The Chinese have stolen America's Secrets

[vector7]

February 28, 2010
Stealing America's Secrets

60 Minutes has obtained an FBI videotape showing a Defense Department employee selling secrets to a Chinese spy that offers a rare glimpse into the secretive world of espionage. Scott Pelley reports.

A sobering moment at 5:30 into the interview.

[American Patriot]

Wait for it...

"NO SHIT!? REALLY?"


OMG where the HELL was CBS when Clinton was in office again??? Oh, SHILLING for him. Sorry. I forgot.

[vector7]

China, Russia on U.S. 'priority watch' list over copyright piracy+

Apr 30 06:11 PM US/EasternWASHINGTON, April 30 (AP) - (Kyodo)—The United States retained China and Russia on a priority watch list Friday for failing to fight rampant piracy of U.S. patents and copyrights, and called for improvement of the situations. "Intellectual property theft in overseas markets is an export killer for American businesses and a job killer for American workers here at home," U.S. Trade Representative Ron Kirk said in releasing an annual report reviewing global intellectual property rights protection.

The USTR said in the report under the Special 301 provision of the 1974 Trade Act that China's enforcement of IPR and implementation of relevant rules under the World Trade Organization remain top priorities for the United States.

The report said China's IPR enforcement regime remains "largely ineffective and non-deterrent" and that U.S. copyright holders suffered "severe losses" due to piracy in China.

"We are seriously concerned about China's implementation of 'indigenous innovation' policies that may unfairly disadvantage U.S. IPR holders," Kirk said in a statement.

Procurement preferences and other measures favoring such policies "could severely restrict market access for American technology and products," the top U.S. trade negotiator said.

The USTR report also urged Beijing to take strong action to curb trademark counterfeiting and copyright piracy on the Internet by significantly increasing criminal prosecutions and other enforcement actions against such offenders.

The United States also called on Russia to enhance its enforcement efforts against piracy and counterfeiting, particularly on the Internet.

The other nine countries on the priority watch list are Algeria, Argentina,Canada, Chile, India, Indonesia, Pakistan, Thailand and Venezuela.

Countries on the priority watch list are considered not to provide an adequate level of IPR protection or enforcement, or market access for those relying on intellectual property protection.

[Ryan Ruck]

CIA Applicant's Arrest Tops Wave Of China Spy Cases

July 20, 2010

A young Michigan man was quietly arrested last month and charged with lying on a CIA job application about his connection with Chinese intelligence, a case that drew virtually no attention outside his home state.

Glenn Duffie Shriver, 28, of Georgetown Township, Mich., tried to conceal $70,000 in payments from the Beijing government and denied his “numerous” meetings with Chinese intelligence officials, according to the government’s indictment.

The indictment doesn’t say what kind of work he was seeking at the CIA. It could not be learned if Shriver had yet entered a plea.

His mother, Karen Chavez, declined to comment on her son's case except to say he "deserves a fair shake."

"He's a good kid. He loves the United States," Chavez told the Grand Rapids Press.

"We thought he was applying for a job to help and use his skills for the United States. He hasn't had any contact back with China for at least five years, maybe six."

Shriver’s arrest on June 22 is just the latest in a virtual tsunami of prosecutions against suspected Chinese agents in the past two years. Many cases are hidden and ongoing.

But more than 40 Chinese and American citizens have been quietly prosecuted -- most of them successfully -- on espionage-related charges in just a little over two years, according to information supplied by the Justice Department. The figure dwarfs the number of Russian spies expelled earlier this month, creating an international sensation.

Lacking a glamorous Mata Hari like the curvaceous Russian spy Anna Chapman, however, almost all the Chinese cases were prosecuted with little fanfare, one at a time, over a period of 28 months.

Also, unlike the spectacular arrests of Russian moles inside the CIA and FBI during the Cold War, the Chinese cases reveal a long-term, even plodding drive by Beijing to acquire U.S. technical and economic -- more than political -- secrets by any means necessary.

“In recent years, the Justice Department has handled an increasing number of prosecutions involving sensitive American weapons technology, trade secrets and other restricted information bound for China,” said Dean Boyd, a spokesman for the Justice Department's National Security Division.

“Some of these cases have involved individuals operating on behalf of the Chinese government or intelligence. Many others have involved private-sector businessmen, scientists, students, or others collecting sensitive U.S. technology or data that is routed to China.”

Requests for comment from Chinese officials were not immediately answered.

At SpyTalk's request, Boyd supplied a compendium of successful federal prosecutions involving espionage and espionage-related charges against Chinese agents, which he cautioned may not be complete.

The list revealed that the Justice Department had convicted 44 individuals in 26 cases since March 2008, almost all of whom are now serving time in federal prisons.

