Virginia Contractor Charged Over Chinese Body Armor Certified as USA and Hong Kong Goods

Federal prosecutors in Maryland have charged Arthur Morgan, 67, of Lorton, Virginia, with wire fraud. The U.S. Attorney’s Office said on December 20, 2019, that he falsely certified Chinese-made ballistic helmets, vests and riot gear sold to federal agencies as products of the United States and Hong Kong.

The charge

• Morgan is CEO of Surveillance Equipment Group Inc. (SEG) and its division SEG Armor.
• The criminal complaint was filed on December 16, 2019. It was unsealed after his arrest on December 17.
• From September 2015 to July 2019, at least five federal agencies, including the U.S. Navy and the State Department, placed nine orders with SEG worth about $639,921.
• Wire fraud carries a maximum sentence of 20 years in prison. A complaint is not a finding of guilt.

Why origin mattered

SEG sold through General Services Administration contracts, which are subject to the Trade Agreements Act. That law requires listed products to be made or “substantially transformed” in a designated country. China is not a designated country.

According to the affidavit, Morgan told a Navy contract specialist that SEG had a factory in southern Virginia where the helmets “were in production.” On the day the Navy made a partial payment of $127,069.60, he paid $67,915 to a Chinese company that makes the same helmet SEG delivered.

Quartz reported that an Army special agent began the investigation in 2018 after noticing that a helmet photo SEG had posted appeared to have been altered. A reverse image search traced the photo to an Alibaba listing from a Chinese state-owned manufacturer.

FAQ

Who was charged?

Arthur Morgan, CEO of Surveillance Equipment Group Inc. and SEG Armor.

What law governed the contracts?

The Trade Agreements Act, which does not allow goods made in China on GSA contracts.

How much were the orders worth?

About $639,921 across nine orders from September 2015 to July 2019.