Chinese Spies Infiltrating US Businesses

[Ryan Ruck]

Chinese Hackers Attacked Oregon Aviation Supplier, Feds Say

October 30, 2018

Federal prosecutors say Chinese intelligence officers and hackers working for them have been charged with commercial espionage that included trying to steal information on commercial jet engines. An unnamed Oregon company was among those attacked, according to the indictment.

Prosecutors say the indictments announced Tuesday include officers working for the foreign intelligence arm of China's Ministry of State Security.

Eight people were indicted in San Diego federal court with conspiring from 2010 to 2015 to steal sensitive turbofan engine technology used in commercial aviation.

Prosecutors say members of the conspiracy hacked into a French aerospace company that was developing the engines with a U.S. company. They also hacked into aerospace companies in Massachusetts, Oregon and Arizona that manufactured engine parts.

A Chinese state-owned aerospace company was working at the time to develop a similar type of engine for use in commercial aircraft.

The Oregon company discovered the hacking attempt in May 2015, according to the indictment. The Justice Department's announcement doesn't identify that company, but says it "built parts for the turbofan jet engine used in commercial airliners" and that the company "identified and removed the conspiracy's malware from its computer systems."

Portland-based Precision Castparts builds parts for fans in commercial jet engines. The company declined to say whether or not it is the business named in Tuesday's indictment but said it frequently works with the FBI to protect its intellectual property and applauded investigators' efforts.

"As a world leader in highly engineered and innovative aerospace products, we continuously work to secure our systems that contain information on our proprietary products and processes," Precision Castparts said in a written statement.

[Ryan Ruck]

U.S. Charges Chinese Spies And Their Recruited Hackers In Conspiracy To Steal Trade Secrets

October 30, 2018

The Justice Department on Tuesday unsealed charges against 10 Chinese spies, hackers and others accused of conspiring to steal sensitive commercial airline and other secrets from U.S. and European companies.

The indictment marks the third time since September that the United States has brought charges against Chinese intelligence officers and their recruits for stealing American intellectual property.

“This is just the beginning,” Assistant Attorney General John Demers said. “Together with our federal partners, we will redouble our efforts to safeguard America’s ingenuity and investment.”

The alleged conspiracy ran for at least five years beginning in 2010, and focused on the theft of technology underlying a turbofan engine used in U.S. and European commercial jets, officials said. The engine was being developed through a partnership between a French company with an office in Suzhou, China, and a U.S. company.

Neither company was identified in the indictment, and none of the alleged conspirators is in U.S. custody.

The superseding indictment was issued Oct. 25 in the Southern District of California.

The defendants hacked the French firm, as well as companies in Arizona, Massachusetts and Oregon that made parts for the jet engine, officials alleged. At the time of the intrusions, a Chinese state-owned aerospace company was developing a comparable commercial jet engine, they said.

The alleged hacking of commercial secrets to benefit a Chinese company took place before Beijing made a pledge to Washington in September 2015 not to conduct such espionage. Experts have said that since then, China’s cyber-enabled commercial spying has resumed, in particular by the Ministry of State Security [MSS], which conducts nonmilitary foreign espionage and handles domestic counterintelligence.

Two of the defendants, Zha Rong and Chai Meng, are officers with the Jiangsu Province Ministry of State Security [JSSD], a provincial arm of the MSS.

Zha Rong is accused of directing the intrusion into the French firm. Chai Meng, who is also known as “Cobain,” coordinated the hackers and the activity of two Chinese employees of the French company, who also were charged for their role in facilitating the technology theft, U.S. officials alleged. Those employees, Gu Gen and Tian Xi, worked in the company’s Suzhou office.

According to the indictment, in January 2014, Tian received malware from his MSS handler and installed it on a company computer. One month later, Gu, who oversaw information security in the French company’s Suzhou office, warned his colleagues when foreign law enforcement notified the company about the malware, U.S. prosecutors said.

As a result, two other defendants erased evidence linking the malware to an account controlled by the Chinese government operatives, prosecutors said.

The first alleged hack took place in January 2010, when the defendants compromised Capstone Turbine, a Los Angeles-based gas turbine manufacturer, to steal data and use its website to spread malware.

Other hacking attempts followed, including against an unidentified San Diego computer technology company whose network was repeatedly compromised, causing thousands of dollars of damage, prosecutors said. In that conspiracy, prosecutors said, Zhang Zhang-Gui, a hacker operating at the direction of the provincial MSS, gave his friend Li Xiao malware that had been developed by the operatives who hacked Capstone Turbine. With that malware, Li was able to hack the San Diego company, prosecutors alleged.

This month, the Justice Department announced that an MSS intelligence officer was extradited to the Southern District of Ohio on charges that he attempted to steal trade secrets related to jet aircraft engines. Last month, a grand jury indicted a U.S. Army recruit accused of working as an agent of a JSSD spy.

[Ryan Ruck]

U.S. Charges Chinese Intelligence Officers For Jet Engine Data Hack

October 30, 2018

Chinese intelligence officers conspired with hackers and company insiders to break into private companies’ computer systems and steal information on a turbo fan engine used in commercial jetliners, according to a U.S. indictment unsealed on Tuesday.

The indictment said that at the time of the hacks, a Chinese-state owned aerospace company was working to develop a comparable engine for use in aircraft manufactured in China and in other countries.

Chinese-made jets, including the C919 and ARJ21, currently use foreign engines but the country has been trying to develop a competitive homegrown alternative.

The 10 people charged conspired to steal sensitive data “that could be used by Chinese entities to build the same or similar engine without incurring substantial research and development expenses,” the indictment released by the U.S. Department of Justice said.

It said more than a dozen companies were targeted, but only Capstone Turbine Corp was identified by name.

The Justice Department said those hacked included a French firm co-developing a turbofan jet engine with a U.S. company.

France’s only civil turbofan engine maker, Safran SA, co-develops engines with U.S.-based General Electric Co through their longstanding CFM International partnership, the world’s biggest jet engine manufacturer by number of units sold.

The venture’s latest engine, known as LEAP, powers the largest category of Airbus SE and Boeing Co jets and includes a version for China’s new passenger plane, the Commercial Aircraft Corporation of China (COMAC) C919.

A Safran spokesman in China declined to comment and the company’s French head office could not be contacted outside normal business hours.

GE declined to comment.

The indictment charges Zha Rong and Chai Meng along with other co-conspirators who worked for the Jiangsu province Ministry of State Security, a unit of the foreign intelligence arm of the Ministry of State Security.

It says their efforts to steal sensitive commercial aviation and other data took place from January 2010 through May 2015.

Chinese Foreign Ministry spokesman Lu Kang said the charges were groundless.

“The relevant accusations are pure fiction and totally fabricated,” he told reporters in Beijing, without elaborating.

This is the third major corporate espionage-related case involving Chinese intelligence officers brought by the Justice Department since last month.

In late September, a Chinese national who had also enlisted in the U.S. Army Reserve was arrested in Chicago for working for Chinese intelligence to recruit engineers and scientists, including some who worked for U.S. defense contractors.

In October, the Justice Department also announced it had arrested a spy for China’s Ministry of State Security on charges of economic espionage and attempting to steal trade secrets from several U.S. aviation and aerospace companies.

In that matter, the FBI said the extradition of Chinese operative Xu Yanjun from Belgium was unprecedented, and the case highlighted the Chinese government’s direct control over economic espionage in the United States.

John Demers, the head of the Justice Department’s National Security Division, highlighted the pattern of the three cases in a public statement.

“This is just the beginning,” he said. “Together with our federal partners, we will redouble our efforts to safeguard America’s ingenuity and investment.”