LI Firm Illegally Sold Chinese Equipment To U.S. Government: DOJ

COMMACK, NY — Aventura Technologies Inc., a Commack-based technology firm, was charged Thursday morning with illegally importing and selling Chinese-manufactured surveillance and security equipment to the U.S. government while claiming everything had been made in the United States, according to the United States Department of Justice. The company, as well as seven current and former employees, sold equipment with known cybersecurity vulnerability to government and private customers, the DOJ said.

Aventura, located at 48 Mall Dr., has generated more than $88 million in sales revenue since November 2010, and the scheme has been ongoing since 2006, Richard P. Donoghue, United States attorney for the Eastern District of New York, said.

In addition to Aventura, the people facing charges are Jack Cabasso, 61, of Northport, Aventura’s managing director and de facto owner and operator; Frances Cabasso, 59, of Northport, his wife and Aventura’s purported owner and chief executive officer; senior executives Jonathan Lasker, 34, of Port Jefferson Station; Christine Lavonne Lazarus, 45, of Shirley and Eduard Matulik, 42, of North Massapequa; current employee Wayne Marino, 39, of Rocky Point; and recently-retired employee Alan Schwartz, 70, of Smithtown; Donoghue said.

Four of those people are also charged with defrauding the U.S. government by falsely claiming that Frances Cabasso was the owner and operator of the company in order to receive valuable government contracts reserved for women-owned businesses when Aventura was actually controlled by her husband, Jack Cabasso, Donoghue said. The Cabassos are also charged with laundering the monetary proceeds of these fraudulent schemes, according to the DOJ.

Six of them were arrested Thursday morning and are scheduled to be arraigned in the afternoon after law enforcement agents executed search warrants at Aventura’s headquarters in Commack and the Cabasso's Northport home, Donoghue said. The government also seized the Cabassos’ 70-foot luxury yacht and froze roughly $3 million in 12 financial accounts that held proceeds from their unlawful conduct, the DOJ said.

If convicted, those involved each face up to 20 years in prison on each charge in the complaint, the DOJ said.

"As alleged, the defendants falsely claimed for years that their surveillance and security equipment was manufactured on Long Island, padding their pockets with money from
lucrative contracts without regard for the risk to our country’s national security posed by secretly
peddling made-in-China electronics with known cyber vulnerabilities," Donoghue said via press release. "With today’s arrests, the defendants’ brazen deceptions and fraud schemes have been exposed, and they will face serious consequences for slapping phony ‘Made in the U.S.A.’ labels on products that our armed forces and other sensitive government facilities depended upon."

For over a decade, Aventura lied to its customers, including the U.S. military, the federal government and private customers in the United States and abroad, the DOJ said.

Over the past decade, Aventura made upwards of $88 million, including over $20 million in federal government contracts, while claiming that it was making its products at its headquarters in Commack, Donoghue said. In fact, Aventura does not manufacture anything in the United States; since at least 2006, Aventura has been primarily importing products from the People's Republic of China, then reselling them as American-made or manufactured in a small number of other countries, Donoghue said.

Aventura imported networked security products from China with known cybersecurity vulnerabilities, and resold them to U.S. military and other government agencies while claiming that they were American-made, Donoghue said. Aventura similarly deceived private customers in the United States and abroad who paid a premium for what they believed to be American-made goods, Donoghue said. Aventura not only defrauded its customers, but also exposed them to serious, known cybersecurity risks, and created a channel by which hostile foreign governments could have tapped into some of the government’s most sensitive facilities, the DOJ said.

As a result, Aventura and the seven individuals are charged with unlawful importation and conspiracy to commit wire and bank fraud, Donoghue said.

Throughout its investigation, the government intercepted and covertly marked several shipments from PRC sources to Aventura’s Commack headquarters, Donoghue said. 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, Donoghue said. In many instances, the items were later resold to government agencies to whom those charged lied that the products were American-made, Donoghue said.

For example, in March 2019, the U.S. Navy ordered a $13,500 laser-enhanced night vision camera from Aventura that was specified as American-made on Aventura’s U.S. General Services Administration (GSA) price list, according to the DOJ. In April 2019, at a shipping facility in Jamaica, Queens, a team led by CBP officers intercepted a shipment from a PRC manufacturer to Aventura that held a camera matching the Navy’s order and secretly marked it for later identification, the DOJ said. Two weeks later, that same camera was delivered to Naval Submarine Base New London in Groton, CT.

Aventura and its employees, working with counterparts in the PRC, took special steps to hide the scheme, Donoghue said. In November 2018, Jack Cabasso exchanged emails with an employee of a PRC manufacturer of surveillance equipment, telling the employee the need to "hide" the Chinese manufacturer's name from Aventura's customers, Donoghue said. Cabasso wrote that Schwartz was "putting together a list" of steps to be taken, Donoghue said. A week later, Cabasso stressed the need to take steps so that "they cannot trace" the product to the Chinese manufacturer, Donoghue said.

"The housings are a problem since you publish them on your website but nothing we can do about
that," Cabasso said according to the DOJ.

Cabasso added "the biggest problem" was that the PRC manufacturer's initials were marked on its circuit boards and mentioned he had "lost several potential customers" because of similar practices by another PRC manufacturer, according to the DOJ. The PRC employee told Cabasso the company’s initials would be removed from all circuit boards shipped to Aventura, Donoghue said. Lasker was copied on all of the emails in the conversation, according to Donoghue.

In December 2018, Jack Cabasso and Marino exchanged emails with employees of another PRC-based digital video equipment maker, where Marino complained to the employees that "communication from the server to the client contains [the PRC manufacturer's name] visible in clear text. This should be changed," according to the DOJ. When one of the employees told them the text could not be changed, Cabasso responded: “WE CANNOT HAVE CUSTOMERS ABLE TO SEE” the PRC manufacturer's name, later adding, "we also sent a sample to a customer and he found [the PRC company's name]. . . branding in the [operating system] which is a problem," according to the DOJ.

