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Thread: Chinese Spies Infiltrating US Businesses

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    Default Chinese Spies Infiltrating US Businesses

    Chinese Spies Infiltrating US Businesses
    The almost legendary MI5 British counterintelligence service is said to be deeply concerned over an increase in spying by Chinese operatives in the United Kingdom. Although intelligence experts aren't certain how widespread the problem is, they believe the espionage is rampant and a serious consequence of the global economy.

    MI5 suspects upwards of 15 foreign intelligence services are working within the UK and are a threat to the United Kingdom's interests, and the primary focus of their counterespionage efforts are the Chinese and Russians.

    In the United States, the FBI is suspicious of Russia, Iran, and North Korea but have focused mostly on the Chinese. The feds estimate that the are over 2,600 Chinese front companies in the US.

    The foreign intelligence threat within the United States is far more complex than it has ever been historically. The threat is increasingly asymmetrical insofar as it comes not only from traditional foreign intelligence services but also from nontraditional, non-state actors who operate from decentralized organizations.

    Intelligence collection is no longer limited to classified national defense information but now includes targeting of the elements of national power, including our national economic interests. Moreover, foreign intelligence tradecraft is increasingly sophisticated and takes full advantage of advances in communications security and the general openness of US society.

    In short, the foreign intelligence threat is more challenging than ever. In the fall of 2003, the Foreign Counterintelligence Program had investigations involving dozens of countries that focused on hundreds of known or suspected intelligence officers who were assigned to enter or travel within the United States. These investigations spanned all 56 field offices.

    In order to meet these challenges, the Foreign Counterintelligence Program is being redesigned to become more nationally focused and directed. Through a more centralized program, the FBI will ensure its ability to establish priorities, be more proactive, and better engage other intelligence community agencies so that cooperation in important cases is immediate and seamless.

    A centralized program will also ensure that infrastructure issues will be consistently addressed and coordinated in order to ensure workforce expertise, that staffing matches the articulated foreign intelligence threat, and that a sufficiently broad and reliable intelligence base is developed. From this foundation, the Foreign Counterintelligence Program will be positioned to achieve its strategic objectives and ultimately reach its goal to prevent harm to the United States through foreign intelligence activity inimical to US interests.

    During the past year, the Foreign Counterintelligence Program has been invigorated by the introduction of a new and innovative National Strategy for Counterintelligence and a program plan, both of which are proactive in emphasis. At the same time, additional resources were introduced to the program. To enhance counterintelligence workforce expertise, a new four-week Counterintelligence Operations course was developed.

    All special agents assigned to the Counterintelligence Program are required to successfully complete this course. Computer-based distance learning courses are also available to all personnel on a variety of counterintelligence topics. A counterintelligence training course for midlevel and executive managers was also initiated, covering topics in both the tactical and strategic areas of counterintelligence management.

    The FBI plays an essential role in the US government's counterintelligence efforts and has the responsibility to produce domestic foreign intelligence in support of other members of the intelligence community.

    The FBI also has the responsibility to oversee the integration of domestic law enforcement and intelligence efforts to address intelligence threats in support of Director of Central Intelligence imperatives. The counterintelligence strategy involves centrally managed, proactive, and nationally directed initiatives, with prioritized and strategic objectives that support DCI imperatives, overseen by experienced headquarters managers.

    Success for the Foreign Counterintelligence Program will be reflected in the extent to which the FBI agents are able to: identify the objectives, the assets, and the operations of foreign intelligence services operating in the United States; disrupt the operations of those foreign intelligence services; and change the behavior of targeted institutions and individuals to minimize opportunities for their exploitation.

    Government support of critical national research and development initiatives in a large number of agencies and involving thousands of government contractors must be protected. Compromise of these initiatives by those hostile to the United States would do irreparable harm. The FBI must effectively meet its responsibility to assess the threat against those projects and, with other Intelligence Community agencies, initiate operations to counter the threat.

    Critical National Assets are any information, policies, plans, technologies, or industries that, if stolen, modified, or manipulated by an adversary would seriously threaten US national or economic security. The FBI has a major role in identifying threats to Critical National Assets and assessing their overall vulnerability, especially in the areas of economic espionage, academic research, and private sector research and development.

    As the remaining world superpower, the United States is targeted from nearly every corner of the globe. The FBI will focus its counterintelligence resources on those countries and non-state actors having the greatest potential to harm US interests, and will work to gain a greater understanding of the threats they pose. Specifically, the FBI will examine threats related to terrorism, espionage, weapons proliferation, national infrastructure, US government perception management, and foreign intelligence activities.

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    Default Re: Chinese Spies Infiltrating US Businesses

    Ex-GM Worker, Husband Accused Of Stealing Secrets
    A former General Motors engineer and her husband conspired to steal trade secrets about hybrid technology and use the information to make private deals with Chinese competitors, according to a federal indictment unsealed Thursday.

    Shanshan Du and Yu Qin, both of Troy, were indicted on conspiracy, fraud and other charges. They had been under scrutiny for years and were charged in 2006 with destroying documents sought by investigators, a case that was dropped while a broader probe was pursued.

    The indictment says Du, who was hired at GM in 2000, purposely sought a transfer in 2003 to get access to hybrid technology and began copying documents by the end of that year.

    In 2005, she copied thousands of documents, five days after getting a severance offer from the automaker, according to the indictment.

    By that summer, Qin was telling people he had a deal to provide hybrid technology to Chery Automobile, a GM competitor in China, the indictment says. The couple had set up their own company, Millennium Technology International.

    Outside court, Assistant U.S. Attorney Cathleen Corken said there's no indication the Chinese benefited.

    Jing Yibo, a Chery spokesman in China, said early Friday that he did not know whether the company had heard of the case and he could not immediately comment.

    Du, 51, and Qin, 49, were arrested Thursday and remained mostly silent during a court appearance where they waived a reading of the indictment. Not-guilty pleas were entered for them. The maximum penalty if convicted is 20 years in prison.

    "Theft of trade secrets is a threat to national security," Andrew Arena, head of the FBI in Detroit, said in a statement.

    Du's attorney, Robert Morgan, declined to comment. Qin's attorney, Frank Eaman, said he was "completely surprised" by the indictment.

    "This investigation has been going on so long I figured if they had a basis they would have charged them a long time ago," Eaman said.

    Corken said GM learned about the alleged theft and called the FBI. GM estimates the value of the stolen information at $40 million.

    In May 2006, Du and Qin were charged with destroying records to stifle an investigation of them. FBI agents followed them to a major grocery store where Qin approached a Dumpster, according to a court filing at the time. Agents later retrieved shredded documents.

    That criminal complaint was dropped less than two months later, a common move when investigators want to further develop a case. The indictment includes an obstruction of justice charge against Qin for the alleged Dumpster incident.

    Du and Qin, both U.S. citizens, were released on bond and ordered to mostly stay in the Detroit area.

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    Default Re: Chinese Spies Infiltrating US Businesses

    Chinese National Charged with Economic Espionage Involving Theft of Trade Secrets from Leading Agricultural Company Based in Indianapolis
    August 31, 2010

    Kexue Huang, aka John, 45, has been arrested and charged in a 17-count indictment with economic espionage intended to benefit a foreign government and instrumentalities, and interstate and foreign transportation of stolen property, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division and U.S. Attorney Timothy M. Morrison for the Southern District of Indiana.

    Huang was arrested on July 13, 2010, in Westborough, Massachusetts by FBI agents, and today made his initial appearance in U.S. District Court for the Southern District of Indiana. According to the indictment, Huang is a Chinese national who was granted legal permanent resident status in the United States. The indictment alleges that Huang, formerly of Carmel, Indiana, misappropriated and transported trade secrets and property to the People’s Republic of China (PRC) while working as a research scientist at Dow AgroSciences LLC (Dow). While he was employed at Dow, he then directed university researchers in the PRC to further develop the Dow trade secrets. He also allegedly applied for and obtained grant funding that was used to develop the stolen trade secrets.

    “Economic espionage robs our businesses and inventors of hard-earned, protected research, and is particularly harmful when the theft of these ideas is meant to benefit a foreign government,” said Assistant Attorney General Lanny A. Breuer of the Criminal Division. “The protection of trade secrets and all intellectual property is vital to the economic success of our country, and our leadership in innovation. We will continue to bring charges under the Economic Espionage Act wherever supported by the evidence.”

    “Complex cases like this one, where the challenge of highly technical evidence is compounded by geography, require extraordinary cooperation and flexibility between all components of the investigation,” said U.S. Attorney Timothy M. Morrison. “We had that here.”

    According to the indictment, Dow is a leading agricultural company that provides agrochemical and biotechnology products. Since approximately 1989, Dow has made substantial investments in research and development to produce a class of organic insect control and management products. A proprietary fermentation process has been used to develop these organic insecticides.

