steve H.S. Kim, 63, of Alameda County, controlled Company A, which sold fan assemblies to the DLA that were either counterfeit or were used or surplus fan assemblies that he claimed were new. To trick the DLA into accepting the fan assemblies, Kim created counterfeit labels — some of which used Company B’s registered trademarks — that he attached to the fan assemblies he sold to the DLA. When the DLA questioned Kim about the origin of the fan assemblies, Kim concealed his scheme by giving the DLA fake tracing documents that he created and often signed using a false identity. Some of these counterfeit fans were installed or intended to be installed with electrical components on a nuclear submarine, a laser system on an aircraft, and a surface-to-air missile system.

“The Defense Criminal Investigative Service (DCIS), the law enforcement arm of the DoD Office of Inspector General, is fully committed to protecting the integrity of the DoD supply chain,” said Special Agent in Charge Bryan D. Denny of the DCIS Western Field Office. “Supplying counterfeit products to the DoD endangers the mission and betrays the public’s trust. This investigation demonstrates DCIS’ ongoing commitment to working with its law enforcement partners to hold individuals who defraud the DoD accountable.”

“The Naval Criminal Investigative Service (NCIS) and our law enforcement partners work diligently to thwart attempts to infiltrate the DoD supply chain with potentially damaging counterfeit product,” said Special Agent in Charge Greg Gross of the NCIS Economic Crimes Field Office. “This case highlights the efforts of the investigative team to expeditiously shut down such a scheme and prevent possible grievous harm to our ability to conduct effective combat operations.”

“This case reflects Homeland Security Investigation’s (HSI) core mission set of investigating national security threats as well as protecting global trade and government supply chains,” said Special Agent in Charge Tatum King of HSI San Francisco. “In this case, the serious risks posed to mission readiness were especially alarming. HSI appreciates the joint efforts of NCIS, DCIS, and the Army Criminal Investigation Division (Army CID), together with the Justice Department, in bringing the violator to justice.”

“The result of this joint investigation underscores the importance of our federal law enforcement partnerships and shows that by working together we can identify, prosecute, and dismantle businesses that supply the U.S. military with fraudulent parts and services,” said Special Agent in Charge Keith K. Kelly of the Army CID Fraud Field Office. “Our Army communities and the public can rest assured that we are committed to pursuing anyone that would defraud the U.S. government for their own personal gain and put combat readiness at risk.”

Kim pleaded guilty to one count of wire fraud and one count of trafficking in counterfeit goods. He is scheduled to be sentenced on July 17 and faces a maximum penalty of 20 years in prison on the wire fraud count and 10 years in prison on the trafficking in counterfeit goods count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

DCIS, NCIS, HSI, and Army CID are investigating the case.

Assistant Chief Kyle C. Hankey and Trial Attorneys Louis Manzo and David D. Hamstra of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Katherine Lloyd-Lovett for the Northern District of California are prosecuting the case. Assistant Deputy Chief Adrienne Rose and Senior Counsels Jason Gull and Matthew A. Lamberti of the Criminal Division’s Computer Crime and Intellectual Property Section provided substantial assistance with the investigation.