The Picone case dates back to April 2012, when FBI agents raided Epic's headquarters. The following year, Picone was formally charged on eight counts, including conspiring to traffic in counterfeit goods, conspiring to traffic in counterfeit military goods, trafficking in counterfeit goods, conspiring to commit wire fraud and conspiring to commit money laundering. All charges resulted from the importing of counterfeit semiconductors from China for resale in the US.
Last June, Picone pleaded guilty to one count of conspiracy to traffic in counterfeit military goods – a relatively recent federal offence introduced as part of the US' National Defense Authorization Act of 2011.
The problem of counterfeit components is not new, but high visibility prosecutions, like that of Picone, are forcing the issue into focus. Simply put, if you are supplying equipment to US defence companies, you need to be 100% sure that all the components you have used are genuine or you too could face arrest, charges and incarceration.
The Picone case is far-reaching because his brokerage companies were used by many household names to acquire hard-to-source parts.
Astute Electronics specialises in supplying hard-to-find and obsolete components. Unlike many other companies, it has a £1million test lab which it uses to determine the authenticity of components it sources that do not have full manufacturer's tracing documentation. Robust quality and inspection procedures have been put in place so when, in 2008, it ordered and received a batch of parts from Epic, it tested every part.
Astute takes testing further than visual inspection and functional test; it uses scanning electron microscopy to check if the part has the right marking and materials. It also has a library of known good parts, so if a component shows up with a different material construction, it can be identified as a fake. An analogy would be that Astute can check the DNA of a device against that of one proven to be true in order to determine whether or not the part is genuine or counterfeit.
When tested, the parts supplied by Epic failed to satisfy the company's quality inspectors that they were what they were claiming to be. The parts were rejected and Epic was black listed.
Remember that US regulations now demand that sub-system suppliers in the supply chain must approve all non-traceable parts used and to show they have taken appropriate measures to ensure they are using genuine components. How can they do this without demanding the appropriate quality tests?
Truthfully, they can't. But the problem is not limited to Pirone's companies; there are instances of suppliers which, on close examination, are 'headquartered' in rooms above a pub. And some of these parts are being used on missile programs.
Astute sits on many international committees and is about to be certified to AS6081; the quality certification that standardises the requirements for distributors in the procurement of parts, detection of counterfeits and establishment of quality management processes, making it the only European company to have this qualification.
Despite that accreditation, Astute was six years ahead of the industry in identifying Pirone's companies as dealing in counterfeit parts. Vigorous testing certainly pays.
Mark Shanley is Astute Electronics' international business manager
