From 2007 to 2010, I was the lead prosecutor responsible for the investigation and trial of Chitron Electronics, Inc. (“Chitron-US”), and two of its executives. Over a six-week trial, we proved to the jury that Chitron-US was a Chinese front company used to illegally export U.S. military and sensitive electronic components to the People’s Republic of China (“PRC”) over a period of more than 10 years. In November 2013, I wrote this article to provide suggestions on how to identify, dismantle, and successfully prosecute illegal procurement networks. I left the government in 2022 after serving as national security prosecutor for more than 18 years and the National Security Chief for the U.S. Attorney’s Office for the District of Massachusetts. I now assist clients in mitigating risks of all kinds, provide guidance on developing robust regulatory compliance programs, and specialize in handling high-stakes criminal and civil litigation matters and government enforcement proceedings. From my new vantage point, this article provides detailed insight and an inside view of a sophisticated procurement scheme, which exploited loopholes in the U.S. supply chain.
Since November 2013, when I wrote this article, the U.S. export control laws and regulations have significantly changed. The U.S. export control system underwent massive changes during a multi-year export control reform effort culminating in the harmonization of the two export control regimes and the transfer of less sensitive items from the U.S. Munitions List to the Commerce Control List. In August 2018, the Export Control Reform Act of 2018 became law and created a permanent statutory authority for the Export Administration Regulations, which regulate and restrict the export and transfer of items with military, dual-use, and purely commercial applications. In 2020, the U.S. Government and the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) revised its policy towards Hong Kong. Hong Kong would no longer be treated as a separate country from the PRC and receive more preferential treatment under the export laws. As a result, BIS determined that Hong Kong was longer eligible for license exceptions for exports to, or transfers within, Hong Kong that were not available for exports to, or transfers within the PRC. Since 2022, export controls have drastically expanded with sweeping implications, which, among other things, have targeted China’s military modernization efforts. Moreover, when the U.S. Department of Commerce’s 50 percent Affiliates Rules goes into effect in 2026, the number of Chinese companies subject to export restrictions will increase from 1,300 to more than 20,000. Despite all of these changes, smuggling methods and illegal procurement schemes used to evade detection of export control violations have remained strikingly similar. They typically involve (1) lying about the end-user and/or ultimate country of destination, (2) falsifying documents, and (3) transshiping parts through non-sanctioned countries.
The expansion of export controls coincides with escalating national security threats posed to the United States. According to the Office of the Director of National Intelligence, the “Chinese Communist Party (“CCP”) and Chinese intelligence services represent the broadest, most active, and persistent espionage threat to the U.S. It also remains the top threat to U.S. technology competitiveness.” The PRC and other state adversaries are seeking to displace U.S. economic and military power. As a result of these national security threats, export control and espionage-related prosecutions have become a priority of the Department of Justice (“DOJ”). During the first Trump Administration, DOJ announced the “China Initiative” which was designed to address growing threats from China ranging from hacking operations to smuggling, theft of intellectual property, and espionage. Although the Trump Administration has not yet officially reinstated the “China Initiative,” DOJ, under Attorney General Bondi’s leadership, has been aggressively targeting the CCP culminating in numerous enforcement actions, including arrests of Chinese nationals in an agroterrorism conspiracy to smuggle a dangerous biological pathogen into the United States for their work at an University of Michigan laboratory in June and two individuals with engaging in “clandestine” intelligence activities for the People Republic of China’s Ministry of State Security in July. On July 28, 2025, DOJ announced that Cadence Design Systems agreed to plead guilty and pay more than $140 million in criminal and civil penalties for unlawfully exporting semiconductor design tools to PRC military university. Most recently, over the last three months, DOJ has brought charges in both California and Florida against a total of six people for conspiracy and illegally exporting millions of dollars’ worth of Nvidia microchips used in artificial intelligence to China. The allegations in both of these cases involve the use of front companies established in the United States and the transshipment of the parts through a third country subject to less onerous export controls.
Because Hong Kong has become a well-known vector of transshipment and BIS has taken numerous steps to eliminate the ability of Hong Kong shell companies to be used for transshipment, other countries are increasingly being used to fulfill the role Hong Kong played in illegal export activity. While the list of potential countries that could be used for his purpose are broad, the most frequently used transshipment countries based upon recently reported illegal export schemes were Singapore, Thailand, and Malaysia.
Federal agencies now work in a far more coordinated fashion, wielding their enforcement powers collaboratively to create the greatest deterrent effect and sharing intelligence across the world. The successful prosecution of Chitron Electronics and its executives would not have been possible without the hard work and collaboration of several law enforcement agencies, but that was not common at that time. With the assistance of several U.S. Attorneys for the District of Massachusetts, from 2007 to 2021, I had established and oversaw the Massachusetts Counter-Proliferation Working Group to combat illegal exports of U.S. military parts and sensitive technology. See CounterProliferation Working Group Information.
Key Takeaways from My Experience
- Establish a robust, risk-based compliance program.
- Thoroughly vet all parties to a transaction.
- Request end-user and end-use information for all sales of any item that is subject to export controls (i.e., designated on the USML or classified with a specific ECCN on the CCL) even those being shipped domestically and conduct due diligence of the purported end-user/end-use.
- Implement enhanced screening measures at all levels of the business operations and throughout the purchasing process.
- Ensure employees are familiar with BIS guidance on the importance of knowing your customers and potential red flags.
- Include destination control statements and export control classification information on quotes, commercial invoices, and shipping documents.
- Perform regular employee compliance training.
- Provide a confidential method for employees to report any suspected violations of U.S. national security laws and ensure such reports are properly reviewed and investigated.
Conclusion:
Organizations of all sizes and types face heightened criminal and civil enforcement based upon the expanding scope of export control, sanctions, and money laundering investigations with escalating national security priorities. Companies face increased risks from DOJ incentivizing reporting suspected violations through its expanded Corporate Whistleblower Pilot Program that added trade and customs fraud and sanctions violations to the list of offenses for which individuals could receive an award of up to $50 million. As a result, organizations should conduct risk assessments of its business operations, thoroughly investigate internal reports/complaints, consider making timely self-disclosures of potential violations of federal laws to DOJ, BIS, and the Department of State’s Directorate of Defense Trade Controls, and take all necessary remedial measures before a whistleblower has the opportunity to report any suspected violations.