Four People from Boulder Indicted on Charges of Conspiracy, Smuggling, and Trafficking in Counterfeit Goods

DENVER—Four Boulder, Colorado men were indicted by a federal grand jury in Denver on December 14, 2009, on charges of conspiracy, smuggling, and trafficking in counterfeit goods, United States Attorney David Gaouette, FBI Special Agent in Charge James Davis, and U.S. Customs and Border Protection Director, Field Operations, San Francisco Richard Vigna, announced. The indictment alleges that the defendants smuggled counterfeit computer network components into the United States from rogue manufactures in China which they then sold throughout the country.

All four defendants appeared in U.S. District Court in Denver yesterday (Tuesday, December 22, 2009), where they were advised of the charges pending against them. They were then ordered released on personal recognizance bonds. Their arraignment is scheduled for December 30, 2009, at 10:00 a.m. before U.S. Magistrate Judge Kristen L. Mix.

According to the indictment, beginning in January 2004 and continuing through May 2007, the defendants owned and ran a Boulder, Colorado-based company known as Axis Distributing Incorporated. In January 2007, Axis changed its name to AD Inc. The defendants, Patrick Love, James Love, Patrick Egan, and Mark Douglas Reilly, sold counterfeit computer hardware. They advertised that their products were manufactured by Cisco, and were “new in box” with original packaging.

Cisco Systems Incorporated is a company that manufactured products used in computer network systems. Cisco protected its products with trademarks and patents registered with the U.S. Patent and Trademark Office. Cisco had authorized distributors that received a discount for goods and services that ranged from 35 to 42 percent.

The defendants offered their purported products at prices substantially less than those advertised by registered Cisco distributors. The indictment states that the defendants used suppliers who were not authorized Cisco distributors. Instead, the defendants bought counterfeit Cisco products from non-authorized suppliers in China, California, and Canada. They paid significantly less for their counterfeit Cisco products.

To ensure that their counterfeit Cisco products appeared genuine, the defendants employed a variety of tactics, including avoiding buying counterfeit products that bore serial numbers. They also requested that their suppliers make sure that the counterfeit products incorporated changes Cisco made to its products and packaging, such as changes to its labels.

Defendants also concealed their trafficking from U.S. Customs and Border Protection (CBP). After CBP seized Axis shipments in the summer of 2005, the defendants subsequently sometimes asked suppliers not to put the name Axis Distributing on shipments, or to affix a false monetary value to a shipment. The defendants also sometimes asked foreign suppliers to ship the counterfeit Cisco products to their personal residences, or another address in the United States, instead of Axis. They also separately received shipments of empty counterfeit Cisco boxes and counterfeit product labels which they used to package their counterfeit products.

“Smuggling and trafficking in counterfeit goods undermines our economy and hurts legitimate businesses,” said U.S. Attorney David Gaouette.

“The FBI has an aggressive posture in combating rogue traffickers of disingenuous computer network hardware, especially if there is a risk that those counterfeit components are potentially sold to and installed in defense, hospital, education, or other critical infrastructure,” said FBI Special Agent in Charge James Davis. “The FBI invests the time, resources, and hard work necessary to pursue prosecution of these cases in an effort to ensure fully functional and secure networks.”

“CBP works closely with the trade community to ensure that counterfeit and potentially harmful products are not allowed to enter the country,” said Richard Vigna, U.S. Customs and Border Protection Director, Field Operations, San Francisco. “U.S. consumers spending their hard-earned dollars deserve the full value and manufacturer support only given to genuine products.”

Patrick Love, who was born in 1966, faces one count of conspiracy, three counts of trafficking in counterfeit goods, and five counts of smuggling.

James Love, who was born in 1958, faces one count of conspiracy, three counts of trafficking in counterfeit goods, and five counts of smuggling.

Patrick Egan, who was born in 1965, faces one count of conspiracy, seven counts of trafficking in counterfeit goods, and five counts of smuggling.

Mark Douglas Reilly, who was born in 1966, faces one count of conspiracy, seven counts of trafficking in counterfeit goods, and five counts of smuggling.

If convicted of conspiracy, the defendants face not more than five years in federal prison, and up to a $250,000 fine.

If convicted of trafficking in counterfeit goods, the defendants face not more than 10 years’ incarceration, as well as up to a $2,000,000 fine.

If convicted of smuggling, the defendants face not more than 20 years in federal prison, as well as up to a $250,000 fine.

The defendants also face restitution and asset forfeiture.

This case was investigated by the Federal Bureau of Investigation (FBI) and the U.S. Customs and Border Protection (CBP).

The case is being prosecuted by Assistant U.S. Attorney Suneeta Hazra.

These charges are only allegations and the defendants are presumed innocent unless and until proven guilty.