Feds knock; a business is lost

After earning an engineering degree, Latifi married a college classmate and launched his own small business. From the start, Latifi focused on high-priced parts that were important but too small to warrant a major company's attention. With an engineer's eye, he looked for ways to redesign unsung components to make them for less, thus profiting both the government and Axion.

In a single-story industrial building, he built a business that employed 60 workers and was eventually valued at $50 million. Axion made parts for Army Hawk missiles, Navy tractors that ferried missiles to carrier-based airplanes and cockpit wiring harnesses for Air Force fighters. By the time the government began investigating, Axion's annual revenue was more than $4 million and Latifi, his wife and their four children lived in a lavishly appointed home assessed at more than $1.4 million.

On that April morning, as the federal agents pored through his belongings, Latifi had an epiphany: "I told my wife, 'Uh-oh. That's the secretary.' "

Elizabeth Lemay had joined Axion as a secretary in early 2002 after relocating from Nashville, where she had been asked to resign from at least two jobs in recent years. Her struggles as a single mother drew the sympathy of Beth Latifi, who began giving her small gifts of cash and furniture, including an antique bed for her daughter. On Aug. 30, 2003, the Latifis even arranged for Lemay and her children to join them on a weekend trip to Atlanta. But Lemay never appeared. She explained her absence by telling the Latifis that she had been carjacked, a story she later acknowledged in court was a lie.

By early September 2003, Lemay had begun signing Alex Latifi's name to company checks she made out to herself, according to the trial transcript. Over several months, she forged at least 15 checks worth a total of $12,730.

That fall, she also began funneling information to Army investigators. Initially, based on misunderstood fragments of conversation, Lemay suspected Latifi was violating the "Buy American Act" by hiring a Chinese company to produce the Black Hawk rotor part — called a bifilar weight assembly — under a contract Axion had been awarded in August.

She was wrong about that. Axion actually hoped to tap the Chinese as a low-cost supplier of tungsten, the raw material used to make the part. But Army investigator Mark Mills, so new in his job that he hadn't yet received his badge and official credentials from headquarters, didn't realize that.

Through the fall, Latifi searched for a low-cost tungsten supplier to help realize his goal of making the helicopter part more efficiently. The traditional method involved machining a 185-pound block of recycled tungsten into a 22-pound part. By re-thinking the design, Latifi thought he could use less than half as much virgin tungsten, which would perform better and cost substantially less.

Latifi sought out Ming Hwang, owner of a year-old San Jose trading company called EcoTungsten. At first, the engineers in China that Hwang used as subcontractors had trouble understanding what the part entailed. So Latifi asked one of his employees, mechanical engineer James Hopkins, to produce a simplified engineering drawing for the Chinese.

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