[American Patriot]

RECENT ESPIONAGE-RELATED PROSECUTIONS INVOLVING CHINA
CIA Applicant Charged with Lying About Affiliation with Chinese Intelligence – On June 22, 2010, Glenn Duffie Shriver was indicted in the Eastern District of Virginia on five counts of making false statements on a 2007 application that he filed for employment with the CIA and during subsequent interviews conducted in June 2010. According to the indictment, Shriver falsely represented that he had not any contact with or received any money from any foreign government or intelligence service. In fact, Shriver had previously traveled to the People’s Republic of China (PRC) and met with intelligence officers of the PRC on numerous occasions and had received a total of $70,000 from intelligence officers of the PRC. Shriver was arrested on June 22, 2010, in Detroit as he was attempting to travel to South Korea.

Defense Department Official Convicted of Providing Classified Information to Chinese Agent – On Sept. 25, 2009, James Wilbur Fondren Jr., a Pentagon official who served as the Deputy Director of the Washington Liaison Office, U.S. Pacific Command, was convicted by a federal jury in the Eastern District of Virginia on one charge of unlawfully communicating classified information to an agent of the People’s Republic of China (PRC) and two counts of making false statements to the FBI. From November 2004 to February 2008, Fondren provided certain classified Defense Department documents and other information to Tai Shen Kuo, an agent of the PRC who he was aware maintained a close relationship with an official of the PRC. Fondren provided classified information via “opinion papers” that he sold to Kuo. Fondren also provided Kuo with sensitive, but unclassified Defense Department publications.

Defense Department Official and Two Others Plead Guilty in Espionage Case Involving China -- On March 31, 2008, Gregg William Bergersen, a former Weapons Systems Policy Analyst at the Defense Security Cooperation Agency, an agency within the Department of Defense, pleaded guilty in the Eastern District of Virginia to a one-count criminal information charging him with conspiracy to disclose national defense information to persons not entitled to receive it. Bergersen provided national defense information on numerous occasions to Tai Shen Kuo, a New Orleans businessman. Working under the direction of an official of the People’s Republic of China (PRC), Kuo cultivated friendships with Bergersen and others within the U.S. government and obtained from them—for ultimate passage to the PRC—sensitive U.S. government information, including classified national defense information. Much of the information pertained to U.S. military sales to Taiwan and was classified at the Secret level. During the course of the conspiracy, Kuo bestowed on Bergersen gifts, cash payments, dinners, and money for gambling during trips to Las Vegas. Unbeknownst to Bergersen, Kuo passed along to the Chinese government official the information that Bergersen had provided him. In some meetings with Kuo, Bergersen cautioned that the information he was providing was classified. Bergersen faces up to ten years in prison. On May 13, 2008, Kuo pleaded guilty to conspiracy to deliver national defense information to a foreign government, namely, the PRC, in connection with the case. Kuo is scheduled to be sentenced on August 8, 2008 and faces a possible life sentence. On May 28, 2008, Yu Xin Kang, of New Orleans, La., pleaded guilty to a one-count criminal information charging her with aiding and abetting an unregistered agent of the PRC. As part of the conspiracy, Kang assisted Kuo by periodically serving as a conduit for information between Kuo and the PRC official.

RECENT TECHNOLOGY TRANSFER / EXPORT / ECONOMIC ESPIONAGE / FOREIGN AGENT PROSECUTIONS INVOLVING CHINA

CHITRON - Electronics Used in Military Radar & Electronic Warfare to China – On May 17, 2010, Zhen Zhou Wu, Yufeng Wei and Chitron Electronics, Inc. were convicted at trial in the District of Massachusetts of conspiring to violate U.S. export laws over a period of ten years and illegally exporting defense articles and Commerce Department-controlled electronics equipment from the United States to China. Several Chinese military entities were among those receiving the exported equipment. Wu and Wei were also both convicted of filing false shipping documents with the U.S. government. As proven at trial, defendants illegally exported military electronic components to China through Hong Kong. The electronics exported are primarily used in military phased array radar, electronic warfare, military guidance systems, and military satellite communications. The defendants also illegally exported Commerce Department-controlled electronics components to China with military applications such as electronic warfare, military radar, and satellite communications systems. Wu founded and controlled Chitron, with headquarters in Shenzhen, China and a U.S. office located in Waltham, Mass., where defendant Wei served as Manager. Wu and Chitron sold electronics from the U.S. to Chinese military factories and military research institutes, including numerous institutes of the China Electronics Technology Group Corporation, which is responsible for the procurement, development and manufacture of electronics for the Chinese military. Since as early as 2002, Wu referred to Chinese military entities as Chitron’s major customer and employed an engineer at Chitron’s Shenzhen office to work with Chinese military customers. By 2007, 25% of Chitron’s sales were to Chinese military entities. Shenzhen Chitron Electronics Company Limited, Wu’s Chinese company through which U.S. electronics were delivered tothe Chinese military and other end-users, was also indicted. The court has entered a contempt order against Chitron-Shenzhen for refusing to appear for trial and fined the corporation $1.9 million dollars. Co-defendant Bo Li, aka Eric Lee, previously pled guilty to making false statements on shipping documents, and faces five years in prison and a $1 million fine. Sentencing is scheduled for July 22, 2010 in Boston. The case was investigated by the Commerce Department’s Office of Export Enforcement; ICE; FBI; and Defense Criminal Investigative Service.

