High-Tech Crimes Escalating Daring Thieves Steal Billions In Computer Chips, Other Parts

It looked like any small computer store. Facing a busy commercial street, it had a big sign out front and its own delivery vans. Yet, somehow, it never seemed to attract many customers.

As it turned out, authorities say, it didn’t need them.

In reality, Prestige Computers was the center of one of the biggest computer chip theft rings in the Silicon Valley, law enforcement officials say. From there, they allege, its operators planned armed robberies and laundered stolen computer components.

The thieves’ undoing came in May when they tried to rob what they thought was an Intel Corp. warehouse, officials said. In fact, it was part of an elaborate FBI sting. The building was empty and its workers were federal agents in bulletproof vests. Ultimately, 17 people connected with Prestige Computers were arrested.

“It sends a message: Hey, the next warehouse you hit, the police and the FBI may be waiting for you,” said FBI supervisor Richard J. Bernes, who oversaw the nine-month operation.

But the San Jose sting was a rare success story in law enforcement’s running war with thieves who operate in one of the world’s most lucrative black markets: stolen computer chips.

Over the past five years, as the high-tech industry has boomed, thefts around the globe have soared more than 100-fold by some estimates.

In the Silicon Valley alone, computer companies lose $1 million a week. Industry analysts estimate that thefts last year cost U.S. companies $8 billion worth of components, based on retail value.

“Technology is the lifeblood of the United States and we are seeing theft steal the competitive edge of this industry,” said MaryLu Korkuch, marketing manager for New Jersey-based Chubb & Sons, one of the biggest insurers of high-tech companies.

Ounce for ounce, top-of-the-line computer chips are more valuable than gold and safer to sell than cocaine. The tiny pieces of silicon - such as central processing units that power personal computers and memory chips that store information - are lightweight and easy to transport.

These facts plus the industry’s often lax security and the growing demand for components have helped fuel a rise in thefts ranging from small-scale employee pilferage to huge armed robberies - including a record $9.9 million heist in Irvine, Calif., in May.

One study estimated that 57 percent of all thefts, big and small, are committed by company insiders - up to 70 percent when contractors and suppliers are included.

“Employees may be making a little more than minimum wage,” said San Jose police officer Bruce Toney, who specializes in high-tech crime. “A central processing unit is about the size of two matchbooks. Put that in your pocket and you can double your income for the week.”

In what used to be considered a safe industry, crime has become increasingly violent: In the past year, computer company employees here and abroad have been shot, knifed, pistol-whipped, bludgeoned and Maced in chip robberies.

Until recently, most computer firms have been easy targets, with protective measures so lax that they all but invited thieves to walk in.

“Some of these companies are in denial,” said Korkuch of Chubb. “It’s a very competitive industry. Some are willing to take the risk to keep pushing the product out the door.”