    According to the indictment, Huang was employed as a Dow research scientist from early 2003 until Feb. 29, 2008. As a Dow employee, Huang signed an agreement that outlined his obligations in handling confidential information, including trade secrets, and prohibited him from disclosing any confidential information without Dow’s consent. Dow employed several layers of security to preserve and maintain confidentiality and to prevent unauthorized use or disclosure of its trade secrets.

    In December 2008, Huang allegedly published an article without Dow’s authorization through Hunan Normal University (HNU) in the PRC, which contained Dow trade secrets. The article allegedly was based on work supported by grants from the National Natural Science Foundation of China (NSFC), a foreign instrumentality of the PRC. Huang also allegedly directed individuals associated with HNU to conduct research at their laboratories on Dow trade secrets. The indictment also alleges that beginning in March 2008, after leaving Dow, Huang applied for and ultimately received grants from NSFC which he used to develop Dow trade secrets.

    The indictment also alleges that beginning as early as September 2007, Huang directed research in the PRC on Dow confidential information, including trade secrets, which he was assigned to research in the course of his Dow employment. In addition, the indictment alleges that Huang sought information about manufacturing facilities in the PRC that would allow him and others to compete in the same market as Dow.

    Huang faces a maximum of 15 years in prison and a $500,000 fine on each of the 12 counts of economic espionage. He faces 10 years in prison and a $250,000 fine on each of the five counts of transportation of stolen property.

    The case is being prosecuted by Assistant U.S. Attorney Cynthia J. Ridgeway of the U.S. Attorney’s Office for the Southern District of Indiana as well as Assistant U.S. Attorney Mark L. Krotoski and Trial Attorney Evan C. Williams of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS). The National Security Division provided assistance in this matter. The investigation is being conducted by the FBI. Significant assistance in the case has also been provided by the CCIPS Cybercrime Lab.

    The charges contained in the indictment are merely allegations, and the defendant is presumed innocent until proven guilty.

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    Default Re: Chinese Spies Infiltrating US Businesses

    Chinese Firm Reportedly Makes Bid For GNC
    December 7, 2010

    The Wall Street Journal is reporting that China's Bright Food Group Co. is nearing agreement to buy Pittsburgh-based GNC Holdings Inc. for between $2.5 billion to $3 billion.

    A sale could be announced in the next few days, the paper said. The parent of GNC Nutrition Centers is owned by Ares Management and the Ontario Teachers' Pension Plan Board.

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    Chinese Man Held For Exporting US Military Know-How
    March 8, 2011

    FBI agents Tuesday arrested a Chinese national working for a US technology company for exporting information about sensitive military know-how to China, justice officials said.

    Liu Sixing, also know as Steve Liu, was arrested at his home in Deerfield, Illinois and charged with one count of exporting defense-related technical data without a license, the Justice Department said in a statement.

    Liu, a Chinese national with permanent residency in the United States, worked for the New Jersey-based company from March 2009 until November 2010 as a senior engineer on a team developing precision navigation devices.

    According to the charge, he boarded a flight from Newark last November to China, but on returning from Shanghai he was found to have a non-work issued computer containing hundreds of documents about the company's projects.

    There were also images of a presentation Liu made to a technology conference which was organized by the Chinese government, the statement said.

    Liu was never issued with a company laptop, and did not have the authority to access the company data outside of its New Jersey facility.

    He also never told the company that he was traveling or that he was participating in the conference in China.

    "According to the complaint, Liu took highly sensitive defense information to China, violating the rules of his company and the laws of this country," said US Attorney Paul Fishman said.

    If convicted, Liu faces a maximum potential penalty of 20 years in prison and a $1 million fine.

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    Default Re: Chinese Spies Infiltrating US Businesses

    Libertyville, Illinois Software Engineer Accused Of Stealing Trade Secrets
    July 2, 2011

    A 49-year-old Libertyville man who was employed as a senior software engineer with the Chicago-based CME Group has been charged with stealing trade secrets, officials said.

    Chunlai Yang was arrested Friday morning by FBI agents at the CME office located at 550 W. Washington St. and was charged with one count of theft of trade secrets, according to a complaint filed in the U.S. District Court of Chicago.

    Yang had been employed with CME since 2000 and was responsible for writing computer code, officials said.

    The company started monitoring his computer activity in May of this year and discovered thousands of files had been copied to a removable storage device. Many of the files were critical to the operation of CME and contained protected source code, officials said.

    An investigation by the FBI revealed Yang had been in contact via email with the director of the Logistics and Trade Bureau for the Zhangjiagang Free Trade Zone, according to the complaint. One email contained a CME document with protected source code and proprietary information.

    Later it was determined Yang had booked a trip to China and was scheduled to leave Chicago on July 7, officials said.

    Yang was ordered held without bail pending his next court appearance Wednesday. He faces up to 10 years incarceration, a $250,000 fine and three years of supervision if convicted, according to the FBI.

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    Super Moderator and PHILanthropist Extraordinaire Phil Fiord's Avatar
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    Default Re: Chinese Spies Infiltrating US Businesses

    I seem to recall a similar situation or few.

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    Default Re: Chinese Spies Infiltrating US Businesses

    Spying Case Over DuPont's Chemical Grows
    March 14, 2012

    The Chinese call it "Titanium white." And it does make many things white, from the inside of Oreo cookies to the paint on cars. Paper, toothpaste, plastics, cosmetics and just about any other commonplace item colored white includes titanium dioxide.

    It's a $17 billion-a-year industry and no one makes the whitener better than DuPont, which has been in the titanium dioxide business for 70 years and controls 20 percent of the world market.

    China can't get enough of the stuff and buys more from the West than it makes domestically. So, U.S. prosecutors say, Chinese Communist leaders decreed that duplicating -- or obtaining -- DuPont's manufacturing method was a national economic and scientific imperative.

    As DuPont was unwilling to sell its method to China, the Chinese government stole it through a company it controlled called Pangang Group Co. Ltd., according to the diplomatically dicey economic espionage case being laid out in San Francisco federal court.

    "Pangang Group employees, in asking me to provide DuPont trade secrets to them, overtly appealed to my Chinese ethnicity and asked me to work for the good of the PRC," longtime DuPont engineer Tze Chao said in a plea agreement signed earlier this month, referring to the People's Republic of China. Chao, 77, is the first of five people charged in the deepening case to plead guilty. He worked at DuPont from 1966 to 2002.

    Chao is now cooperating with investigators, who say a Northern California couple Chao worked for are at the center of the case. Another former DuPont scientist, the Pangang company and one of its executives are also charged in an indictment unsealed recently in San Francisco.

    All are accused of economic espionage. Lawyers for the Chinese company say they will seek a dismissal.

    Prosecutors allege China used purloined technology to build the only factory inside China known to be producing titanium oxide the DuPont way, which uses chlorination rather than the sulfate method. DuPont's patented manufacturing method, while still dangerous, dirty and complicated, is nonetheless still cleaner and quicker than the outdated production method employed by the other Chinese factories.

    Federal prosecutors say Walter Liew and his wife Christina Liew launched a small California company in the 1990s aimed at exploiting China's desperate desire to build a DuPont-like factory. The couple recruited former DuPont scientists with the single-minded goal of winning Chinese contracts.

    "Some years ago China let me know that she urgently needed titanium white by chlorination technology," said a letter written by Walter Liew to Pangang officials in 2004 that boasted about a conversation years earlier with a high-ranking government official.

    "After many years of follow-up research and application, my company has possession and mastery of the complete DuPont way," said the letter, which was seized by the FBI and appears in a court filing.

    In 2009, the Chinese government-controlled Pangang Group Co. Ltd. awarded Liew's company a $17 million contract to build a factory that could produce 100,000 metric tons of "Titanium white" a year. The same company had earlier awarded the Liews' company millions more in similar contracts for smaller projects.

    Prosecutors allege that the Chinese factory, which is now operational, was built with a detailed DuPont instruction manual stamped "confidential" that was used to build DuPont's newest plant in Taiwan.

    The alleged scheme began to unravel in August 2010, according to court filings, when DuPont received an anonymous letter accusing Walter Liew and a scientist named John Liu of stealing the company's technology. At the time, Liu was working at Chevron Corp. as a high-paid engineer, but appeared to be moonlighting for the Liews' company and was considering working for them fulltime.

    DuPont took the letter seriously enough to convince Chevron to launch an investigation of Liu. Chevron ultimately provided DuPont with lengthy email exchanges that contained highly technical titanium dioxide manufacturing information and suspended Lui.

    DuPont filed a lawsuit early last year against the Liews and Liu, alleging they trucked in stolen DuPont information. Liu has since been dropped from the lawsuit and is not charged criminally, which defense lawyers say suggest he's working with investigators.