Thermal Imaging Cameras to China – On May 14, 2010, Sam Ching Sheng Lee, part-owner and Chief Operations Manager of Multimillion Business Associate Corporation ("MBA"), pleaded guilty in the Central District of California to conspiracy to violate the International Emergency Economic Powers (IEEPA) for illegally exporting national security-controlled thermal imaging cameras to China. His nephew, Charles Yu Hsu Lee, pleaded guilty the same day to misprision of a felony for the same activity. The Lees were arrested on Dec. 30, 2008 in Hacienda Heights, Ca, pursuant to a Dec. 16, 2008 indictment charging them with conspiracy to export and exporting national security-controlled items without a license in violation of the IEEPA. The indictment alleged thatthe defendants, doing business as MBA, an import/export business located in Hacienda Heights, assisted persons in China to illegally procure export controlled thermal-imaging cameras. During the period between April 2002 and July 2007, defendants allegedly exported a total of ten thermal-imaging cameras to China in circumvention of export laws. After being advised of strict export restrictions, Charles Lee allegedly purchased the cameras from U.S. suppliers for approximately $9,500 a piece by withholding the fact that
the devices were destined to China. His uncle, Sam Lee, then received the devices and through his company, arranged for their shipment to Shanghai, China without obtaining proper licenses. One of the recipients is alleged to be an employee of a company in Shanghai engaged in the development of infrared technology. The thermal-imaging cameras are controlled for export to China by the Department of Commerce for national security and regional stability reasons because of their use in a wide variety of military and civilian applications. This investigation was conducted by the EAGLE Task Force in the Central District of California.

Sensitive Military Encryption Technology to China – On May, 11, 2010, Chi Tong Kuok, a resident of Macau, China, was convicted by a jury in the Southern District of California for his alleged efforts to acquire sensitive defense technology used in encrypted U.S. military or government communications from U.S. sellers and to cause these items to be illegally exported to China. AJuly 7, 2009 indictment charged Kuok with conspiracy to export defense articles and smuggle goods from the United States, smuggling goods from the United States, attempted export of defense articles and money laundering. Kuok was arrested on June 17, 2009 in Atlanta, Ga., as he was en route from Macau to Panama via Paris in order to meet with undercover federal agents to take possession of controlled U.S. technology. Among other things, Kuok allegedly negotiated with undercover agents to obtain PRC-148 radios and a KG-175 Taclane Encryptor. The PRC-148 is a multi-band radio used most commonly by U.S. Special Forces. The KG-175 Taclane Encryptor was developed by General Dynamics under a contract with the National Security Agency for use by the U.S. military to encrypt Internet Protocol communications. This investigation was conducted by ICE and DCIS.

Carbon-Fiber Material with Rocket & Spacecraft Applications to China – On Oct. 8, 2009, three individuals were sentenced in the District of Minnesota for illegally exporting high-modulus, carbon fiber material to the China Academy of Space Technology. Jian Wei Ding was sentenced to 46 months in prison. Kok Tong Lim was sentenced to just over one year of confinement because of his cooperation in the case, while Ping Cheng was sentenced to one year probation due to his cooperation in the investigation. On March 20, 2009, Ding pleaded guilty to one count of conspiracy to violate the Export Administration Regulations. Cheng entered his plea on Feb. 13, 2009 and Lim entered his plea on March 9, 2009. All three men were indicted on Oct. 28, 2008 forconspiring to illegally export to China controlled carbon-fiber material with applications in aircraft, rockets, spacecraft, and uranium enrichment process. The intended destination for some ofthe materials was the China Academy of Space Technology, which oversees research institutes working on spacecraft systems for the PRC government. For national security, nuclear proliferation and antiterrorism reasons, the U.S. government requires a license to export these carbon-fiber materials. Jian Wei Ding was a resident of Singapore and owned or was a affiliated with various Singaporean import/export companies, including Jowa Globaltech Pte Ltd, FirmSpace Pte Ltd, and Far Eastron Co. Pte Ltd. Kok Tong Lim was a resident of Singapore and once was affiliated withFirmSpace, Pte Ltd. Ping Cheng was a resident of New York and the sole shareholder of Prime Technology Corporation. This investigation was conducted by ICE and BIS.

