U.S. agency goes undercover to expose fraud

FRAMINGHAM, Mass. — A U.S. federal watchdog agency, the Government Accountability Office, has gone undercover on the Internet to expose manufacturers actively willing to sell bogus military-grade electronics parts used in major weapons and aircraft systems of the Department of Defense.

It’s part of an effort to look into supply-chain fraud that could undermine weapons’ integrity or endanger troops’ lives, the GAO said in its report to Congress about its undercover operation. GAO found plenty of vendors, mainly in China, willing to sell crummy military-grade weapons parts — and wound up buying more than a dozen of them. It then had an outside firm, SMT Corp., analyze them for authenticity, and SMT in extensive lab analysis found them all either blatantly fraudulent or “highly suspicious.”

The undercover work exposing the fake electronics that the military might end up ordering through Internet-based trading platforms was just a sampling, the GAO emphasizes, but shows that the threat of supply-chain fraud to the DOD is a serious national security issue.

To carry out its undercover identity, GAO first “created a fictitious company and gained membership to two Internet platforms providing access to vendors selling military-grade electronic parts,” the GAO report says.

GAO doesn’t disclose what online trading platforms these were, but notes one of them granted membership without receiving requested documentation and the second let in the GAO’s fake company after it supplied “factitious business references” that no one checked.

The GAO, with help from the Defense Logistics Agency, then requested quotes from vendors on both online trading sites for military-grade electronics parts that are either obsolete or very rare; with authentic parts numbers but with date codes after the last date the part was manufactured; and totally bogus parts numbers that aren’t associated with authentic electronics parts at all.

The GAO ended up purchasing 16 parts, four of which technically do not even exist. China was the main source of responses, and the GAO purchased parts from vendors in Shenzen, Shantou and Beijing.

Some of these were electronics parts that in theory would be used in military systems, including Army and Air Force Joint Surveillance and Target Attack Radar Systems, the F-15 Eagle fighter plane, the Maverick AGM-65A missile, the Air Force Special Operations Forces’ AC-130H Gunship aircraft, the B-2B aircraft and the Navy’s Hawkeye aircraft. The GAO noted that in some cases, the failure of a critical part could pose a risk to the system overall. “Counterfeit parts — generally the misrepresentation of parts’ identity or pedigree — can seriously disrupt the DOD supply chain, harm weapons systems integrity and endanger troops’ lives,” the GAO report concluded.
(From Network World U.S.)

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