    Walter Liew countered the lawsuit by arguing that the technology at issue is essentially publicly available and filed counterclaims against DuPont, alleging it stole his trade secrets when it convinced Chevron officials to seize Liu's laptop and email exchanges discussing the China project.

    When DuPont filed its lawsuit, it also called the FBI.

    On July 19, FBI agents armed with a search warrant swooped into the Liews' Orinda home about 20 miles east of San Francisco. They seized thousands of pages of documents and confronted Christina Liew with a key to a safe-deposit box.

    In Mandarin Chinese, her husband admonished her to deny any knowledge of the key and she did. The FBI didn't disclose that one of its agents spoke fluent Mandarin. Instead, they followed Christina Liew to the Oakland bank that contained the safety-deposit box in question. It contained a "trove" of incriminating documents, according to prosecutors.

    The Liews were arrested and charged with lying to federal investigators and obstructing the investigation. Christina Liew was granted bail and freed shortly after her arrest. Walter Liew, however, had been denied bail after a judge agreed with prosecutors that he was a flight risk.

    In opposing his request for bail, prosecutors argued that the Liews have wired millions of dollars to relatives in China and own a home in Malaysia where Walter was born, and they cited the couples' behavior during the raid. The Liews pleaded not guilty to the obstruction charges.

    Last month, prosecutors unsealed a revised indictment charging the Liews with trade secret thefts.

    Walter Liew shuffled into court Thursday dressed in gray jail garb and through his lawyer asked for two more weeks to enter a plea to the new charges. Walter Liew says he intends to hire a new lawyer to combat the economic espionage charges.

    Christina Liew pleaded not guilty to all charges.

    "The Liews did not commit economic espionage," her attorney Doren Weinberg said outside of court.

    Robert J. Maegerle, who worked for DuPont from 1956 to 1991 before going to work for the Liews, also pleaded not guilty Thursday to economic espionage charges. The elderly Maegerle is accused of providing the Liews with detailed information about DuPont's Taiwan factory.

    Pangang, the Chinese government-controlled company, through its U.S. lawyers have refused to enter a plea. The lawyers say they plan to seek dismissal of the charges, arguing Pangang wasn't properly "served" notice of them. Although Pangang is based in Sichuan Province, the defense says the notice was sent to a New Jersey subsidiary that is a "separate company."

    The Chinese consulate in San Francisco didn't return a phone call Friday.

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    Super Moderator Malsua's Avatar
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    Default Re: Chinese Spies Infiltrating US Businesses

    The Chinese steal everything.

    We should let them steal some plans for stuff they want...complete with misdirection that will cost them billions in lost productivity.
    "Far better it is to dare mighty things, to win glorious triumphs even though checkered by failure, than to rank with those poor spirits who neither enjoy nor suffer much because they live in the gray twilight that knows neither victory nor defeat."
    -- Theodore Roosevelt


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    Default Re: Chinese Spies Infiltrating US Businesses

    Quote Originally Posted by Malsua View Post
    The Chinese steal everything.

    We should let them steal some plans for stuff they want...complete with misdirection that will cost them billions in lost productivity.
    Is it Malstien or oppenheimal, cause you must be a damn genius Gump!
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    Agriculture Spies Target Seed Technology, Feds Say

    December 12, 2013

    A corporate agriculture espionage case announced Thursday by federal prosecutors offered a glimpse into how at least seven Chinese men allegedly traveled across the Midwest to steal millions of dollars in seed technology.

    The investigation revealed how the men used counter-surveillance techniques to shake FBI tails, but still had the seeds confiscated by law enforcement authorities as they tried to leave the country.

    Mo Hailong, also known as Robert Mo, is accused of stealing trade secrets worth at least $30 million to $40 million, said Nicholas Klinefeldt, U.S. Attorney for the Southern District of Iowa. It's the first corporate agriculture espionage case of its kind in Iowa, officials said.

    "The point is to call people out on this type of activity," Klinefeldt said. "So that people know about it, and so companies can take the right precautions to prevent it from happening again."

    Mo, the only person charged or arrested, used an alias to tour DuPont Pioneer's headquarters in Johnston, Iowa, and Monsanto's research facility in Ankeny. He also attend a state dinner in which Iowa Gov. Terry Branstad welcomed Xi Jinping, the then-future president of China, back to the Iowa. Mo and others often met at farm in Illinois bought by Kings Nower Seed, a Chinese seed company for which they were spying, court documents show.

    The charge against Mo comes in a state that has pushed to increase trade with China. In October, trade agreements worth an estimated $1 billion were signed by companies from Iowa and China's Hebei Province.

    Mo allegedly stole inbred corn seeds from fields in Iowa and Illinois between September 2011 and October 2012 that represented several years worth of research, according to a criminal complaint. Inbred seeds are valuable because they pass on drought- and pest-resistant traits to planting seeds that will be grown and harvested.

    Mo, a Chinese citizen and permanent U.S. resident, faces up to 10 years in prison and a $5 million fine, officials said. He works for a company that's a part of DBN Group, a Chinese conglomerate with a corn seed company, Kings Nower Seed.

    Additional charges may be filed against the other men who helped Mo try to steal the seed technology, officials said.

    The federal investigation began in June 2011 when DuPont Pioneer officials told FBI agents they had spotted Mo in one of the company's fields near Tama. A farm manager had seen Mo on his knees in a recently planted field. Monsanto also reported suspicious activity in fields near Bondurant.

    In February 2012, Mo used an alias to tour Pioneer and Monsanto facilities with a group, in the days leading up to the state dinner for Xi, who was then China's vice president.

    DuPont Pioneer security alerted the FBI to Mo's visit. Agents followed Mo to a symposium at the World Food Prize building in Des Moines, where he used the same alias as in the tours - Hougang Wu, chairman of the Dalian Zhangzidao Fishery Group.

    After the symposium, Mo spoke to a man with close connections to DuPont Pioneer. Mo and Wang Lei, vice chairman of Kings Nower Seed, met at a sports bar near their hotel in Urbandale. Xaoming Bao, a Chinese seed executive and former DuPont Pioneer employee, joined them. Xaoming's wife is a corn geneticist at DuPont Pioneer, according to court documents.

    DuPont Pioneer declined to answer questions about the case. In a statement, a spokeswoman said the company is cooperating with the investigation.

    Seeds with genetic traits that make plants resistant to drought and pests are worth billions of dollars, said Jeff Wolt, an Iowa State University agronomy professor.

    "It's really the foundation for Iowa agriculture, so it's really something that we need to protect," Wolt said.

    China has accelerated its development of seed technology in recent years, Wolt said.

    Despite record harvests in recent years, China can't grow enough corn. Chronic water shortages, less arable land and other constraints will pressure production, experts say.

    As a result, China has begun buying U.S. corn and is expected to buy much more. By 2022, China is forecast to import six times the amount of corn it does now and become the world's largest importer of the grain, according to a 2012 U.S. Department of Agriculture report.

    FBI teams tracked Mo and five others with connections to Kings Nower Seed across the U.S. They observed Mo buying nearly $3,000 in Pioneer and Monsanto seeds in Dallas Center, Iowa, and northern Missouri.

    The FBI saw Mo drop seeds off at a rented storage facility near Adel. It was near the facility that the FBI saw Mo use driving maneuvers designed to detect and evade anyone following him: He made several U-turns and backed into parking lots, documents show.

    Mo also drove slowly on the interstate for long stretches and suddenly accelerated, another counter-surveillance technique, according to documents.

    A farm purchased by Kings Nower Seeds for $600,000 appeared to serve as a base of operations. Mo and others unloaded seeds there and may have planted test crops, documents show.

    Mo shipped 15 packages weighing 341 pounds to his home in Boca Raton, Fla. UPS packing slips listed the contents as "corn samples," documents show.

    GPS data and audio secretly recorded in rental cars confirm the Chinese men made several stops next to research fields belonging to seed companies including DuPont Pioneer and Monsanto, documents show. FBI teams observed several of them drive slowly by farm fields in Illinois and Indiana.

    On Sept. 30, 2012, FBI teams stopped three of the men as they left the country. Authorities seized corn seeds tucked into envelopes and napkins, and confiscated other evidence.

    At O'Hare International Airport in Chicago, authorities found envelopes hidden in a popcorn box stored in the luggage of Li Shaoming, believed to be CEO of Kings Nower Seed, documents show. Li's travel companion, Ye Jian, a Kings Nower Seed employee, had seeds wrapped in 30 Subway restaurant napkins in his luggage. Ye had more napkins in his pockets, according to documents.