Restricted Integrated Circuits with Military Applications to China – On Aug. 3, 2009, William Chai-Wai Tsu, an employee of a Beijing-based military contracting company called Dimigit Science & Technology Co. Ltd, and the vice president of a Hacienda Heights, CA, front company called Cheerway, Inc., was sentenced in the Central District of California to 40 months in prison. Tsu illegally exported more than 400 restricted integrated circuits with applications in military radar systems to China over a 10-month period, according to court documents. These dual-use items are restricted for export for national security reasons. Tsu purchased many of the items from U.S.-distributors after falsely telling these U.S. companies that he was not exporting the circuits abroad. According to court documents, Tsu supplied restricted U.S. technology to several customers in China, including the “704 Research Institute,” which is known as the “Aerospace Long March Rocket Technology Company” and is affiliated with the state-owned China Aerospace Science & Technology Corporation. Tsu’s employer in China, Dimigit, boasted in brochures that its mission was “providing the motherland with safe, reliable and advanced electronic technical support in the revitalization of our national military industry.” Tsu was indicted in the Central District of California on Feb. 6, 2009 on charges of violating the International Emergency Economic Powers Act. He later pleaded guilty to two federal counts of the indictment on March 13, 2009. This case was the product of an investigation by the Export and Anti-proliferation Global Law Enforcement (EAGLE) Task Force in the Central District of California, which includes BIS, ICE, FBI, CBP, Diplomatic Security Service and the Transportation Security Administration.

Restricted Thermal Imaging Technology to China – On July 27, 2009, Zhi Yong Guo, a resident of Beijing, was sentenced in the Central District of California to 60 months in prison, while Tah Wei Chao, also a resident of Beijing, was sentenced to 20 months in prison. Both were sentenced in connection with a plot to procure and illegally export thermal-imaging cameras to the People’s Republic of China without obtaining the required export licenses. Guo and Chao were indicted on federal charges on July 17, 2008. Chao pleaded guilty to three federal counts in July 2008. On Feb. 23, 2009, following a one-week trial, Guo was convicted of two federal counts. The case related to ten cameras concealed in luggage destined for China in April 2008. The export of these thermal-imaging cameras to China are controlled by the Department of Commerce for national security and regional stability reasons because of their use in a wide variety of civilian and military applications. In March 2008, Chao ordered 10 thermal-imaging cameras from FLIR Systems, Inc. for $53,000. Representatives from FLIR Systems repeatedly warned Chao that the cameras could not be exported without a license. Both Chao and Guo were arrested at Los Angeles International Airport in April 2008 after authorities recovered the ten cameras that had been hidden in their suitcases. In addition to the 10 cameras intercepted by federal authorities, Chao admitted that, acting at the behest of Guo, he shipped three cameras to China in October 2007. The evidence at trial showed that Guo, an engineer and a managing director of a technology development company in Beijing, directed Chao to obtain the cameras for Guo’s clients, the Chinese Special Police and the Special Armed Police. This case was the product of an investigation by the Export and Anti-proliferation Global Law Enforcement (EAGLE) Task Force in the Central District of California, including BIS, ICE, FBI, CBP, DSS, and TSA.

Economic Espionage / Theft of Space Shuttle and Rocket Secrets for China – On July 16, 2009, former Rockwell and Boeing engineer Dongfan “Greg” Chung was convicted at a bench trial in the Central District of California of charges of economic espionage and acting as an illegal agent of the People’s Republic of China (PRC), for whom he stole restricted technology and Boeing trade secrets, including information related to the Space Shuttle program and the
Delta IV rocket. According to the judge’s ruling, Chung served as an illegal agent of China for more than 30 years and kept more than 300,000 pages of documents reflecting Boeing trade secrets stashed in his home as part of his mission of steal aerospace and military trade secrets from Boeing to assist the Chinese government. Chung sent Boeing trade secrets to the PRC via the mail, via sea freight, via the Chinese consulate in San Francisco, and via a Chinese agent named Chi Mak. On several occasions, Chung also used the trade secrets that he misappropriated from Boeing to prepare detailed briefings that he later presented to Chinese officials in the PRC. On Feb. 8, 2010, Chung was sentenced to nearly 16 years in prison (188 months) in the Central District of California. Chung was originally arrested on Feb. 11, 2008, in Southern California after being indicted on eight counts of economic espionage, one count of conspiracy to commit economic espionage, one count of acting as an unregistered foreign agent, one count of obstruction of justice, and three counts of making false statements to the FBI. According to the indictment, individuals in the Chinese aviation industry began sending Chung “tasking” letters as early as 1979. Over the years, the letters directed Chung to collect specific technological information, including data related to the Space Shuttle. Chung responded in one letter indicating a desire to contribute to the “motherland.” In various letters to his handlers in the PRC, Chung referenced engineering manuals he had collected and sent to the PRC, including 24 manuals relating to the B-1 Bomber that Rockwell had prohibited from disclosure outside of the company. The investigation was conducted by the FBI and NASA.

