Unsealed lawsuit alleges military safety gear made with counterfeit microchips in St. Petersburg



A secret whistleblower lawsuit, unsealed recently by a federal judge, sheds new light on questions raised by the July 15, 2009 federal raid of a local defense contractor.

On the day of the raid, the general manager of the Conax defense plant in St. Petersburg told reporters he had no idea why federal agents were swarming over his facility and hauling away documents and hard drives.

“We’re still trying to figure out what they’re after,” Conax General Manager Chet Claudon told reporters the day of the raid.

But a “false claims” federal lawsuit filed prior to the raid by two Conax former engineers and immediately sealed under court order, has recently become a public record following a settlement in the case and de-mystifies what the federal agents were after.

The so-called “Qui Tam” suit filed by the Conax whistleblowers on behalf of the government alleges the company knowingly sold defective and counterfeit safety gear to NASA and the military without alerting the contract overseers in the Department of Defense, despite internal opposition from a handful of Conax engineers who were worried about equipment testing failures.

That whistleblower lawsuit resulted in a $4.4 million financial settlement in August with the Department of Justice by Conax Florida and its British-based parent company Cobham PLC.

Cobham says the settlement only addressed two of the many allegations raised in the 48 page lawsuit involving a number of its products. The Department of Justice settlement ultimately focused on a pilot restraint system called the MA-16 and a parachute release system called SEAWARS.

As part of the settlement, Conax had to pay $2 million in damages to the government and supply nearly 5000 electronic devices called SEAWARS, free of charge. SEAWARS separates pilots who eject into water from their parachutes with an electrically triggered explosive charge in order to keep them from drowning in their rigging.

The lawsuit alleged that Conax manufactured SEAWARS—using counterfeit electronic chips that that came to light because of an unusually high failure rate in testing.

Michael Hippert is the independent broker, outside of Conax’s normal supply stream, who says he unwittingly supplied those counterfeit chips. Hippert told Eight on Your Side he obtained them from a source in Asia, but when he sold them to Conax he had no idea they were counterfeit parts.

Hippert said he learned about the problem chips sometime after he sold them to Conax when a NASA investigator showed up at his office asking questions. “It’s an ever evolving industry and stuff like this happens,” said Hippert.

An unrelated investigation into counterfeit electronic parts last year by the U.S. Senate Armed Services Committee revealed the problem does indeed happen with troubling frequency across the defense industry. Senate investigators said they uncovered 1800 instances of equipment containing suspected counterfeit electronic parts sold to the Department of Defense by contractors other than Conax. Senate investigators determined 70 % of the parts they traced sold by those other contractors lead back to sources in China.

In the Conax case, the whistleblowers alleged that even when senior managers were made aware of a counterfeit microchip that Hippert says he unwittingly sold them for use in SEAWARS, they didn’t’t stop production.

The whistleblowers said Conax’s Operations Manager likened the chips to generic “jelly beans” and said the source of the chips ddidn’tt matter as long as they worked in the SEAWARS devices. According to the lawsuit, that same manager said it would not be economically or politically feasible to recall SEAWARS devices and the only impact of a recall would be to give Conax a “black eye” with the U.S. military.

A press release by Conax said no criminal charges ever resulted from the investigation, none of the products it sold to the government have ever proved unsafe or caused harm, and the entire matter was resolved by a ”minimal sum” compared to the amount of federal contracts involved.

“They can say what they will in their press releases,” said Rick Morgan, the lawyer who filed suit on behalf of the whistleblowers. “But the fact is they made some changes.”

Records show that Conax and its parent company Cobham have received $52 million in federal contracts since the raid in St. Petersburg four years ago. It remains the only company in the world authorized by the defense department to manufacture and is a so-called “sole supplier”of SEAWARS and MA-16’s.

Conax’s St. Petersburg facility is in the process of shutting down. The company plans to move its manufacture of SEAWARS to another state.