    North of Burlington, Vt., a man named Wang Hongwei was crossing into Canada by car. He had lost an FBI tail by suddenly turning into a parking lot. Authorities found 44 bags with envelopes containing corn kernels, a notebook with GPS coordinates and a camera with hundreds of pictures of corn fields, documents show.

    A search warrant later allowed authorities to test the seeds. Results showed several samples were the valuable inbred seeds.

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    Creepy Ass Cracka & Site Owner Ryan Ruck's Avatar
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    May a Thousand Spies Bloom

    January 16, 2014

    Who knew China needed tips on rice cultivation?

    When Customs and Border Protection agents opened the luggage of a Chinese agricultural delegation last August, they found envelopes containing specially engineered rice and other seeds allegedly stolen from a company in Arkansas. According to a criminal complaint filed last month in Kansas, the seeds - genetically engineered for pharmaceutical uses at a cost of millions of dollars - were illegally obtained with the help of two Chinese immigrants, one a plant geneticist at a USDA-funded research center in Arkansas, the other an LSU-educated biotechnologist at the Colorado company that manufactured the seeds.

    Just next door in Iowa, in 2011, a farm field manager for DuPont Pioneer, a top seed-development company, confronted a Chinese man digging up genetically engineered corn in an open field. Another man was waiting nearby in a car. After an awkward exchange about what they were doing, the two sped off - but not before the farmer took down their license plate.

    The FBI entered the case and bugged the car of two of the suspects. "These are actually very serious offenses," one was overheard saying. The other agreed: "They could treat us as spies!"

    Six Chinese nationals were eventually charged with conspiring to steal trade secrets in this case, all of them employees of Chinese seed firms. The suspected ring leader, according to the indictment, was Mo "Robert" Hailong, of Boca Raton, Fla., a naturalized U.S. citizen who is director of international business for the Beijing Dabeinong Technology Group Company. Investigators suspect that someone at DuPont Pioneer tipped the accused spies to the location of the seedlings. Hailong is in custody, the others are at large.

    According to intelligence experts, Hailong and the other seed-spy suspects are just a few of the locusts in a swarm, feasting on American technological secrets. Their Iowa caper drew fleeting attention last year because of its quirky audacity, but Chinese business spies are rounded up nearly every week in the U.S., with but a sliver of the attention given to China's cyberwar. While some agents are professional spies dispatched by Chinese intelligence to pursue U.S. military secrets, far more are "amateurs" deployed to get five-finger discounts on U.S. business samples, the experts say.

    While the CIA is chasing terrorists across deserts, the Chinese are chasing U.S. brain products from coast to coast, from advanced cancer research in Wisconsin to wind power software in Massachusetts, according to scores of cases currently filling state and federal court dockets.

    Michelle Van Cleave, a former head of the National Counterintelligence Executive (NCIX), told Newsweek this week, "It's true that China has experienced amazing economic growth, but what most people don't realize is that part of that growth is fueled by a state-run systematic program of theft, pure and simple. Companies like Motorola, Ford, GM, DuPont and more - the private-sector engines of innovation and wealth - are all targeted by the Chinese."

    Van Cleave and other counterintelligence officials say the Chinese are uncommonly clever and patient. "They clandestinely employ commercial firms in technology collection activities," she explained. "They insert collectors inside U.S. companies to facilitate technology acquisition...

    "Beijing has informal organizations in the U.S. to help track the access of these experts so they can plan their next moves - which means things will continue to get worse. The numbers of businessmen and commercial enterprises, scientists, engineers, academics working in the U.S. from China keep growing, far exceeding our ability to keep tabs on potential illegal activity."

    There also appear to be using sleeper cells. Many students are sent to the U.S. and lie low for years before they're called into action, usually after they've gained employment in high-tech firms.

    "I like to equate the Chinese approach to sowing grass seed," says I.C. Smith, a retired FBI China expert who is co-author (with British espionage scholar Nigel West) of the Historical Dictionary of Chinese Intelligence. "They go out in the yard, throw down a sack of seed, but don't water and fertilize it, knowing that not all the seeds will sprout but they're willing to take the losses. They've 'over-seeded' [the U.S.] and know that some of the seeds will indeed grow grass."

    Added bonus, says Smith: China's intelligence investment "is virtually nil, and they have great plausible deniability.

    "If we look at all the Chinese 'spy' cases," he adds, "virtually all those involving ethnic Chinese are first-generation emigrants to the U.S. - they're the ones with ethnic, cultural and emotional ties to mother China." Non-Chinese Americans get involved, too, Smith says, "but overall, I suspect most cooperate with the Chinese simply because they are mercenary - for the money. And the Chinese are good at exploiting whatever makes them susceptible to cooperation."

    On Thursday, Treasury Secretary Jack Lew maintained that Chinese commercial espionage is unlike anything done by the U.S. or other governments. He also rejected a suggestion that Beijing's spying on U.S. soil was equivalent to the National Security Agency's penetration of other countries. "I don't think there's any way to compare the kinds of intelligence activities that almost every country engages in for national security purposes with the deliberate theft of trade secrets for commercial advantage," Lew said during a Q&A after a speech at the Council on Foreign Relations in Washington, adding later that the issue has not "in any way been taken off the table in terms of our conversation with the Chinese."

    Some pleasant chat that must be.

    In the meantime, the FBI can't possibly keep an eye on every Chinese student who comes here to enroll in advanced technology courses - nor should it try. NSA eavesdropping on China can generate hundreds of leads that require tedious, time-consuming follow-ups, and by many accounts, the bureau has its hands full with terrorism.

    Following an eruption of Chinese espionage in Wisconsin last year, an FBI special agent advised business leaders there to take more care in protecting proprietary research and trade secrets. But treating all Chinese-American employees as possible spies is impractical, not to mention distasteful and possibly illegal.

    The U.S. lacks a comprehensive strategy to counter Chinese espionage, says Van Cleave, but the Obama White House begs to differ. Last February it issued a paper, "Strategy on Mitigating the Theft of U.S. Trade Secrets," that cited "five action areas: diplomatic engagement, industry-led voluntary best practices, domestic law enforcement investigations, legislative reviews, and stakeholder outreach and public awareness campaigns," according to Patrick Ventrell, a White House National Security Council spokesman.

    To that Van Cleave adds, Go after them in Beijing! U.S. intelligence should recruit more moles in Chinese intelligence, she says, "to find out what they are doing and how they are doing it, in order to be able to identify vulnerabilities and stop them."

    Both the FBI and the CIA have such a mandate, but it hasn't made a dent in Chinese espionage, judging from those cases piling up in state and federal courts. Between 2008 and 2010, the Justice Department prosecuted 26 cases that resulted in the convictions of over 40 Chinese nationals on charges of espionage, stealing U.S. government and industrial secrets and illegally exporting sensitive materials to China. Of some 280 arms export prosecutions in the past eight years, 66 involved Chinese nationals, a Reuters investigation found.

    U.S. intelligence is, however, paying attention: The FBI's new head of counterintelligence, Robert Anderson, Jr., made his mark in Chinese espionage cases. The current head of NCIX, Frank Montoya, Jr., formerly headed the FBI office in Honolulu, which has prosecuted several Chinese espionage cases. At the CIA, "there's been a huge increase in quality, in depth, and understanding" of China, says David Sedney, a former assistant secretary of defense for East Asia who also served as deputy chief of the American embassy in Beijing from 2004 to 2007. "I lay a lot of that on the overall U.S. improvement in understanding China and East Asia. They are hiring people who have really good, solid undergraduate and graduate degrees and who have lived in China and have studied at places like Beijing University."

    But realistically, U.S. intelligence hasn't a chance of "flooding the zone" in police state-China. So until American spy catchers come up with a better trap, China's agents will roam virtually free, vacuuming up U.S. secrets.

    "It's just a giant sucking sound," Sedney said.

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    Creepy Ass Cracka & Site Owner Ryan Ruck's Avatar
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    Default Re: Chinese Spies Infiltrating US Businesses

    Google sells Motorola to Lenovo...


    What We Know About the Motorola-Lenovo Deal

    January 29, 2014

    With the Lenovo-Motorola deal now official from all parties, we thought a quick recap of everything was in store. Since this move has clearly brought out plenty of your emotions, especially when it comes to thinking about your next smartphone purchase, we are sure you want answers. While we won’t have them all, and should know more tomorrow after Google’s earnings call, we do have plenty to share.

