Cyte-M, Inc.

PSSST! HAVE YOU HEARD?
These Semiconductors Are Hot – Or Rather, They’re Stolen

The high-tech industry is very susceptible to theft
In his 19 years as a police officer-including three in narcotics-no one had ever pulled a gun on Detective Sgt. Mark Kerby of the Santa Clara, Calif., police department. That changed, however, when he went undercover to deliver memory modules for Century Micro Electronics, also in Santa Clara.

The police were tipped off about a potential crime by Century executives, who became suspicious after being asked to deliver the modules to “Zycom Corp.,” in a building the supplier knew was vacant.

Kerby arrived with $19,500 worth of modules at a prearranged time and found the building locked. He saw a man hanging around the front of the building and asked him if he knew anything about Zycom. That’s when the gun was pulled. Police backups immediately arrested the man, as well as one accomplice.

Robberies and rip-offs have hit the electronics industry hard. Businesses in Fremont, Calif., a company-rich town in Silicon Valley, lost $5.5 million in electronic equipment in 1990, and four large insurance carriers in the area reported losses of $20 million in 1989. Some observers believe those numbers underestimate the actual amount of stings involving OEMs, customers and brokers.

By nature, the semiconductor market is vulnerable to rip-off artists. There are always new brokers selling generic product, and buyers are constantly scouting for good deals. The products themselves are light, small, and have high value. As a result, they are easy to move and easy to steal.

“Probably 75% to 80% of the cases I get, have some internal involvement,” says Detective Curt Codey, who handles high-tech crimes for the Fremont Police Department. Employees can leave doors unlocked, disable alarms, draw floor plans, tell thieves where products is stored, or even steal merchandise themselves.

Bribes can also turn employees into accomplices. For example, a worker at one company was approached by a stranger who offered $50,000 if the employee would help steal a pallet of hard drives worth about $400,000. Instead, the employee told his boss.

Buyers should beware of the offer they can’t refuse. Stolen goods are usually sold for a fraction of their market price. They move through the market quickly, often change brokers’ hands several times in a matter of hours, and turn a profit each time. This makes it more difficult to prove that the final buyer had any knowledge of the theft.

“One buyer bought products for such a low price, he had to be suspicious,” says Kevin Fairchild, a retired policeman who is now a security consultant with Cyte-M Investigations, Santa Clara. “Unfortunately, greed got in the way of {his conscience}.”

Those who knowingly buy or sell stolen goods are subject to prosecution in California and many other states. Buyers who suspect a product is stolen, bud don’t ask, also lose out.

“The person who buys the product is getting victimized,” says Fairchild. “He has to give up what he bought, and he loses his money too.”

It is a good idea to know who you’re dealing with. Black market brokers need only a phone and a fax machine to present the façade of legitimacy.

OEMs are the most obvious targets of rip-offs, but a buyer’s inventory moves just as well on the black market. For example, Hewlett-Packard had $400,000 worth of 386 processors stolen from one of its facilities.

“As times get more difficult, opportunities arise geometrically for people to be ripped off,” says Sgt. Jim McMahon of the High-Tech Crimes Detail at the San Jose Police Department. The likelihood of getting 50% off for any parts in times of financial depression is there, but certain clues should scream at you, he adds.

Very low prices or extremely large volumes from an unusual source should sound a mental alarm. “Ask a lot of questions to make sure the person you’re buying from has legal title and custody, or you may {later have} to explain it to a judge,” McMahon says.

Buyers can’t be too scrupulous about identifying contacts. It is wise to demand and check on references from new brokers. In one case, an employee from a systems house called a customer and offered a terrific price for some units. Fortunately, the customer double-checked with the supplier and learned that although the caller was an employee, he had no authority so sell the systems.

TO combat the crime problem, companies are becoming more security-conscious. The High-Tech Crime Investigation Association has seven chapters nationwide. For more information, contact the HTCIA’s Silicon Valley chapter in Walnut, Calif.

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