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Sunnyvale firm to pay $545K to settle claims it sold Chinese-made equipment to U.S. government

Sunnyvale firm to pay $545K to settle claims it sold Chinese-made equipment to U.S. government

SAN FRANCISCO — A Sunnyvale-based network security company has agreed to pay more than half a million dollars to settle allegations it sold Chinese-made equipment to the U.S. government in violation of the False Claims Act, according to federal prosecutors. According to a settlement agreement made public Friday, Fortinet Inc. acknowledged that between 2009 and…

SAN FRANCISCO — A Sunnyvale-based network security company has agreed to pay more than half a million dollars to settle allegations it sold Chinese-made equipment to the U.S. government in violation of the False Claims Act, according to federal prosecutors.

According to a settlement agreement made public Friday, Fortinet Inc. acknowledged that between 2009 and 2016 one of its employees directed the relabeling of products to make them appear as though they were in compliance with the Trade Agreements Act. The act prohibits government contractors from purchasing products that are not entirely from or “substantially transformed” in the United States or other designated countries.

Prosecutors said the new labels did not include the country of origin and featured phrases such as “designed in the United States or Canada” or “assembled in the United States.” A portion of the products were then resold through distributors and subsequent resellers to U.S. government end users.

“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 Denny, Defense Criminal Investigative Service special agent in charge, in a statement.

“Contracting companies that conduct business with the federal government must uphold our trade laws,” added Homeland Security Office of Inspector General Special Agent in Charge Amanda Thandi. “Any misrepresentation during this process undercuts its integrity.”

The allegations came to light thanks to a lawsuit filed by Yuxin “Jay” Fang, a Fortinet employee living in China, under the “qui tam” provisions of the False Claims Act. The act allows a private citizen to bring a suit on behalf of the U.S. government for false claims and share in any recovery. The act also allows the United States to intervene in and take over a whistle-blower suit, which it did in this case.

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

Prosecutors said Fortinet has terminated the employee responsible for relabeling the products.

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