    Quick bullets:

    • Lenovo will pay “about” $2.91 billion for Motorola, including $1.41 billion will be paid at close, comprised of $660 million in cash and $750 million in Lenovo ordinary shares. The remaining $1.5 billion will be paid in the form of a 3-year promissory note.
    • Google is keeping a “vast majority” of Motorola’s patents to help “defend the entire Android ecosystem.”
    • Lenovo will receive a license to the patent portfolio that Google is keeping.
    • Lenovo will still receive over 2,000 patent assets, along with the Motorola Mobility brand and trademark portfolio.
    • Lenovo intends to keep Motorola’s “distinct brand identity.”
    • So what happens to the name “Motorola”? We don’t know just yet. With that said, after Lenovo bought IBM’s PC business, they certainly don’t call them “IBM Thinkpads” anymore. If you want a Thinkpad today, it’s a Lenovo Thinkpad.
    • Can a Lenovo “Moto X” or Lenovo “DROID ULTRA” carry weight with smartphone consumers in the U.S.? That’s what we are about to find out. They certainly know what they are doing on the PC side, having led the PC sales category for some time.
    • Lenovo is going to try to scale Motorola into a global player with their “experience in hardware” and “global reach.” As of right now, Motorola has its Moto X in North America, Brazil, and parts of Europe. It has the Moto G in a number of other countries, but the major global presence is not there.
    • As Page mentioned in his blog post, the deal has yet to be approved in the U.S. or China, and even if it does get approval, will take all sorts of time before that happens. Remember that Google announced plans to acquire Motorola in August of 2011, but that the deal wasn’t approved until the following May. For now, it is business as usual for Motorola and Google.
    • 2014 should still be exactly what you were hoping it would be with Motorola doing the next line-up of phones to follow the Moto X. Larry Page even said he is “very excited” about the smartphone lineup for this year.
    • MotoMaker – staying or going? After sitting down for an interview with Motorola execs at CES, I got the feeling that MotoMaker and customization is here to stay. Well, at least for now. Motorola more than likely already has their 2014 roadmap ironed out, which would include MotoMaker. Once this deal is finalized and they start thinking about 2015, anything goes.
    • Page said that this move will help Google to “drive innovation across the Android ecosystem, for the benefit of smartphone users everywhere.” Is it just me, or does that come across as, “We got rid of Motorola so other OEMs could stop worrying about us owning them and focus on making great Android handsets.”?


    Updates: A conference call with Lenovo is apparently going on, Re/code has the play-by-play, some of which we have included below.

    • Dennis Woodside (maybe other members of the executive team) will be a part of management, at least for the transition.
    • Chicago HQ of Motorola will stick around for now.
    • There are no current plans to lay anyone off – Lenovo likes the talent that Motorola possesses.
    • Lenovo wouldn’t commit to the Texas Moto X plant, saying that it will evaluate to see what the most cost effective way to win the market is.
    • Lenovo thinks it is in prime position to soon sell 100 million smartphones.
    • Regina Dugan’s advanced research unit (electronic tattoo stuff) was not a part of the acquisition.
    • The Advanced Technology Group (including Project Ara) are staying with Google, as a part of the Android team.


    At this point, I think I’m trying to remain calm and positive over the situation. Lenovo is a well recognized PC brand who is looking to acquire a well-recognized U.S. smartphone brand. Can those two mesh and create a smartphone arm that can compete with Samsung and Apple? I hope so. Is it better to have Lenovo behind you than Google? I’d argue that it’s probably not, though Lenovo is the real deal in terms of a tech company. It could have been worse. It could have been Huawei or ZTE or something.

    I’d imagine that we’ll know a lot more tomorrow after Google’s Q4 earnings call.

    After reading comments from all parties, are you feeling any better?

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    Super Moderator and PHILanthropist Extraordinaire Phil Fiord's Avatar
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    Default Re: Chinese Spies Infiltrating US Businesses

    Wow. I knew Moto was bought by Goog. But reselling it to Lenovo? That is the Chinese company that bought IBM's laptop division.

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    Creepy Ass Cracka & Site Owner Ryan Ruck's Avatar
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    Default Re: Chinese Spies Infiltrating US Businesses

    Yep... Also makes a lot of emergency services comm gear among many other things.

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    Creepy Ass Cracka & Site Owner Ryan Ruck's Avatar
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    Default Re: Chinese Spies Infiltrating US Businesses


    Chinese Woman Charged In Plot To Steal U.S. Corn Technology

    July 2, 2014

    A Chinese woman has been arrested and charged with trying to steal patented U.S. seed technology as part of a plot to smuggle types of specialized corn from farm fields in the U.S. Midwest for use in China, authorities said on Wednesday.

    The woman, Mo Yun, is married to the founder and chairman of a Chinese conglomerate that runs a corn seed subsidiary. She and her brother, Mo Hailong, worked together and with others to steal the valuable corn seed from Iowa and Illinois, according to law enforcement officials. Mo Hailong was indicted and arrested in December.

    Mo Hailong is director of the international business of the Beijing Dabeinong Technology Group Co, a part of DBN Group, which is run by Shao Genhuo. DBN operates a corn seed subsidiary called Kings Nower Seed, according to Nicholas Klinefeldt, U.S. Attorney for the Southern District of Iowa.

    Mo Yun is married to Shao Genhuo, said Klinefeldt.

    The others involved in the conspiracy include employees at U.S. seed companies who provided locations where experiments with the genetically altered seeds took place; or they provided gene sequencing information for the bio-engineered seeds, according to documents filed in U.S. District Court in the Southern District of Iowa.

    Both Iowa-based DuPont Pioneer, the agricultural unit of DuPont, and Missouri-based Monsanto, two of the world's largest agricultural seed companies, have said they are cooperating with federal authorities in the ongoing probe.

    The investigation began after DuPont Pioneer security staff detected suspicious activity in fields where the company was testing new types of seed, and notified authorities.

    Both Monsanto and DuPont develop and sell genetically altered seeds that are coveted by many farmers because they help farmers fight insect and weed problems, and can yield more in adverse growing conditions. But the seed technology is patented and the seeds are higher priced than conventional seeds.

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    Default Re: Chinese Spies Infiltrating US Businesses

    Of course, as always, the crux of the matter is to what extent this is sanctioned by the government. Terribly hard to proove of course, and so the Chinese will likely wriggle their way out of it all.

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    Creepy Ass Cracka & Site Owner Ryan Ruck's Avatar
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    U.S. Indicts 6 Chinese Citizens On Charges Of Stealing Trade Secrets

    May 19, 2015

    A federal grand jury has indicted six Chinese citizens in what authorities say was a long-running conspiracy to steal valuable technology from two U.S. firms for the benefit of the Chinese government.

    The indictment, unsealed Monday, highlights the threat posed by insiders who use their position to steal sensitive information on behalf of a foreign government or for financial gain. The move is part of a larger trend by the U.S. government to step up efforts to deter Chinese theft of trade secrets.

    It is also a manifestation of the ongoing innovation war between China and the United States and could increase tensions in a relationship that is already fraught.

    “According to the charges in the indictment, the defendants leveraged their access to and knowledge of sensitive U.S. technologies to illegally obtain and share U.S. trade secrets with the [People’s Republic of China] for economic advantage,” said Assistant Attorney General John Carlin, head of the Justice Department’s national security division. “Economic espionage imposes great costs on American businesses, weakens the global marketplace and ultimately harms U.S. interests worldwide.”

    [Read the full indictment]

    One of the six defendants, Hao Zhang, 36, was arrested on Saturday at Los Angeles International Airport. He had flown from China to speak at a conference.

    Zhang and two other defendants had obtained engineering degrees from the University of Southern California and then *secured jobs at high-tech firms. The other three remained in China and were alleged to be part of a conspiracy in which the defendants set up a company in China to profit from stolen U.S. technology that filters wireless signals in cellphones and other mobile devices.

    At the university, Zhang and Wei Pang, 35, had conducted research on thin-film bulk acoustic resonator, or FBAR, technology with U.S. Defense Department funding. After earning their doctorates in 2005, Pang was hired as an FBAR engineer at Avago Technologies in Colorado and Zhang took a similar job at Skyworks Solutions in Massachusetts.

    The 32-count indictment alleges that beginning in 2006, Zhang, Pang and their co*conspirators developed a business plan and began soliciting Chinese universities to become partners in establishing a business using the FBAR technology.

    The government alleges that the men carried out their plan with the intent of benefiting the Chinese government and Tianjin University, a state school; a university investment arm called Tianjin Micro Nano Manufacturing Tech; the government’s Tianjin Economic Development Area; and ROFS Microsystems, a joint venture between the investment arm and the defendants.

    According to the indictment, in 2006, Huisui Zhang, a third defendant and USC classmate, e-mailed Pang and Hao Zhang his notes from a planning meeting for creating a factory in China. One section of the notes was titled “Moving Avago to China.”

    In another e-mail, Pang told a former USC colleague, also a Chinese citizen, that “the filter market for cell-phone alone is estimated to be more than $1 billion in 2005,” according to the indictment.

    In yet another e-mail, Pang told his colleagues that they could beat competitors because they would save “a lot” of money by not having to conduct research and development, the indictment states.