On Nov. 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, with Cabasso calling it a "big problem" that "doesn't get any worse," because the PRC manufacturer 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, the DOJ said. Cabasso said the PRC manufacturer "will acknowledge they manufacture no products outside of China," and attached an article about the removal of cameras created by the PRC company from the U.S. Embassy in Afghanistan, Donoghue said.

Aventura was importing security equipment from the PRC manufacturer while Jack Cabasso was complaining to GSA about other contractors’ supposed dealings with the company, Donoghue said. For example, bank records show that Aventura wired funds to the PRC company on Oct. 31, 2016 and Nov. 29, 2016, Donoghue said. Law enforcement records show that on Dec. 13, 2016, Aventura imported from the Chinese company an 1,800-pound shipment of goods manifested as "digital video," Donoghue said.

In November 2018, Jack Cabasso and Matulik reached a potential distributor in Qatar, who wanted assurance that Aventura’s cameras were American made, according to the DOJ. Cabasso told him: "I believe Ed [Matulik] confirmed that they are made in the Aventura factory here in New York and [anyone] may visit at any time" and attached what was supposedly a photo 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 appears on Aventura’s website, Donoghue said. In reality, the photograph first appeared in a trade publication article recounting a reporter’s visit to a PRC company's manufacturing facility in Hangzhou, PRC, and it shows their assembly line, not Aventura’s, Donoghue said.

Regarding the company's scheme to portray Aventura as a woman-owned small business, Jack and Frances Cabasso, along with Lasker and Lazarus, lied on several occasions that Frances Cabasso was the chief executive of Aventura, Donoghue said. However, Jack Cabasso was the true chief executive officer while his wife played a minimal role, Donoghue said. As a result, Aventura had access to government contracts set aside for women-owned small businesses, Donoghue said.

Aventura's website and its GSA web-page claimed it was a woman-owned business, according to the DOJ. On Jan. 13, 2014, a GSA employee emailed Frances Cabasso to "verify if Aventura Technologies, Inc. is a Woman-Owned business," with Cabasso replying "Yes we are still a certified women-owned business," the DOJ said. Aventura has won numerous contracts from the federal government on the strength of its status as a woman-owned business, Donoghue said.

Jack Cabasso repeatedly admitted he was the true chief executive officer of Aventura, Donoghue said. In 2017, he emailed an Air Force procurement officer, saying "I am the Managing Director of Aventura Technologies and the senior most person within the organization," according to the DOJ. In a 2018 deposition, Cabasso said his job description was to "oversee all operations of the company," the DOJ said. Frances Cabasso, however, has worked as a bookkeeper at an unrelated accounting firm since 2011 and is rarely present at Aventura’s offices, Donoghue said.

At times, emails sent to Frances Cabasso’s email address appear to have been auto-
forwarded to Jack Cabasso, who sometimes signed his responses in his wife's name, Donoghue said. The employees joked about the fact that Frances Cabasso did not work at Aventura, Donoghue said. For example, in an instant message exchange on Dec. 5, 2016 between Jack Cabasso and Lazarus, both of them discussed moving another employee into "Fran’s" office—the office of the purported owner of the company—putting the name "Fran’s" in quotation marks, Donoghue said.

There's also the alleged money laundering scheme, according to the DOJ.

Jack and Frances Cabasso siphoned Aventura’s illegal profits out of the company through a network of shell companies and intermediaries, with the funds then being directed to investments owned by the Cabassos or controlled for their benefit, Donoghue said.

Between 2016 and 2018, Aventura transferred around $2 million to an attorney escrow account belonging to a Long Island-based law firm, some of which appears to have been intended to hide the source of the funds, Donoghue said. For example, on May 24, 2016, Aventura transferred $450,000 to the law firm, Donoghue said. That same day, the law firm paid a total of $435,000 towards the purchase of a new home for a relative of the Cabassos, Donoghue said.

In early 2018, Aventura transferred $675,000 to the law firm, Donoghue said. Those funds were loaned out to a separate company for use in purchasing a house, Donoghue said. When that company repaid the loan to the law firm, the proceeds, around $682,000, were transferred to Frances Cabasso, Donoghue said.

In addition to the transactions through the law firm, Aventura transferred at least $2.75 million to shell companies owned by Frances Cabasso, Donoghue said. Those funds were then transferred to a number of accounts, including Frances Cabasso’s personal bank account and the business account of a lawyer retained by Jack Cabasso, Donoghue said. Some of these funds were returned to Aventura’s bank accounts, in transactions having no discernible economic purpose, Donoghue said.

In addition to these and other transfers, Aventura made around $1 million in payments since 2013 related to the Cabassos’ 70-foot luxury yacht, known as the Tranquilo, which is moored in the gated community where the Cabassos live, Donoghue said. Although Aventura is the listed owner of the Tranquilo, the yacht appears to have no connection with Aventura’s corporate business, and its rental income flows to the Cabassos, not to Aventura, Donoghue said.

"Greed is at the heart of this scheme, a reprehensible motive when the subjects in this case allegedly put into question the security of men and women who don uniforms each day
to protect our nation," said FBI Assistant Director-in-Charge William F. Sweeney Jr. "There is no mistaking the cyber vulnerabilities created when this company sold electronic surveillance products made in the PRC, and then using those items in our government agencies and the branches of our armed forces. I cannot stress enough that we will do everything we can to search out and stop any other company willing to cut corners and pocket profits that endanger the lives of Americans, and make this country less safe."