Hunting Down Fakes

This is a significant and insidious global problem.  Consumers’ lives are put on the line for dirty profits from these merchants of death.  Sadly many consumers lack the ability to differentiate authenticate drugs from fakes.  Worst of all corruption officials are paid enough to look away and act like the problem does not exist.  My hat is off to the Interpol and Customs Enforcement task force working to attack this death supply chain.

Crackdown Targets Counterfeit Drugs
Washington Post (11/20/09) Mui, Ylan Q.

Law enforcement agents from around the world have cracked down on counterfeit pharmaceutical products as part of a new global effort to prevent these medications from reaching patients. The operation, known as Pangea, has already uncovered nearly 800 alleged packages of counterfeit or suspicious medications in the United States, including imitation Viagra, Vicodin, and Claritin. Officials say these counterfeit medications pose a serious patient safety risk, as some have been found to have as much as three times more of the active ingredient than is usually prescribed. Other medications may be placebos and some have been found to contain potentially toxic substances including drywall material, antifreeze, and yellow highway paint. In addition to seizing these medications, officials also shutdown 68 online pharmacies believed to be trafficking in fake pharmaceuticals. The National Association of Boards of Pharmacy maintains a list of approximately 4,000 Internet-based pharmacies that it says are questionable. It also certifies legitimate sellers through its Verified Internet Pharmacy Practice program. Thus far, 17 Web-based pharmacies have met the requirements for certification through the program. In an effort to further prevent the sale of counterfeit drugs, Rep. Steve Israel (D-N.Y.) recently proposed a bill that would increase penalties for counterfeiters and enhance the Food and Drug Administration’s ability to track them. However, the bill is currently stalled in committee.


July’s Counterfeiting By The Numbers

Did you know that approximately $90 million in pirated and counterfeit goods have been seized in July 2009 alone?

Italy seizes millions in Chinese counterfeit goods ($28 Million approx.)

BoC seizes fake imported goods from China ($5.7M approx.)

HP and Dubai Police seize fakes worth Dh70 million ($19 million approx.)

Police seize $340,000 in counterfeit clothing from Newport News merchant

Customs seizes $1.1 million of counterfeit jeans at port

Police: NYC bust nets thousands of fake goods ($10 Million approx.)

60,000 Russian DVDs Seized At 4 Shops ($400K approx.)

100,000 pirated CDs seized including MJs songs ($147K approx.)

Cigarettes worth over £1m seized ($1.7M approx.)

ATF seizes 12 million counterfeit Marlboro cigarettes made in China ($500K approx.)

Counterfeit medical products seized in Lesotho INTERPOL-supported operation ($500K)

Fake and expired drugs seized; counterfeit and expired drugs were seized in Kenya’s Eldoret Town and a suspect arrested in a crackdown by the Pharmacy and Poison Board ($1M approx.)

Raid Nets Over 26,000 Pieces of Counterfeit Tiffany Jewelry ($2.6 M approx.)

Seven million cigarettes seized ($5M approx.)

9m cigarettes are seized at docks ($6.7M approx.)

Malaysian police bust video piracy ring ($600K approx.)

Police arrest, charge man after seizing over 15,000 pirated DVDs – Mt Pritchard ($450K)

P40M worth of counterfeit goods seized ($840K approx.)

£3m in fake goods seized ($5M approx.)


Security Officers went way too far

In one of China’s industrial giants, private security organization applies Gestapo tactics in furtherance of their client’s policy.  Incidents like this discredit an organization’s reputation and create unnecessary subterfuge.  The matter would undoubtedly create considerable backlash for Foxconn’s clients.  It also highlights an important oversight regarding policy statements.  It’s ok to have global policy statements just as long as we provide clear guidelines on how they should be executed.  This is especially important if the operation is located in a country with sketchy human rights past.  One thing is clear for me, ambiguous protection policy without the human rights counterweight is just throwing out the baby with the bath water.

IPhone Maker in China Is Under Fire After a Suicide

By DAVID BARBOZA   Published: July 27, 2009

A 25-year-old worker in China jumped from an apartment building after being accused of stealing an iPhone prototype.


Is Economic Espionage At All Time High?

