Date: March 19, 2024 Contact: newsroom@ci.irs.gov Central Islip, NY — Earlier today, Aventura Technologies, Inc. (Aventura) pleaded guilty to committing mail and wire fraud conspiracy and illegal importation in federal court in Central Islip. The guilty plea reflects Aventura’s long-running, lucrative scheme to purchase Chinese-made security equipment (such as networked surveillance cameras) and resell it as U.S.-made, including to multiple agencies of the U.S. government, branches of the military and to customers overseas in the public and private sectors. The scheme began in 2006, ending in 2019 when charges were brought in this case. Aventura made more than $112 million in sales during that time. Today’s proceeding was held before United States Magistrate Judge Arlene R. Lindsay. In connection with its guilty plea, the company agreed to dissolve itself and to forfeit more than $3 million in seized assets, including Aventura’s headquarters and a seventy-foot yacht partially owned by the defendants, as well as more than 7,000 seized items of merchandise. All seven individuals charged in this case have pleaded guilty, including Aventura’s nominal president Frances Cabasso and its true chief executive, her husband Jack Cabasso. In addition to Aventura’s fraudulent resale of Chinese-made goods, the company defrauded customers by falsely claiming that Frances Cabasso was in charge of Aventura in order to obtain access to valuable government contracts reserved for women-owned businesses. Frances Cabasso pled guilty to wire fraud conspiracy in connection with that scheme. The individual defendants who pled guilty in the case were Frances Cabasso, Jack Cabasso, and senior executives Jonathan Lasker, Christine Lavonne Lazarus and Eduard Matulik, as well as employees Wayne Marino and Alan Schwartz. The charges were announced by Breon Peace, United States Attorney for the Eastern District of New York; Thomas Fattorusso, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation (CI); James Smith, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); Robert C. Erickson, Jr., Deputy Inspector General, General Services Administration Office of Inspector General (GSA OIG); Brian J. Solecki, Acting Special Agent in Charge, Defense Criminal Investigative Service, Northeast Field Office (DCIS); Francis J. Russo, Director, Customs and Border Protection, New York Field Office (CBP); William W. Richards, Special Agent in Charge, Air Force Office of Special Investigations, Office of Procurement Fraud Investigations (AFOSI); Heather Hill, Acting Inspector General, Treasury Inspector General for Tax Administration (TIGTA); Greg Gross, Special Agent in Charge, Naval Criminal Investigative Service, Economic Crimes Field Office (NCIS); Keith K. Kelly, Special Agent-in-Charge, Army Criminal Investigation Division’s Fraud Field Office (Army CID); and Teri L. Donaldson, Inspector General for the Department of Energy (DOE IG). “For years, the defendants, while pretending to be a women-owned business, intentionally corrupted the U.S. military supply chain by passing off Chinese-made networked electronics with known vulnerabilities as American-made,” stated United States Attorney Peace. “This case highlights the importance of national and international inter-agency cooperation in securing our cyber supply chain and protecting our military readiness. We will spare no effort in holding accountable those who undermine and threaten the national security of the United States.” “Executives of Aventura Technologies have already pled guilty, detailing how the company fronted illegal importations and wire fraud by the sale of thousands of goods that entered the U.S. under fraudulent circumstances to federal entities,” stated IRS CI Special Agent-in-Charge Fattorusso. “Their scheme went further to purport that Aventura was a woman-owned business simply to win additional government contracts. It is not common to see both the executives and the company face prosecution, but in this case, today’s guilty plea is proof of the significant amount of evidence present in this case.” “This GSA contractor lied about its surveillance and security equipment being made in the United States when it was actually being made in China,” stated GSA Deputy Inspector General Erickson. “Company executives also misrepresented to GSA that the company was woman-owned to gain access to government contracts they otherwise would not have been eligible to receive. We remain committed to investigating contract fraud such as this and holding criminals accountable.” “The introduction of misbranded parts and materials into the DoD’s supply chain poses a significant risk to America’s military readiness and our national security,” stated DCIS Acting Special Agent-in-Charge Solecki. “We remain committed to working with our law enforcement partners and the Department of Justice, to ensure that individuals and companies who engage in fraudulent activity, at the expense of our nation’s military members, are investigated and prosecuted.” “U.S. Customs and Border Protection provided the critical link to an ongoing investigation that resulted in the takedown of an elaborate criminal enterprise,” stated CBP Director Russo. “This case serves as a great example of collaborative law enforcement efforts to uncover and dismantle criminal enterprises that seek to defraud the United States government for personal gain while jeopardizing our national defense and causing economic harm to their competitors.” “This outcome demonstrates the Office of Procurement Fraud’s commitment to identify and hold accountable those who engage in fraudulent behavior that places our warfighters at risk,” stated AFOSI Special Agent-in-Charge Richards. “AFOSI, alongside our joint investigative and prosecutorial partners, will work tirelessly to combat fraud threatening the Department of the Air Force.” “The Treasury Inspector General for Tax Administration (TIGTA) is the nation’s tax watchdog agency committed to ensuring the integrity of