Military Technical Data on Unmanned Aerial Vehicles to China – On July 1, 2009, Dr. John Reece Roth was sentenced in the Eastern District of Tennessee to 48 months in prison followed by two years supervised release for illegally exporting sensitive military technical data related to a U.S. Air Force contract. Roth, a former Professor Emeritus at the University of Tennessee, was convicted on Sept. 2, 2008 of 15 counts of violating the Arms Export Control Act, one count of conspiracy, and one count of wire fraud. Roth had illegally exported military technical data relating to plasma technology designed to be deployed on the wings of Unmanned Aerial Vehicles (UAVs) or “drones” operating as a weapons or surveillance systems. The illegal exports involved technical data related to an Air Force research contract that Roth provided to foreign nationals from China and Iran. In addition, Roth carried multiple documents containing controlled military data with him on a trip to China and caused other controlled military data to be e-mailed to an individual in China. On Aug. 20, 2008, Atmospheric Glow Technologies, Inc (AGT), a privately-held plasma technology company in Tennessee, also pleaded guilty to charges of illegally exporting U.S. military data about drones to a citizen of China in violation of the Arms Export Control Act. Roth and AGT were first charged on May 20, 2008 in an 18-count indictment. In a related case, on April 15, 2008, Daniel Max Sherman, a physicist who formerly worked at AGT, pleaded guilty to an information charging him with conspiracy to violate the Arms Export Control Act in connection with this investigation. Sherman was later sentenced to 14 months in prison on Aug. 10, 2009 after cooperating in the investigation. The investigation was conducted by the FBI, ICE, U.S. Air Force Office of Special Investigations, DCIS and BIS.

Military Night Vision Technology to China – On July 1, 2009, Bing Xu, of Nanjing, China, was sentenced in the District of New Jersey to 22 months in prison followed by two years of supervised release after pleading guilty on Feb. 24, 2009, to conspiracy to illegally export military-grade night vision technology to China. Xu, a manager at Everbright Science and Technology, Ltd, a company in Nanjing, China, admitted that he conspired with others at Everbright to purchase certain night-vision technology from a company in the United States, which required a license from the State Department for export. Xu admitted that he and others at Everbright first attempted to obtain the necessary export license for the night-vision equipment. When the license application was denied by the Department of State, Xu agreed with others at Everbright to take steps to export the night-vision optical equipment illegally. Xu has been in custody since his arrest in on October 2007 pursuant to a criminal complaint. Xu arrived in New York on Oct. 26, 2007 from China a day after his Chinese employer wire transferred $14,080 to agents as payment for the purchase of the equipment. The investigation was conducted by ICE and the DCIS.

Thermal Imaging Cameras to China – On June 9, 2009, a federal grand jury in the Southern District of Ohio indicted Hing Shing Lau, also known as Victor Lau, a foreign national living in Hong Kong, Peoples Republic of China, on charges of trying to buy 12 infrared thermal imaging cameras from a Dayton-area company in order to illegally export the cameras to Hong Kong and China. The indictment alleges that Lau tried to buy 12 thermal imaging cameras manufactured in Texas by contacting a company in the Dayton area. On three occasions, he wired transferred a total of $39,514 from Hong Kong to the U.S. as partial payment for the cameras. The indictment charges Lau with two counts of violating export control laws and four counts of money laundering. Canadian authorities arrested Lau on June 3 at the Toronto International Airport pursuant to a provisional arrest warrant issued by U.S. authorities. The investigation was conducted by the FBI, and BIS, with the assistance of the U.S. Department of State.

