Equipment for military, 'Made in the USA,' was from China

Nicole Hong, The New York Times

Posted at Nov 08 2019 10:18 AM

Jonathan Lasker, Director of Operations at Aventura Technologies Inc., exits Brooklyn Federal Court following his arraignment in the Brooklyn borough of New York. Brendan McDermid, Reuters

NEW YORK — The surveillance cameras and other equipment that Aventura Technologies sold for years to the U.S. military looked like solid American products, packaged in boxes with "Made in the USA" labels and stars-and-stripes logos.

The items were installed throughout government agencies, including on aircraft carriers and a Department of Energy facility. Then last year, a service member on an Air Force base noticed that an Aventura body camera displayed Chinese characters on the screen.

On Thursday, federal prosecutors in New York said that the equipment had actually been made in China and was vulnerable to hacking, raising the possibility that U.S. government agencies had installed software in their security networks that could be used for spying by China.

In a 40-page complaint, prosecutors unsealed criminal charges against Aventura, of Commack, New York, and seven of its current and former employees. The defendants were accused of lying to their American customers for more than a decade about the Chinese origins of the company’s products.

The case taps into a longstanding worry among U.S. national security officials about the potential for Chinese telecommunications equipment to be used for espionage. Since 2012, more than 80% of economic-espionage cases brought by federal prosecutors have involved China, according to the Justice Department.

In a sign of how seriously U.S. officials take the threat, President Donald Trump this year moved to ban American firms from installing foreign-made equipment that could pose a national security risk. The move effectively barred Chinese telecom giant Huawei from doing business with American companies without U.S. government approval.

The Aventura products bought by government agencies included night-vision and body cameras, automated turnstiles and other security equipment, prosecutors said.

Six of the seven defendants — Jack Cabasso, Frances Cabasso, Jonathan Lasker, Christine Lavonne Lazarus, Eduard Matulik and Alan Schwartz — were arrested early Thursday and made their first court appearances later in the day. The seventh defendant, Wayne Marino, was expected to surrender to authorities Friday.

A lawyer for Schwartz called the allegations “unsubstantiated and unfortunate.” Lawyers for the other defendants either declined to comment or did not respond to requests for comment.

The defendants were charged with conspiracy to commit wire fraud and illegal importation. Jack and Frances Cabasso, a married couple, were also charged with money laundering conspiracy.

Frances Cabasso, owner and chief executive of Aventura Technologies Inc., exits Brooklyn Federal Court following her arraignment in the Brooklyn borough of New York. Brendan McDermid, Reuters

A lawyer for Cabasso did not immediately respond to a request for comment.

The biggest customers for Aventura, which has made more than $88 million in sales since 2010, were government agencies, including the Army, Navy and Air Force.

The company did not immediately respond to an emailed request for comment. A phone number listed on the Aventura website has been disconnected.

The company’s customers paid a premium to buy products that they believed were manufactured in the United States, prosecutors said. When customers asked for reassurances that Aventura’s cameras were made in America, company executives said they were manufactured at a factory in New York.

Richard P. Donoghue, the U.S. attorney for the Eastern District of New York, declined to say Thursday whether the case had any link to the Chinese government or whether anyone in China had hacked into Aventura’s equipment. He said the investigation was continuing, and that authorities were looking for private-sector customers who bought Aventura products.

“This software that was then put into U.S. systems was known to have vulnerabilities that would allow others to access those networks,” Donoghue said. He added: “Obviously it’s a grave concern to the United States that infrastructure is compromised by hardware and software made in the People’s Republic of China.”

Authorities are in the process of removing the equipment from government facilities, Donoghue said.

The scheme’s mastermind, prosecutors said, was Cabasso, the 61-year-old owner of Aventura and a resident of Northport.

In a memo seeking to detain Cabasso in custody until trial, prosecutors portrayed him as a serial con man with a long criminal history.

Since 1982, prosecutors said, he had been convicted of jury tampering, grand larceny and other crimes. He had deep business relationships in China and used a network of shell companies to launder the millions of dollars he made, the prosecution memo said.

Cabasso was also accused of making false representations that his wife was Aventura’s chief executive so that the company could obtain government contracts set aside specifically for small businesses owned by women.

Prosecutors seized the Cabassos’ 70-foot luxury yacht, the Tranquilo, and froze 12 bank accounts containing around $3 million.

Cabasso was so brazen, according to a criminal complaint, that he emailed a government representative in 2016 to accuse other American contractors of selling surveillance products that were made in China.

He called the practice a “big problem,” the complaint said, and he expressed concerns about the cybersecurity issues connected to buying equipment from a Chinese company.