the IRS contracting and procurement process,” stated TIGTA’s Acting Inspector General Hill. “We are aggressively investigating individuals who attempt to defraud the IRS, like the individuals in this case. Companies working with the IRS and the Department of Treasury must conduct themselves with integrity and honesty. Thank you to the U.S. Attorney’s Office and law enforcement partners for their support in this investigation.” “Falsely misrepresenting the country of origin for equipment sold to the U.S. Government that is directly used in support of the safety and readiness of our warfighters is a serious crime,” said NCIS Special Agent-in-Charge Gross. “NCIS is committed to protecting the integrity of the Department of the Navy’s procurement and acquisitions process.” “Today's plea is a fitting end for those who conspire to defraud the government,” stated Army CID Special Agent-in-Charge Kelly. “We are proud to work alongside our federal law enforcement partners to protect the United States Government from those who seek to misrepresent themselves and their product, thereby threatening the readiness of the U.S. Army and potentially risking the lives of countless soldiers.” “The installation of the material provided by Aventura in a Department of Energy facility would have provided a possible pathway for the PRC to gather information on the personnel who work at one of the Nation’s most advanced research facilities,” said DOE Inspector General Donaldson. “I thank our law enforcement partners who supported our Special Agents to ensure this equipment didn’t make its way into the lab, and the US Attorney’s Office in the Eastern District of New York for holding the company who put our national security at risk, accountable for its actions.” The Country of Origin Fraud and Unlawful Importation Scheme As admitted in court, Aventura lied for over a decade to its customers, including the U.S. military, the federal government, numerous private customers in the United States, and public and private sector customers abroad. Between 2008 and November 2019, Aventura made upwards of $112 million, including over $20 million in federal government contracts, while claiming that it was manufacturing its products at its headquarters in Commack, New York. In fact, since at least 2006, Aventura imported goods, primarily from the People’s Republic of China (PRC), then resold them as American-made or manufactured in a small number of other countries. The company’s marketing relied heavily on U.S. flags and “American-made” branding, and its sales force routinely asserted that Aventura was the sole U.S. manufacturer of security equipment. As described below, Jack Cabasso went to extreme lengths to conceal the Chinese origin of his products, while at the same time writing to U.S. government procurement officials to accuse his competitors of reselling Chinese-made goods. Visitors to Aventura’s corporate headquarters were shown a fictitious “lab,” and were told that a separate building was reserved for classified government work and was off-limits to visitors. In fact, Aventura did not own or occupy the building in question. In the course of its investigation, the government intercepted and covertly marked numerous shipments from PRC sources to Aventura’s Commack, New York headquarters. In some cases, cameras shipped from the PRC were pre-marked with Aventura’s logo and the phrase “Made in USA,” accompanied by an American flag. In many instances, the items were later resold to government agencies to whom the defendants falsely represented that the products were American-made. Examples include: In March 2019, the U.S. Navy ordered from Aventura a $13,500 laser night vision camera that was specified as American-made on Aventura’s U.S. General Services Administration (GSA) price list. In April 2019 at a shipping facility in Jamaica, Queens, a team led by Customs and Border Protection (CBP) officers intercepted a shipment from a PRC manufacturer to Aventura that contained a camera matching the Navy’s order, and surreptitiously marked it for later identification. Two weeks later, that same camera was delivered to Naval Submarine Base New London in Groton, Connecticut. In September 2018, the Department of Energy (DOE) ordered approximately $156,000 worth of supposed American-made networked automated turnstiles from Aventura, to be installed at a facility in Tennessee. In January 2019, turnstiles matching DOE’s order were intercepted in a shipment from a PRC manufacturer and marked by CBP; one month later, they arrived at the DOE facility in Tennessee. The crates shipped by Aventura to the DOE appeared identical to those that the CBP-led team had inspected, except that the shipping labels from the PRC directing the crates to Aventura had been peeled off, leaving behind visible traces of paper and glue. A special agent with the Department of Energy Office of Inspector General placed a call to Lazarus regarding the turnstile shipment in May 2019. During the call, Lazarus falsely stated that the turnstiles were “U.S. made [in] New York.” In 2018, Aventura sold the U.S. Air Force 25 body cameras. Aventura was contractually required to provide goods from a limited set of countries that did not include the PRC. In August 2018, however, an Air Force service member observed Chinese characters on the built-in screen of one of the body cameras. The body camera was sent for analysis to a specialist, who downloaded its firmware and found numerous indications that the camera was manufactured in the PRC. The camera contained multiple preloaded images that were apparently designed to display on the built-in screen—including the U.S. Air Force logo, the logo of the PRC Ministry of Public Security, and the logo of a PRC manufacturer of security equipment. All three logos had been saved to the camera’s firmware using the same software, on a computer that was set to a time zone in the PRC—indicating that the camera’s manufacturer in the PRC had been aware that the U.S. Air Force