Amplifiers & Missile Target Acquisition Technology to China – On May 14, 2009, Joseph Piquet, the owner and President of AlphaTronX, a company in Port St. Lucie, Fla., that produces electronic components, was sentenced in the Southern District of Florida to 60 months in prison followed by two years supervised release. On March 5, 2009, he was convicted of seven counts arising from a conspiracy to purchase military electronic components from Northrop Grumman Corporation, and to ship them to Hong Kong and the People’s Republic of China without first obtaining required export licenses under the Arms Export Control Act and the International Emergency Economic Powers Act. Among those items involved in the conspiracy were high-power amplifiers designed for use by the U.S. military in early warning radar and missile target acquisition systems, as well as low noise amplifiers that have both commercial and military use. Piquet was first indicted on June 5, 2008, along with his company, AlphaTronX, Inc, as well as Thompson Tam, and Ontime Electronics Technology Limited. Tam is a director of Ontime Electronics, an electronics company in China. This investigation was conducted by BIS and ICE.

Trade Secrets to China – On April 10, 2009 Yan Zhu, a Chinese citizen in the U.S. on a work visa, was arrested in the District of New Jersey on charges of theft of trade secrets, conspiracy, wire fraud, and theft of honest services fraud in connection with a plot to steal software from his former U.S. employer and sell a modified version to the Chinese government after he was fired. Zhu was employed as a senior environmental engineer from May of 2006 until his termination in July of 2008. Zhu worked for a comprehensive multi-media environmental information management portal that developed a proprietary software program for the Chinese market which allows users to manage air emissions, ambient water quality, and ground water quality. This investigation was conducted by the FBI.

Restricted Technology to China – On April 7, 2009, Fu-Tain Lu was arrested in San Francisco pursuant to an April 1, 2009 indictment in the Northern District of California charging him with lying to federal agents and conspiring to illegally export restricted microwave amplifier technology to China. According to the indictment, Lu, and the two companies he founded, Fushine Technology, Inc., of Cupertino, Calif., and Everjet Science and Technology Corporation, based in China, conspired to export sensitive microwave amplifier technology that was restricted for national security reasons to China without first obtaining a Commerce Department license. This investigation was conducted by the Department of Commerce (BIS), the FBI, ICE, and U.S. Customs and Border Protection.

Rocket / Space Launch Technical Data to China – On April 7, 2009, Shu Quan-Sheng, a native of China, naturalized U.S. citizen and PhD physicist, was sentenced to 51 months in prison forillegally exporting space launch technical data and defense services to the People’s Republic of China (PRC) and offering bribes to Chinese government officials. Shu pleaded guilty on Nov. 17, 2008, in the Eastern District of Virginia to a three-count criminal information. He was arrested on Sept. 24, 2008. He was the President, Secretary and Treasurer of AMAC International, a high-tech company located in Newport News, Va., and with an office in Beijing, China. Shu provided the PRC with assistance in the design and development of a cryogenic fueling system for space launch vehicles to be used at the heavy payload launch facility located in the southern island province of Hainan, PRC. The Hainan facility will house launch vehicles designed to send space stations and satellites into orbit, as well as provide support for manned space flight and future lunar missions. Shu also illegally exported to the PRC technical data related to the design and manufacture of a “Standard 100 M3 Liquid Hydrogen (LH) 2 Tank. In addition, Shu offered approximately $189,300 in bribes to government officials with the PRC’s 101 Institute to induce the award of a hydrogen liquefier project to a French company he represented. In January 2007, the $4 million hydrogen liquefier project was awarded to the French company that Shu represented. This investigation was conducted by the FBI, ICE, BIS and DCIS.

Restricted Electronic Components to China – On Jan. 20, 2009, Michael Ming Zhang and Policarpo Coronado Gamboa were arrested pursuant to indictments in the Central District of California charging them with separate schemes involving the illegal export of controlled U.S. electronic items to China and the illegal trafficking of counterfeit electronic components from China into the United States. Zhang was the president of J.J. Electronics, a Rancho Cucamonga, CA, business, while Gamboa owned and operated Sereton Technology, Inc., a Foothill Ranch, CA, business. Zhang allegedly exported to China dual-use electronic items that have uses in U.S. Army battle tanks. He also allegedly imported and sold in the United States roughly 4,300 Cisco electronic components bearing counterfeit marks from China. Gamboa is charged with conspiring with Zhang to import Sony electronic components with counterfeit marks from China for distribution in the United States. The case was investigated by the FBI, BIS, DCIS, ICE, the U.S. Postal Inspection Service, and the Orange County Sheriff’s Department, in conjunction with the EAGLE Task Force in the Central District of California.

