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Contractor Pleads Guilty to Supplying USCG With Chinese-Made Goods

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Crew members of the Coast Guard buoy tender Kanawha reset a wire rope on deck, 2015. I-Tek supplied Coast Guard buoy tenders with Chinese 1/2" wire rope from about 2015-17 (USCG)

Published Dec 8, 2020 2:41 PM by The Maritime Executive

Five managers from a Hampton, Virginia-based trading company have pleaded guilty to relabeling Chinese-made supplies to sell to the U.S. armed forces, including equipment for the U.S. Coast Guard.

The company, I-Tek - also known as Iris Kim, Inc. - received about $25 million in defense procurement contracts over the span of 2011-2018. Until 2011, the firm's founder, a naturalized citizen named Beyung S. Kim, was listed as its owner. From 2012-2017, a disabled veteran was listed as the owner and president, though the veteran did not enter into contracts on the firm's behalf or receive a regular salary; this arrangement allowed I-Tek access to defense procurement set-asides for disabled veteran-owned businesses, according to prosecutors. 

To source its goods, I-Tek allegedly employed a Chinese national who coordinated with Chinese manufacturers to make merchandise that would be imported to the U.S. under another name, Atlantic Solar Power, Inc. (ASP). Over the period in question, ASP had no tax returns, bank accounts or other signs of an independent business. I-Tek contracted with third-party warehousing and merchandising firms in the U.S. to handle storage, source label removal and (in some cases) "Made in the USA" label attachment. This allegedly kept I-Tek at arms length from activity that allowed it to circumvent federal sourcing requirements for items like clothing and souvenirs.

In 2015, I-Tek submitted a bid on a contract to provide 600-foot reels of 1/2-inch wire rope for the U.S. Coast Guard's buoy tenders. On the bid, it described itself as a disabled veteran-owned small business, and Beyung Kim told contracting officers that he intended to source the wire rope from South Korea and Canada - both approved partner nations for defense contracting. 

Under the multi-year contract, the USCG placed orders for 3,200 reels for about $920,000, or about $0.48 per foot. To fill the orders, I-Tek-affiliated companies imported wire rope from Chinese (not Korean or Canadian) manufacturers, then allegedly delivered it to U.S. Coast Guard cutters with an I-Tek invoice attached. 

On November 30, Beyung Kim pleaded guilty to one count of conspiracy to defraud the United States and one count of entry of goods by means of false statements. The plea includes an admission of the allegations describing I-Tek's activities. The first charge carries a maximum penalty of five years in prison, a fine of $250,000, asset forfeiture and full restitution of the amount of the fraud. The second carries a maximum penalty of two years in prison, along with similar fine and restitution provisions.