was a likely end user of the camera. Coverup of the Country of Origin Fraud and Unlawful Importation Scheme The defendants, working with counterparts in the PRC, went to extraordinary lengths to conceal this scheme. For example: In November 2018, Jack Cabasso exchanged emails with an employee of a PRC manufacturer of surveillance equipment (PRC Manufacturer-2), identifying the need to “hide” the name of PRC Manufacturer-2 from Aventura’s customers. One week later, Cabasso stressed the need to take steps so that “they cannot trace” the product to PRC Manufacturer-2. Cabasso added that “the biggest problem” was that PRC Manufacturer-2’s initials were marked on its circuit boards, and said that he had “lost several potential customers” because of similar practices by another PRC manufacturer (PRC Manufacturer-1). The employee responded that the company’s initials would be removed from all circuit boards shipped to Aventura. Similarly, in December 2018, Aventura executives exchanged emails with employees of another PRC-based digital video equipment manufacturer (PRC Manufacturer-4). They complained to the employees that “communication from the server to the client contains [PRC Manufacturer-4’s name] visible in clear text. This should be changed.” When one of the employees wrote that this could not be changed, Jack Cabasso responded: “WE CANNOT HAVE CUSTOMERS ABLE TO SEE [PRC Manufacturer-4’s name]”, later adding: “we also sent a sample to a customer and he found [PRC Manufacturer-4] … branding in the [operating system] which is a problem.” On or about November 23, 2016, Jack Cabasso sent an email to a GSA representative accusing 12 other GSA contractors of selling products to the U.S. Government that were manufactured by a PRC manufacturer of surveillance equipment (PRC Manufacturer-1). Cabasso asserted that this was a “big problem” and “doesn’t get any worse,” because PRC Manufacturer-1 was “actually the Communist Chinese Government and ha[d] ‘significant’ cybersecurity issues aside from” compliance with U.S. laws specifying country-of-origin requirements for government purchases. Cabasso stated that PRC Manufacturer-1 “will acknowledge they manufacture no products outside of China,” and appended an article about the removal of cameras manufactured by PRC Manufacturer-1 from the U.S. Embassy in Afghanistan. Notably, Aventura was importing security equipment from PRC Manufacturer-1 while Jack Cabasso was complaining to GSA about other contractors’ supposed dealings with the company. For example, bank records show that Aventura wired funds to PRC Manufacturer-1 in the PRC on or about Oct. 31, 2016 and Nov. 29, 2016, and law enforcement records show that on or about Dec. 13, 2016, Aventura imported from PRC Manufacturer-1 in PRC an approximately 1,800-pound shipment of goods manifested as “digital video.” In November 2018, Aventura executives communicated with a potential distributor in Qatar who asked for assurance that Aventura’s cameras were American made. Cabasso responded: “I believe Ed [Matulik] confirmed that they are made in the Aventura factory here in New York and [anyone] may visit at any time.” Cabasso attached what purported to be a photograph of Aventura’s assembly line, depicting a row of seated individuals in blue lab coats and protective hairnets working at laboratory benches—a photograph that also appeared on Aventura’s website. In reality, this photograph first appeared in a trade publication article recounting a reporter’s visit to PRC Manufacturer-1’s manufacturing facility in Hangzhou, PRC, and it depicts PRC Manufacturer-1’s assembly line—not Aventura’s. The Scheme to Misrepresent Aventura as a Woman-Owned Small Business In a parallel scheme, Jack and Frances Cabasso, along with other Aventura executives, falsely represented on numerous occasions that Frances Cabasso was the chief executive of Aventura. In fact, Frances Cabasso was in charge only on paper; the true chief executive officer of Aventura was Jack Cabasso, and Frances Cabasso played a minimal role at the company. This misrepresentation gave Aventura access to government contracts that were set aside for women-owned small businesses, a category that is legally defined to include only businesses owned by women where management and daily operations are also controlled by one or more women. Aventura’s website and its GSA webpage identify Aventura as a woman-owned business, and the defendants repeatedly certified to the GSA and stated to government procurement officers that Aventura is a woman-owned business. For example, on or about Jan. 13, 2014, a GSA employee emailed Frances Cabasso to “verify if Aventura Technologies, Inc. is a Woman-Owned business.” She replied: “Yes we are still a certified women-owned business.” Aventura won multiple contracts from the federal government on the strength of its status as a woman-owned business. In fact, real control at Aventura was exercised by Jack Cabasso. Frances Cabasso worked as a bookkeeper at a nearby business and was rarely present at Aventura’s offices. At times, emails sent to Frances Cabasso’s email address were auto-forwarded to Jack Cabasso, who sometimes signed his responses in Frances’s name. The defendants openly joked about the fact that Frances Cabasso did not work at Aventura. For example, in an instant message exchange on December 5, 2016 between Jack Cabasso and Lazarus, both defendants discussed moving another employee into “Fran’s office”--the office of the purported owner of the company—putting the word “Fran’s” in quotation marks. The government’s case is being handled by the Office’s National Security and Cybercrime Section. Assistant United States Attorneys Alexander Mindlin, Kayla Bensing and Claire Kedeshian are in charge of the prosecution. Significant contributions were made by former Assistant United States Attorney Ian Richardson, now Chief Counsel for Corporate Enforcement within the Department’s National Security Division. CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.