    In 2008, Tianjin University officials agreed to finance the defendants’ establishment of a factory, the indictment says. In 2009, Pang and Hao Zhang quit their jobs with Avago and Skyworks and accepted positions as professors at Tianjin.

    Also in 2009, at the university’s direction, Pang set up a shell company in the Cayman Islands to appear to be the legitimate source of the stolen trade secrets, according to the indictment.

    In 2008 and 2009, the government alleged, Pang and Zhang *e-mailed each other a series of files, slides and documents containing Avago and Skyworks trade secrets. The secrets allegedly *stolen included pricing details, *silicon-etching techniques, tool specifications and design kits.

    In 2009 and 2010, according to the indictment, Zhang and Pang filed patent applications in the United States based on stolen Avago and Skyworks technologies and listed themselves as either sole inventors or co-inventors.

    In 2011, the men launched ROFS Microsystems. Later that year, the government alleged, Avago became aware of Pang’s thefts after it saw the patent applications. In late 2011, Pang’s former boss, Rich Ruby, traveled to China to attend a conference. While there, he visited Tianjin University to see Pang and Zhang’s new lab, where he recognized that it was allegedly using stolen Avago technology. He confronted Pang and another defendant, Jinping Chen, the university’s assistant dean, and accused them of stealing and using the company’s trade secrets.

    Pang denied having any company to sell FBAR technology. Chen e-mailed Ruby that the university was not using any of the patented technologies Ruby mentioned.

    Also indicted were Zhao Gang, the general manager at ROFS, and Chong Zhou, a Tianjin University graduate student who worked with Pang and Zhang and allegedly altered documents containing Avago trade secrets.

    All were charged with conspiracy to commit economic espionage and conspiracy to commit theft of trade secrets. Zhang, Pang and Zhou were also charged with economic espionage and theft of trade secrets.

    The case is being prosecuted by the U.S. attorney’s office in San Francisco, in consultation with the Justice Department’s counterespionage section.

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    Creepy Ass Cracka & Site Owner Ryan Ruck's Avatar
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    Default Re: Chinese Spies Infiltrating US Businesses


    The Big Hack: How China Used a Tiny Chip to Infiltrate U.S. Companies

    The attack by Chinese spies reached almost 30 U.S. companies, including Amazon and Apple, by compromising America’s technology supply chain, according to extensive interviews with government and corporate sources.

    October 4, 2018

    In 2015, Amazon.com Inc. began quietly evaluating a startup called Elemental Technologies, a potential acquisition to help with a major expansion of its streaming video service, known today as Amazon Prime Video. Based in Portland, Ore., Elemental made software for compressing massive video files and formatting them for different devices. Its technology had helped stream the Olympic Games online, communicate with the International Space Station, and funnel drone footage to the Central Intelligence Agency. Elemental’s national security contracts weren’t the main reason for the proposed acquisition, but they fit nicely with Amazon’s government businesses, such as the highly secure cloud that Amazon Web Services (AWS) was building for the CIA.

    To help with due diligence, AWS, which was overseeing the prospective acquisition, hired a third-party company to scrutinize Elemental’s security, according to one person familiar with the process. The first pass uncovered troubling issues, prompting AWS to take a closer look at Elemental’s main product: the expensive servers that customers installed in their networks to handle the video compression. These servers were assembled for Elemental by Super Micro Computer Inc., a San Jose-based company (commonly known as Supermicro) that’s also one of the world’s biggest suppliers of server motherboards, the fiberglass-mounted clusters of chips and capacitors that act as the neurons of data centers large and small. In late spring of 2015, Elemental’s staff boxed up several servers and sent them to Ontario, Canada, for the third-party security company to test, the person says.

    Nested on the servers’ motherboards, the testers found a tiny microchip, not much bigger than a grain of rice, that wasn’t part of the boards’ original design. Amazon reported the discovery to U.S. authorities, sending a shudder through the intelligence community. Elemental’s servers could be found in Department of Defense data centers, the CIA’s drone operations, and the onboard networks of Navy warships. And Elemental was just one of hundreds of Supermicro customers.

    During the ensuing top-secret probe, which remains open more than three years later, investigators determined that the chips allowed the attackers to create a stealth doorway into any network that included the altered machines. Multiple people familiar with the matter say investigators found that the chips had been inserted at factories run by manufacturing subcontractors in China.

    This attack was something graver than the software-based incidents the world has grown accustomed to seeing. Hardware hacks are more difficult to pull off and potentially more devastating, promising the kind of long-term, stealth access that spy agencies are willing to invest millions of dollars and many years to get.

    There are two ways for spies to alter the guts of computer equipment. One, known as interdiction, consists of manipulating devices as they’re in transit from manufacturer to customer. This approach is favored by U.S. spy agencies, according to documents leaked by former National Security Agency contractor Edward Snowden. The other method involves seeding changes from the very beginning.

    One country in particular has an advantage executing this kind of attack: China, which by some estimates makes 75 percent of the world’s mobile phones and 90 percent of its PCs. Still, to actually accomplish a seeding attack would mean developing a deep understanding of a product’s design, manipulating components at the factory, and ensuring that the doctored devices made it through the global logistics chain to the desired location—a feat akin to throwing a stick in the Yangtze River upstream from Shanghai and ensuring that it washes ashore in Seattle. “Having a well-done, nation-state-level hardware implant surface would be like witnessing a unicorn jumping over a rainbow,” says Joe Grand, a hardware hacker and the founder of Grand Idea Studio Inc. “Hardware is just so far off the radar, it’s almost treated like black magic.”

    But that’s just what U.S. investigators found: The chips had been inserted during the manufacturing process, two officials say, by operatives from a unit of the People’s Liberation Army. In Supermicro, China’s spies appear to have found a perfect conduit for what U.S. officials now describe as the most significant supply chain attack known to have been carried out against American companies.

    One official says investigators found that it eventually affected almost 30 companies, including a major bank, government contractors, and the world’s most valuable company, Apple Inc. Apple was an important Supermicro customer and had planned to order more than 30,000 of its servers in two years for a new global network of data centers. Three senior insiders at Apple say that in the summer of 2015, it, too, found malicious chips on Supermicro motherboards. Apple severed ties with Supermicro the following year, for what it described as unrelated reasons.

    In emailed statements, Amazon (which announced its acquisition of Elemental in September 2015), Apple, and Supermicro disputed summaries of Bloomberg Businessweek’s reporting. “It’s untrue that AWS knew about a supply chain compromise, an issue with malicious chips, or hardware modifications when acquiring Elemental,” Amazon wrote. “On this we can be very clear: Apple has never found malicious chips, ‘hardware manipulations’ or vulnerabilities purposely planted in any server,” Apple wrote. “We remain unaware of any such investigation,” wrote a spokesman for Supermicro, Perry Hayes. The Chinese government didn’t directly address questions about manipulation of Supermicro servers, issuing a statement that read, in part, “Supply chain safety in cyberspace is an issue of common concern, and China is also a victim.” The FBI and the Office of the Director of National Intelligence, representing the CIA and NSA, declined to comment.

    The companies’ denials are countered by six current and former senior national security officials, who—in conversations that began during the Obama administration and continued under the Trump administration—detailed the discovery of the chips and the government’s investigation. One of those officials and two people inside AWS provided extensive information on how the attack played out at Elemental and Amazon; the official and one of the insiders also described Amazon’s cooperation with the government investigation. In addition to the three Apple insiders, four of the six U.S. officials confirmed that Apple was a victim. In all, 17 people confirmed the manipulation of Supermicro’s hardware and other elements of the attacks. The sources were granted anonymity because of the sensitive, and in some cases classified, nature of the information.

    One government official says China’s goal was long-term access to high-value corporate secrets and sensitive government networks. No consumer data is known to have been stolen.

    The ramifications of the attack continue to play out. The Trump administration has made computer and networking hardware, including motherboards, a focus of its latest round of trade sanctions against China, and White House officials have made it clear they think companies will begin shifting their supply chains to other countries as a result. Such a shift might assuage officials who have been warning for years about the security of the supply chain—even though they’ve never disclosed a major reason for their concerns.

    Back in 2006, three engineers in Oregon had a clever idea. Demand for mobile video was about to explode, and they predicted that broadcasters would be desperate to transform programs designed to fit TV screens into the various formats needed for viewing on smartphones, laptops, and other devices. To meet the anticipated demand, the engineers started Elemental Technologies, assembling what one former adviser to the company calls a genius team to write code that would adapt the superfast graphics chips being produced for high-end video-gaming machines. The resulting software dramatically reduced the time it took to process large video files. Elemental then loaded the software onto custom-built servers emblazoned with its leprechaun-green logos.

