Fortinet Sold Chinese-Made Equipment to Military, Pays Big Settlement

Fortinet has agreed to a $545,000 settlement with the U.S. government for violating the False Claims Act by selling Chinese-made equipment to the U.S. military in breach of the Trade Agreements Act (TAA).

The settlement was announced by the U.S. Department of Justice. Fortinet sells network security devices, some of which may be sold through distributors and subsequent resellers to U.S. government end users.

The TAA generally prohibits certain government contractors from buying products that are not entirely from, or “substantially transformed” in the United States or certain designated countries.

In this case, Fortinet acknowledged that between January of 2009 and the fall of 2016 an employee responsible for supply chain management directed other employees and contractors to change product labels so that no country of origin was listed, or to include the phrases “Designed in the United States and Canada,” or “Assembled in the United States.” A portion of the products were sold to U.S. government end users.

Fortinet has since fired the employee.

Fortinet sent us the following statement:

“We hold ourselves to the highest ethical standards of trust and integrity. This was an isolated incident that involved events from more than two years ago in which a rogue former employee acted against our policies. When we were made aware of the incident, we took immediate action, including thoroughly investigating the matter, terminating the employee and implementing additional safeguards to prevent an issue like this from happening again. The nominal settlement amount of $545,000 reflects in part our cooperation to promptly and thoroughly address this matter.”

To settle the allegations, Fortinet has agreed to pay $400,000 and to provide the U.S. Marine Corps with additional equipment valued at $145,000.

“Contractors that supply the U.S. government with Chinese-made technology will be pursued and held accountable when violating the TAA,” said Defense Criminal Investigative Service (DCIS ) Special Agent in Charge Bryan Denny. “The DCIS and its law enforcement partners are committed to combating procurement fraud and cyber risk within U.S. Department of Defense programs.”

“Contractors who undermine American trade interest and pose a security risk by selling unauthorized foreign-made devices to the United States will be held accountable,” said Department of Homeland Security Office of Inspector General (DHS-OIG) Special Agent in Charge Amanda Thandi. “Contracting companies that conduct business with the federal government must uphold our trade laws; any misrepresentation during this process undercuts its integrity.”

The lawsuit was filed by Yuxin “Jay” Fang under the qui tam provisions of the False Claims Act. Under the Act, private citizens can bring suit on or behalf of the government for false claims and share in any recovery. The Act also permits the United States to intervene in and take over a whistleblower suit, as was done here.