By Francisco Mateo, CPP, CFE

I previously posted about the Lloyd’s 360 Risk Insight findings on the increased risk of “piracy, kidnapping and government expropriations, which have been exacerbated by the global financial crisis.”  Likewise, economic espionage is another threat to business value.  There has been an increase lately leading to notable cases. 

Such is the case of Sergey Aleynikov, a former Goldman Sachs Group Inc computer programmer accused of stealing secret trading codes from the financial firm which cost nearly $50 million to produce.

In a recent disclosure financial industry giant Deutsche Bank recently fired two executives, Wolfram Schmitt, head of investor relations, and Rafael Schenz, German security chief for their involvement in retaining an investigations firm to gather information on activist shareholder Michael Bohndorf and media tycoon Leo Kirch.  The improper acts took place over the last 4 years.  The case highlights how commercial espionage cases transcend companies from diverse industries.

A recent Stuff Magazine in New Zealand noted on Business spies on the rise, as they try to gain an edge over each other’s business in a tough business environment.  What is remarkable about these cases is that even small businesses are joining the act.

The current trend indicates that economic espionage would continue to grow in significance for both businesses and governments. Most recently Chinese authorities arrested 4 Australian mining firm, Rio Tinto, employees accused of “bribing Chinese steel company employees to obtain confidential information on China’s negotiating position in the talks.” The arrest of Stern Hu, an Australian national who up until his arrest was Rio Tinto’s GM in China, has been received with stern condemnation from the Australia’s foreign minister.  Ironically there have been notable espionage cases involving Chinese nationals in the US. David Yen Lee is a Taiwan native facing a five-count indictment alleging theft of trade secrets from Valspar Corp., a publicly traded maker of household paint and other coating products. Other cases include Hanjuan Jin a former software engineer at Motorola Inc. accused of stealing commercial and military secrets. The most notable case is that of Chinese citizen Dongfan “Greg” Chung former aerospace engineer at the Boeing plant in Huntington Beach, California; convicted in the first-ever trial under the Economic Espionage Act, for taking 300,000 pages of sensitive documents that included information about the U.S. space shuttle and booster rockets.


The growing economic espionage problem highlights the difficulties of protecting intellectual property from competitors worldwide.  The trend calls for increase vigilance and counterintelligence efforts at all levels.  I recently posted on the successful strategy at Apple, which has nourished a culture of honesty and awareness. Some of the strategies include:

  • Hardening R&D areas with elaborate access control schemes.
  • Some companies employ Technical Surveillance Countermeasures (TSCM) like office debugging sweeps periodically.
  • Keeping a tight lid on information access and dissemination, through, security awareness, non-disclosure agreement, etc.
  • Security cameras in areas where employees are working on important projects.
  • Cloaking and disinformation are also part of a counterintelligence/counter-surveillance strategy.

Regardless of the strategies companies use, prudence should prevail since lack of transparency regarding a company’s products or services can be counterproductive from a shareholder point of view.  Regardless of your company’s size, all strategies should be evaluated with the right internal stakeholders (Legal, marketing, corporate security, etc.) before execution.

Industrial Espionage Prevention

The following article from The NYT highlights Apple’s hyper-vigilant approach to R&D information protection.  Besides using effective protection strategy and even the old cloak-and-dagger operation, security awareness appears to be ingrained in the fabric of Apple’s culture.

Apple Obsessed With Secrecy on Products and Top Executives
New York Times (06/23/09) P. B1; Stone, Brad; Vance, Ashlee

Apple has implemented a number of security measures in an effort to tightly control information about its products. For example, the company requires employees who work on top-secret projects to pass through a number of security doors and enter a numeric code to get into their offices. In addition, Apple has installed security cameras in areas where employees are working on important projects. According to an employee who worked in such an area, workers in some product-testing rooms must cover up devices in black cloaks when they are working on them and turn on red warning lights when removing the cloaks. The red lights were installed to alert workers in the area to be more careful than they otherwise would be, the employee said. Another step Apple has taken to prevent the release of information about its products involves providing employees with incorrect details about a product in order to track down the source of news reports that contain the false information. Employees are sometimes fired for leaking information. According to Regis McKenna, a Silicon Valley marketing veteran who used to advise Apple on its media strategy, the culture of secrecy began to take shape in the wake of Apple’s launch of the first Macintosh. Apple was concerned because competitors knew about the Mac before it was introduced.