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The Threat Posed by Fake Cisco Parts

An FBI report says counterfeit components from China could help foreign agents penetrate secure systems

The prosecution of an American company called Syren Technology offers a tantalizing hint of the espionage threat posed by fake Chinese computer parts. But so far neither U.S. law enforcement nor industry has publicly produced evidence of this kind of high-tech spying.

Syren's proprietors, brothers Michael and Robert Edman, were indicted in Houston in December 2007 for selling counterfeit Cisco Systems (CSCO) computer gear to the Marine Corps, Air Force, and "multiple defense contractors." Federal prosecutors allege that the Edmans acquired the fake routers and other equipment from an "unindicted co-conspirator...who lives in China and sells counterfeit Cisco products using various company names, including Cyberstar Company Ltd. and Netwave Company Ltd." The Edmans have pleaded not guilty, contending that they didn't realize they were dealing in counterfeit equipment.

A January 2008 FBI briefing on the Syren investigation and others like it, prepared for technology industry audiences, says the counterfeit Cisco components could allow foreign agents to disrupt secure networks and "weaken cryptographic systems." The 50-page briefing questions whether the counterfeiting is "for-profit or state-sponsored" but doesn't offer an answer.

FBI officials and prosecutors involved in the Houston case declined to comment. The U.S. has said previously that China has attempted in a variety of ways to spy on the Pentagon and major American defense contractors. One alleged method: online penetration of defense-industry computer networks (BusinessWeek, "E-spionage," Cover Story, Apr. 21, 2008). Attacks on these networks have proliferated, but direct ties to the government of China or other foreign rivals haven't surfaced publicly.

The FBI says a two-year investigation called Operation Cisco Raider has "disrupted a large distribution network" of "counterfeit network hardware manufactured in China." But Chinese computer counterfeiters have remained mostly beyond the reach of U.S. law enforcement. Cisco says it is working with China to shut down counterfeiters. The company adds that it has not found any of its equipment modified for spying but concedes that espionage is "not technically inconceivable."

Grow is a correspondent in BusinessWeek's Atlanta bureau .

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