    Elemental servers sold for as much as $100,000 each, at profit margins of as high as 70 percent, according to a former adviser to the company. Two of Elemental’s biggest early clients were the Mormon church, which used the technology to beam sermons to congregations around the world, and the adult film industry, which did not.

    Elemental also started working with American spy agencies. In 2009 the company announced a development partnership with In-Q-Tel Inc., the CIA’s investment arm, a deal that paved the way for Elemental servers to be used in national security missions across the U.S. government. Public documents, including the company’s own promotional materials, show that the servers have been used inside Department of Defense data centers to process drone and surveillance-camera footage, on Navy warships to transmit feeds of airborne missions, and inside government buildings to enable secure videoconferencing. NASA, both houses of Congress, and the Department of Homeland Security have also been customers. This portfolio made Elemental a target for foreign adversaries.

    Supermicro had been an obvious choice to build Elemental’s servers. Headquartered north of San Jose’s airport, up a smoggy stretch of Interstate 880, the company was founded by Charles Liang, a Taiwanese engineer who attended graduate school in Texas and then moved west to start Supermicro with his wife in 1993. Silicon Valley was then embracing outsourcing, forging a pathway from Taiwanese, and later Chinese, factories to American consumers, and Liang added a comforting advantage: Supermicro’s motherboards would be engineered mostly in San Jose, close to the company’s biggest clients, even if the products were manufactured overseas.

    Today, Supermicro sells more server motherboards than almost anyone else. It also dominates the $1 billion market for boards used in special-purpose computers, from MRI machines to weapons systems. Its motherboards can be found in made-to-order server setups at banks, hedge funds, cloud computing providers, and web-hosting services, among other places. Supermicro has assembly facilities in California, the Netherlands, and Taiwan, but its motherboards—its core product—are nearly all manufactured by contractors in China.

    The company’s pitch to customers hinges on unmatched customization, made possible by hundreds of full-time engineers and a catalog encompassing more than 600 designs. The majority of its workforce in San Jose is Taiwanese or Chinese, and Mandarin is the preferred language, with hanzi filling the whiteboards, according to six former employees. Chinese pastries are delivered every week, and many routine calls are done twice, once for English-only workers and again in Mandarin. The latter are more productive, according to people who’ve been on both. These overseas ties, especially the widespread use of Mandarin, would have made it easier for China to gain an understanding of Supermicro’s operations and potentially to infiltrate the company. (A U.S. official says the government’s probe is still examining whether spies were planted inside Supermicro or other American companies to aid the attack.)

    With more than 900 customers in 100 countries by 2015, Supermicro offered inroads to a bountiful collection of sensitive targets. “Think of Supermicro as the Microsoft of the hardware world,” says a former U.S. intelligence official who’s studied Supermicro and its business model. “Attacking Supermicro motherboards is like attacking Windows. It’s like attacking the whole world.”

    Well before evidence of the attack surfaced inside the networks of U.S. companies, American intelligence sources were reporting that China’s spies had plans to introduce malicious microchips into the supply chain. The sources weren’t specific, according to a person familiar with the information they provided, and millions of motherboards are shipped into the U.S. annually. But in the first half of 2014, a different person briefed on high-level discussions says, intelligence officials went to the White House with something more concrete: China’s military was preparing to insert the chips into Supermicro motherboards bound for U.S. companies.

    The specificity of the information was remarkable, but so were the challenges it posed. Issuing a broad warning to Supermicro’s customers could have crippled the company, a major American hardware maker, and it wasn’t clear from the intelligence whom the operation was targeting or what its ultimate aims were. Plus, without confirmation that anyone had been attacked, the FBI was limited in how it could respond. The White House requested periodic updates as information came in, the person familiar with the discussions says.

    Apple made its discovery of suspicious chips inside Supermicro servers around May 2015, after detecting odd network activity and firmware problems, according to a person familiar with the timeline. Two of the senior Apple insiders say the company reported the incident to the FBI but kept details about what it had detected tightly held, even internally. Government investigators were still chasing clues on their own when Amazon made its discovery and gave them access to sabotaged hardware, according to one U.S. official. This created an invaluable opportunity for intelligence agencies and the FBI—by then running a full investigation led by its cyber- and counterintelligence teams—to see what the chips looked like and how they worked.

    The chips on Elemental servers were designed to be as inconspicuous as possible, according to one person who saw a detailed report prepared for Amazon by its third-party security contractor, as well as a second person who saw digital photos and X-ray images of the chips incorporated into a later report prepared by Amazon’s security team. Gray or off-white in color, they looked more like signal conditioning couplers, another common motherboard component, than microchips, and so they were unlikely to be detectable without specialized equipment. Depending on the board model, the chips varied slightly in size, suggesting that the attackers had supplied different factories with different batches.

    Officials familiar with the investigation say the primary role of implants such as these is to open doors that other attackers can go through. “Hardware attacks are about access,” as one former senior official puts it. In simplified terms, the implants on Supermicro hardware manipulated the core operating instructions that tell the server what to do as data move across a motherboard, two people familiar with the chips’ operation say. This happened at a crucial moment, as small bits of the operating system were being stored in the board’s temporary memory en route to the server’s central processor, the CPU. The implant was placed on the board in a way that allowed it to effectively edit this information queue, injecting its own code or altering the order of the instructions the CPU was meant to follow. Deviously small changes could create disastrous effects.

    Since the implants were small, the amount of code they contained was small as well. But they were capable of doing two very important things: telling the device to communicate with one of several anonymous computers elsewhere on the internet that were loaded with more complex code; and preparing the device’s operating system to accept this new code. The illicit chips could do all this because they were connected to the baseboard management controller, a kind of superchip that administrators use to remotely log in to problematic servers, giving them access to the most sensitive code even on machines that have crashed or are turned off.

    This system could let the attackers alter how the device functioned, line by line, however they wanted, leaving no one the wiser. To understand the power that would give them, take this hypothetical example: Somewhere in the Linux operating system, which runs in many servers, is code that authorizes a user by verifying a typed password against a stored encrypted one. An implanted chip can alter part of that code so the server won’t check for a password—and presto! A secure machine is open to any and all users. A chip can also steal encryption keys for secure communications, block security updates that would neutralize the attack, and open up new pathways to the internet. Should some anomaly be noticed, it would likely be cast as an unexplained oddity. “The hardware opens whatever door it wants,” says Joe FitzPatrick, founder of Hardware Security Resources LLC, a company that trains cybersecurity professionals in hardware hacking techniques.

    U.S. officials had caught China experimenting with hardware tampering before, but they’d never seen anything of this scale and ambition. The security of the global technology supply chain had been compromised, even if consumers and most companies didn’t know it yet. What remained for investigators to learn was how the attackers had so thoroughly infiltrated Supermicro’s production process—and how many doors they’d opened into American targets.

    Unlike software-based hacks, hardware manipulation creates a real-world trail. Components leave a wake of shipping manifests and invoices. Boards have serial numbers that trace to specific factories. To track the corrupted chips to their source, U.S. intelligence agencies began following Supermicro’s serpentine supply chain in reverse, a person briefed on evidence gathered during the probe says.

    As recently as 2016, according to DigiTimes, a news site specializing in supply chain research, Supermicro had three primary manufacturers constructing its motherboards, two headquartered in Taiwan and one in Shanghai. When such suppliers are choked with big orders, they sometimes parcel out work to subcontractors. In order to get further down the trail, U.S. spy agencies drew on the prodigious tools at their disposal. They sifted through communications intercepts, tapped informants in Taiwan and China, even tracked key individuals through their phones, according to the person briefed on evidence gathered during the probe. Eventually, that person says, they traced the malicious chips to four subcontracting factories that had been building Supermicro motherboards for at least two years.

    As the agents monitored interactions among Chinese officials, motherboard manufacturers, and middlemen, they glimpsed how the seeding process worked. In some cases, plant managers were approached by people who claimed to represent Supermicro or who held positions suggesting a connection to the government. The middlemen would request changes to the motherboards’ original designs, initially offering bribes in conjunction with their unusual requests. If that didn’t work, they threatened factory managers with inspections that could shut down their plants. Once arrangements were in place, the middlemen would organize delivery of the chips to the factories.

    The investigators concluded that this intricate scheme was the work of a People’s Liberation Army unit specializing in hardware attacks, according to two people briefed on its activities. The existence of this group has never been revealed before, but one official says, “We’ve been tracking these guys for longer than we’d like to admit.” The unit is believed to focus on high-priority targets, including advanced commercial technology and the computers of rival militaries. In past attacks, it targeted the designs for high-performance computer chips and computing systems of large U.S. internet providers.

