A North Kingstown, RI, man involved in a scheme to sell remarked microprocessors to U.S. military contractors was sentenced earlier this month by U.S. District Judge Michael P. Shea in Hartford, CT.
Jeffery Warga, president and owner of Rhode Island-based Bay Components, LLC, has been sentenced to three years’ probation and ordered to pay a $10,000 fine. According to courtroom documents, Jeffrey Krantz was the CEO and an owner of Harry Krantz, LLC, a New York-based company that bought and sold, among other things, obsolete electronic parts for use by the U.S. military and commercial buyers. In 2005, Krantz entered into a business relationship with Warga to sell military microprocessor chips to Bay Components, which would in turn sell them to a Connecticut company. Krantz and Warga knew that the Connecticut company wanted new and original chips, not falsely remarked chips.
Although many components manufactured for the commercial electronics market are approved for use in military (mil-spec) applications, many devices cannot withstand the extremes of military use. Counterfeiters often re-mark commercial components as mil-spec that ultimately fail in the field. Other chips are manufactured outright as counterfeits but marked with a manufacturer’s brand, date code and other identifiers.
According to the U.S. Department of Justice:
Between 2005 and 2008, Krantz purchased and sold, and caused to be purchased and sold, more than 1,000 chips to Bay Components, which, in turn sold them to the Connecticut company. The chips were marked with certain information, including a certain manufacturer’s name and trademark, a date code, and a military part number. In approximately December 2005, the first shipments of about 330 chips that Krantz had sold to Bay Components were rejected by the Connecticut company for being the wrong part because the chip contained the wrong die inside. In 2006, Krantz replaced those chips with at least some of the replacement chips bearing the date code 9832. Between 2006 and 2008, Krantz sold and caused to be sold at least 900 chips with date code 9832 to Bay Components, the majority of which were sold to the Connecticut company. The co-conspirators knew that the chips originated from a parts supplier in China, and there was a high probability that they were falsely remarked not the original chips of the certain manufacturer as represented by the markings on the chip.
The investigation revealed that many of the chips were used in the assembly of U.S. military and commercial helicopters. The DOJ reported that the chips have been examined and determined not to be the root cause of any mechanical problems experienced by the helicopters to date. The investigation is ongoing.
On December 12, 2014, Warga pleaded guilty to one count of conspiracy to commit wire a fraud.
On July 28, 2015, Krantz pleaded guilty to one count of wire fraud. On December 10, 2015, he was sentenced to three years of probation and was ordered to pay a $100,000 fine.