Fortinet Pays $545,000 Over Relabeled China-Made Gear Sold to USA Government

Sunnyvale, California-based cybersecurity company Fortinet Inc. agreed to pay $545,000 to settle allegations that it sold China-made network security products to the USA government with altered origin labels, the Justice Department announced on April 12, 2019.

The settlement

• $400,000 paid to the USA government.
• $145,000 in equipment for the U.S. Marine Corps.

The allegations

The Trade Agreements Act (TAA) generally limits federal agencies to buying products made in the USA or in designated countries. China is not one of them.

Fortinet acknowledged that, from January 2009 through fall 2016, an employee responsible for supply chain management directed others to change product labels so the products would look TAA compliant. Labels were changed to read “Designed in the United States and Canada” or “Assembled in the United States.” The products were then sold to distributors and resellers who resold them to the government.

“Contractors that supply the U.S. Government with Chinese-made technology will be pursued and held accountable when violating the Trade Agreement Act,” said Bryan D. Denny, special agent in charge for the Defense Criminal Investigative Service.

Fortinet told CRN that the case involved an isolated incident by a rogue employee who had been fired.

The whistleblower

The settlement resolves a 2016 lawsuit filed by Yuxin “Jay” Fang, a former logistics specialist in Fortinet’s Vancouver office. According to the complaint, a sales invoice listed 32 units sold for $390,302.40 as “TAA Compliant Inventory,” when the devices were made only in China.

FAQ

How much did Fortinet pay?

$545,000: $400,000 to the government and $145,000 in equipment for the Marine Corps.

What were the labels changed to say?

“Designed in the United States and Canada” or “Assembled in the United States.”

Who brought the case?

Former Fortinet logistics specialist Yuxin “Jay” Fang, in a 2016 whistleblower lawsuit.