    Provided details of Businessweek’s reporting, China’s Ministry of Foreign Affairs sent a statement that said “China is a resolute defender of cybersecurity.” The ministry added that in 2011, China proposed international guarantees on hardware security along with other members of the Shanghai Cooperation Organization, a regional security body. The statement concluded, “We hope parties make less gratuitous accusations and suspicions but conduct more constructive talk and collaboration so that we can work together in building a peaceful, safe, open, cooperative and orderly cyberspace.”

    The Supermicro attack was on another order entirely from earlier episodes attributed to the PLA. It threatened to have reached a dizzying array of end users, with some vital ones in the mix. Apple, for its part, has used Supermicro hardware in its data centers sporadically for years, but the relationship intensified after 2013, when Apple acquired a startup called Topsy Labs, which created superfast technology for indexing and searching vast troves of internet content. By 2014, the startup was put to work building small data centers in or near major global cities. This project, known internally as Ledbelly, was designed to make the search function for Apple’s voice assistant, Siri, faster, according to the three senior Apple insiders.

    Documents seen by Businessweek show that in 2014, Apple planned to order more than 6,000 Supermicro servers for installation in 17 locations, including Amsterdam, Chicago, Hong Kong, Los Angeles, New York, San Jose, Singapore, and Tokyo, plus 4,000 servers for its existing North Carolina and Oregon data centers. Those orders were supposed to double, to 20,000, by 2015. Ledbelly made Apple an important Supermicro customer at the exact same time the PLA was found to be manipulating the vendor’s hardware.

    Project delays and early performance problems meant that around 7,000 Supermicro servers were humming in Apple’s network by the time the company’s security team found the added chips. Because Apple didn’t, according to a U.S. official, provide government investigators with access to its facilities or the tampered hardware, the extent of the attack there remained outside their view.

    American investigators eventually figured out who else had been hit. Since the implanted chips were designed to ping anonymous computers on the internet for further instructions, operatives could hack those computers to identify others who’d been affected. Although the investigators couldn’t be sure they’d found every victim, a person familiar with the U.S. probe says they ultimately concluded that the number was almost 30 companies.

    That left the question of whom to notify and how. U.S. officials had been warning for years that hardware made by two Chinese telecommunications giants, Huawei Corp. and ZTE Corp., was subject to Chinese government manipulation. (Both Huawei and ZTE have said no such tampering has occurred.) But a similar public alert regarding a U.S. company was out of the question. Instead, officials reached out to a small number of important Supermicro customers. One executive of a large web-hosting company says the message he took away from the exchange was clear: Supermicro’s hardware couldn’t be trusted. “That’s been the nudge to everyone—get that crap out,” the person says.

    Amazon, for its part, began acquisition talks with an Elemental competitor, but according to one person familiar with Amazon’s deliberations, it reversed course in the summer of 2015 after learning that Elemental’s board was nearing a deal with another buyer. Amazon announced its acquisition of Elemental in September 2015, in a transaction whose value one person familiar with the deal places at $350 million. Multiple sources say that Amazon intended to move Elemental’s software to AWS’s cloud, whose chips, motherboards, and servers are typically designed in-house and built by factories that Amazon contracts from directly.

    A notable exception was AWS’s data centers inside China, which were filled with Supermicro-built servers, according to two people with knowledge of AWS’s operations there. Mindful of the Elemental findings, Amazon’s security team conducted its own investigation into AWS’s Beijing facilities and found altered motherboards there as well, including more sophisticated designs than they’d previously encountered. In one case, the malicious chips were thin enough that they’d been embedded between the layers of fiberglass onto which the other components were attached, according to one person who saw pictures of the chips. That generation of chips was smaller than a sharpened pencil tip, the person says. (Amazon denies that AWS knew of servers found in China containing malicious chips.)

    China has long been known to monitor banks, manufacturers, and ordinary citizens on its own soil, and the main customers of AWS’s China cloud were domestic companies or foreign entities with operations there. Still, the fact that the country appeared to be conducting those operations inside Amazon’s cloud presented the company with a Gordian knot. Its security team determined that it would be difficult to quietly remove the equipment and that, even if they could devise a way, doing so would alert the attackers that the chips had been found, according to a person familiar with the company’s probe. Instead, the team developed a method of monitoring the chips. In the ensuing months, they detected brief check-in communications between the attackers and the sabotaged servers but didn’t see any attempts to remove data. That likely meant either that the attackers were saving the chips for a later operation or that they’d infiltrated other parts of the network before the monitoring began. Neither possibility was reassuring.

    When in 2016 the Chinese government was about to pass a new cybersecurity law—seen by many outside the country as a pretext to give authorities wider access to sensitive data—Amazon decided to act, the person familiar with the company’s probe says. In August it transferred operational control of its Beijing data center to its local partner, Beijing Sinnet, a move the companies said was needed to comply with the incoming law. The following November, Amazon sold the entire infrastructure to Beijing Sinnet for about $300 million. The person familiar with Amazon’s probe casts the sale as a choice to “hack off the diseased limb.”

    As for Apple, one of the three senior insiders says that in the summer of 2015, a few weeks after it identified the malicious chips, the company started removing all Supermicro servers from its data centers, a process Apple referred to internally as “going to zero.” Every Supermicro server, all 7,000 or so, was replaced in a matter of weeks, the senior insider says. (Apple denies that any servers were removed.) In 2016, Apple informed Supermicro that it was severing their relationship entirely—a decision a spokesman for Apple ascribed in response to Businessweek’s questions to an unrelated and relatively minor security incident.

    That August, Supermicro’s CEO, Liang, revealed that the company had lost two major customers. Although he didn’t name them, one was later identified in news reports as Apple. He blamed competition, but his explanation was vague. “When customers asked for lower price, our people did not respond quickly enough,” he said on a conference call with analysts. Hayes, the Supermicro spokesman, says the company has never been notified of the existence of malicious chips on its motherboards by either customers or U.S. law enforcement.

    Concurrent with the illicit chips’ discovery in 2015 and the unfolding investigation, Supermicro has been plagued by an accounting problem, which the company characterizes as an issue related to the timing of certain revenue recognition. After missing two deadlines to file quarterly and annual reports required by regulators, Supermicro was delisted from the Nasdaq on Aug. 23 of this year. It marked an extraordinary stumble for a company whose annual revenue had risen sharply in the previous four years, from a reported $1.5 billion in 2014 to a projected $3.2 billion this year.

    One Friday in late September 2015, President Barack Obama and Chinese President Xi Jinping appeared together at the White House for an hourlong press conference headlined by a landmark deal on cybersecurity. After months of negotiations, the U.S. had extracted from China a grand promise: It would no longer support the theft by hackers of U.S. intellectual property to benefit Chinese companies. Left out of those pronouncements, according to a person familiar with discussions among senior officials across the U.S. government, was the White House’s deep concern that China was willing to offer this concession because it was already developing far more advanced and surreptitious forms of hacking founded on its near monopoly of the technology supply chain.

    In the weeks after the agreement was announced, the U.S. government quietly raised the alarm with several dozen tech executives and investors at a small, invite-only meeting in McLean, Va., organized by the Pentagon. According to someone who was present, Defense Department officials briefed the technologists on a recent attack and asked them to think about creating commercial products that could detect hardware implants. Attendees weren’t told the name of the hardware maker involved, but it was clear to at least some in the room that it was Supermicro, the person says.

    The problem under discussion wasn’t just technological. It spoke to decisions made decades ago to send advanced production work to Southeast Asia. In the intervening years, low-cost Chinese manufacturing had come to underpin the business models of many of America’s largest technology companies. Early on, Apple, for instance, made many of its most sophisticated electronics domestically. Then in 1992, it closed a state-of-the-art plant for motherboard and computer assembly in Fremont, Calif., and sent much of that work overseas.

    Over the decades, the security of the supply chain became an article of faith despite repeated warnings by Western officials. A belief formed that China was unlikely to jeopardize its position as workshop to the world by letting its spies meddle in its factories. That left the decision about where to build commercial systems resting largely on where capacity was greatest and cheapest. “You end up with a classic Satan’s bargain,” one former U.S. official says. “You can have less supply than you want and guarantee it’s secure, or you can have the supply you need, but there will be risk. Every organization has accepted the second proposition.”

    In the three years since the briefing in McLean, no commercially viable way to detect attacks like the one on Supermicro’s motherboards has emerged—or has looked likely to emerge. Few companies have the resources of Apple and Amazon, and it took some luck even for them to spot the problem. “This stuff is at the cutting edge of the cutting edge, and there is no easy technological solution,” one of the people present in McLean says. “You have to invest in things that the world wants. You cannot invest in things that the world is not ready to accept yet.”

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    Default Re: Chinese Spies Infiltrating US Businesses

    To add to that last post, there has been a bit of back and forth between those named as affected and others as to whether there is any veracity to the claims or not.

    Will update this post with articles.

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