Motorola Trade Secrets to China -- On Dec. 9, 2008, in the Northern District of Illinois, Hanjuan Jin was charged in a superseding indictment that added three counts of economic espionage in violation of 18 U.S.C. § 1831. The charges were added to an April 1, 2008, indictment that charged Jin with theft of trade secrets under 18 U.S.C. § 1832. Jin is a former Motorola employee who started with the company in 1998. On February 28, 2007, one day after quitting Motorola, Jin was stopped at O’Hare airport with over 1,000 Motorola documents in her possession, both in hard copy and electronic format. A review of Motorola computer records showed that Jin accessed a large number of Motorola documents late at night. At the time she was stopped, Jin was traveling on a one-way ticket to China. The section 1831 charges are based on evidence that Jin intended that the trade secrets she stole from Motorola would benefit the Chinese military.Motorola had spent hundreds of millions of dollars on research and development for the proprietary data that Jin allegedly stole. The investigation was conducted by the FBI, with assistance from U.S Customs and Border Protection.

Stolen Trade Secrets to Chinese Nationals – On Nov. 21, 2008, Fei Ye and Ming Zhong were sentenced in the Northern District of California to one year in prison each, based in part on their cooperation, after pleading guilty on Dec. 14, 2006 to charges of economic espionage for possessing trade secrets stolen from two Silicon Valley technology companies. The pair admitted that their company was to have provided a share of any profits made on sales of the stolen chips to Chinese entities. The case marked the first convictions in the nation for economic espionage. They were first indicted on Dec. 4, 2002. The investigation was conducted by ICE, FBI and CBP.

Military Accelerometers to China – On Sept. 26, 2008, Qing Li was sentenced in the Southern District of California to 12 months and one day in custody, followed by three years of supervised released, and ordered to pay $7,500 for conspiracy to smuggle military-grade accelerometers from the United States to the People’s Republic of China (PRC). Li pleaded guilty on June 9, 2008 to violating Title 18, USC Section 554. She was indicted for the offense on Oct. 18, 2007. According to court papers, Li conspired with an individual in China to locate and procure as many as 30 Endevco 7270A-200K accelerometers for what her co-conspirator described as a “special” scientific agency in China. This accelerometer has military applications in “smart” bombs and missile development and in calibrating the g-forces of nuclear and chemical explosions. The investigation was conducted by ICE and the DCIS.

Military Aircraft Components to China and Iran -- On Aug. 28, 2008, Desmond Dinesh Frank, a citizen and resident of Malaysia, was sentenced to 23 months in prison after pleading guilty on May 16, 2008, to several felonies in the District of Massachusetts in connection with a plot to illegally export military items to China and Iran. A six-count indictment returned on Nov. 15, 2007 charged Frank, the operator of Asian Sky Support, Sdn., Bhd., in Malaysia, with conspiring to illegally export items to Iran, conspiring to illegally export C-130 military aircraft training equipment to China, illegally exporting defense articles, smuggling, and two counts of money laundering. Frank was arrested in Hawaii on Oct. 8, 2007 by ICE agents. Frank conspired with others to illegally export and cause the re-export of goods, technology and services to Iran without first obtaining the required authorization from the Treasury Department. He also conspired with others to illegally export ten indicators, servo driven tachometers -- which are military training components used in C-130 military flight simulators -- from the United States to Malaysia and ultimately, to Hong Kong, China, without the required license from the State Department. This investigation was conducted by ICE, BIS, and DCIS.

U.S. Military Source Code and Trade Secrets to China – On June 18, 2008, Xiaodong Sheldon Meng was sentenced in the Northern District of California to 24 months in prison, three-years of supervised release, and a $10,000 fine for committing economic espionage and violating the Arms Export Control Act. Meng pleaded guilty in August 2007 to violating the Economic Espionage Act by misappropriating a trade secret used to simulate motion for military training and other purposes, with the intent to benefit China’s Navy Research Center in Beijing. He also pleaded guilty to violating the Arms Export Control Act for illegally exporting military source code involving a program used for training military fighter pilots. Meng was the first defendant in the country to be convicted of exporting military source code pursuant to the Arms Export Control Act. He was also the first defendant to be sentenced under the Economic Espionage Act. Meng was charged in a superseding indictment on Dec. 13, 2006. The investigation was conducted by FBI and ICE.

Controlled Amplifiers to China – On June 6, 2008, WaveLab, Inc. of Reston, Virginia, was sentenced in the Eastern District of Virginia to one year of supervised probation and a $15,000 fine, together with $85,000 in forfeiture previously ordered, for the unlawful export of hundreds of controlled power amplifiers to China. The exported items, which have potential military applications, are controlled and listed on the Commerce Control List for national security reasons. Wave Lab purchased these items from a U.S. company and assured the company that the products would not be exported from the United States, but would be sold domestically. WaveLab pleaded guilty on March 7, 2008 to a criminal information filed the same day. The investigation was conducted by BIS and ICE.

