Feds raid New York tech firm, Accused of Selling Chinese Equipment

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Feds raid New York tech firm, Accused of Selling Chinese Equipment.

Federal agents raided a Long Island tech firm early Thursday and arrested its top executives amid concerns the company was selling Chinese-made equipment to the U.S. military while claiming it had been manufactured in the United States.

According to federal prosecutors, Aventura Technologies of Commack has been running the alleged scheme since 2006, selling equipment with “known cybersecurity vulnerability” to government and other customers.

The alleged fraud is raising security concerns about the materials that wound up being used by the U.S. Navy and other military branches. It comes amid a tense standoff between the U.S. and Chinese governments over whether Chinese equipment from state-linked enterprises should be in sensitive U.S. networks and facilities.

“As alleged, the defendants falsely claimed for years that their surveillance and security equipment was manufactured on Long Island, padding their pockets with money from lucrative contracts without regard for the risk to our country’s national security posed by secretly peddling made-in-China electronics with known cyber vulnerabilities,” United States Attorney Richard Donoghue said in a statement.

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In at least one case, according to the complaint, the U.S. Navy ordered a night vision camera from Aventura for delivery to the U.S. Naval Submarine Base New London in Groton, Connecticut. The camera that was delivered, the complaint alleges, was imported from China despite the company saying it was U.S.-made.

Since November 2010, Aventura’s revenues have exceeded more than $88 million, including more than $20 million from federal government contracts, court papers say.

Among the items sold to the United States government by Aventura were 25 body cameras to the U.S. Air Force to be used by security personnel at a United States air base, turnstiles to be installed at a U.S. Department of Energy facility in Tennessee, and a night vision camera to the U.S. Navy which was delivered to the U.S. Submarine base at Groton, Connecticut, prosecutors say.

“There is no mistaking the cyber vulnerabilities created when this company sold electronic surveillance products made in the [People’s Republic of China], and then using those items in our government agencies and the branches of our armed forces,” said FBI Assistant Director William F. Sweeney.

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Navy spokesman Lt. Tim Pietrack said that all affected commands have been notified and the equipment will be removed and replaced. Currently, it does not appear that any equipment purchased from Aventura was placed on Navy warships, Pietrack said in a statement.

According to a Navy official, six closed circuit television cameras were purchased to be used on a Navy supply vessel.

There are no national security risks as a result of the purchased equipment, Pietrack said.

FBI, Customs, IRS and other agents with various inspector general offices were seen executing a search warrant at the headquarters of Aventura Thursday morning. Earlier in the day, six current and former executives and employees were arrested, including “de facto owner” Jack Cabasso and his wife, CEO Frances Cabasso. Authorities also seized the Cabassos’ 70-foot yacht.

The other four arrested were identified as Jonathan Lasker, Alan Schwartz, Eduard Matulik and Christine Lazarus. It wasn’t immediately clear what roles each played in the company, and each was released on $250,000 bond after appearing in federal court in Brooklyn Thurday.

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Frances Cabasso was released on $1 million bond, and Jack Cabasso remained in custody after not having a bail package to offer. One more defendant, Wayne Marino, is expected to surrender on Friday.

Some of the equipment sold was surveillance- and security-related technology for both United States government agencies and private customers.

The raid on Long Island involves dozens of investigators as containers of equipment need to be hauled away for examination. Trucks and other law enforcement vehicles could be seen as the search continues at Aventura.

A call to the company for comment was not immediately returned. The 20-year-old firm describes itself as a specialist in security technology, offering everything from X-ray scanners and turnstiles to license plate recognition software and system architecture services.

Defense attorneys for the defendants refused to comment. If convicted, each of the top counts carry up to 20 years in prison.

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