Chinese Agent Sentenced for Exporting Defense Articles to China – On March 24, 2008, Chi Mak, a former engineer for defense contractor Power Paragon, is sentenced in the U.S. District Court for the Central District of California to 293 months (more than 24 years) in prison for orchestrating a conspiracy to obtain U.S. naval warship technology and to illegally export this material to the People’s Republic of China (PRC). Mak was found guilty at trial in May 2007 of conspiracy, two counts of attempting to violate export control laws, acting as an unregistered agent of a foreign government and making false statements. The investigation revealed that Mak had been given “tasking” lists from the PRC that requested specific defense information, including U.S. Naval research related to nuclear-powered submarines and other data. Mak gathered technical data about the Navy’s current and future warship technology and conspired with others to illegally export this data to the PRC. After Mak was convicted at trial, his four co-conspirators pleaded guilty. Chi Mak’s brother, Tai Mak, and Chi Mak’s wife, Rebecca Chiu, are scheduled to be sentenced in April and May 2008, respectively. Chi Mak’s sister-in-law, Fuk Li, and nephew, Billy Mak, were previously sentenced to time served and face deportation to China. On April 21, 2008, Chi Mak’s brother, Tai Mak, was sentenced to 10 years imprisonment pursuant to a June 4, 2007, plea agreement in which he pleaded guilty to one count of conspiracy to export defense articles.

[Ryan Ruck]

U.S. Man Snared In Chinese Weapons Sting

December 7, 2010

A man from Washington state is charged with trying to smuggle sensitive military technology to China following a sting operation, the FBI said.

Lian Yang, 46, appeared in U.S. District Court in Seattle to face charges for violating the Arms Export Control Act after his arrest Friday for allegedly trying to sell military secrets to Beijing.

The FBI said it had information to suggest Yang was looking for ways to purchase and smuggle sensitive technology from the United States earlier this year. He was arrested last week after meeting with undercover officers to allegedly exchange cash for the restricted items.

The FBI accuses Yang of trying to buy and export 300 radiation-hardened, programmable semiconductor devices used in satellites in violation of export restrictions.

"The Arms Export Control Act is a critical safeguard for our nation," said U.S. Attorney for the Western District of Washington Jenny Durkan in a statement. "Our national security and economic competitiveness rely on vigorous protection of our sensitive technologies."

The FBI alleges that Yang "contemplated" setting up a shell company to facilitate the sale.

He faces up to five years in prison if convicted of the charges.

[vector7]

Chinese Espionage and French Trade Secrets

By Sean Noonan

Paris prosecutor Jean-Claude Marin on Jan. 14 began an inquiry into allegations of commercial espionage carried out against French carmaker Renault. The allegations first became public when Renault suspended three of its employees on Jan. 3 after an internal investigation that began in August 2010. Within days, citing an anonymous French government source, Reuters reported that French intelligence services were looking into the possibility that China played a role in the Renault espionage case. While the French government refused to officially confirm this accusation, speculation has run wild that Chinese state-sponsored spies were stealing electric-vehicle technology from Renault.

The Chinese are well-known perpetrators of industrial espionage and have been caught before in France, but the details that have emerged so far about the Renault operation differ from the usual Chinese method of operation. And much has been learned about this MO just in the last two years across the Atlantic, where the United States has been increasingly aggressive in investigating and prosecuting cases of Chinese espionage. If Chinese intelligence services were indeed responsible for espionage at Renault it would be one of only a few known cases involving non-Chinese nationals and would have involved the largest amount of money since the case of the legendary Larry Wu-Tai Chin, China’s most successful spy.

STRATFOR has previously detailed the Chinese intelligence services and the workings of espionage with Chinese characteristics. A look back at Chinese espionage activities uncovered in the United States in 2010, since our latest report was compiled, can provide more context and detail about current Chinese intelligence operations.

Chinese Espionage in the U.S.

We chose to focus on operations in the United States for two reasons.

First, the United States is a major target for Chinese industrial espionage. This is because it is a leader in technology development, particularly in military hardware desired by China’s expanding military, and a potential adversary at the forefront of Chinese defense thinking.

Second, while it is not the only country developing major new technologies in which China would be interested, the United States has been the most aggressive in prosecuting espionage cases against Chinese agents, thereby producing available data for us to work with.

Since 2008, at least seven cases have been prosecuted each year in the United States against individuals spying for China. Five were prosecuted in 2007. Going back to about 2000, from one to three cases were prosecuted annually, and before that, less than one was prosecuted per year.

Most of the cases involved charges of violating export restrictions or stealing trade secrets rather than the capital crime of stealing state secrets. As the premier agency leading such investigations, the FBI has clearly made a policy decision to refocus on counterintelligence after an overwhelming focus on counterterrorism following 9/11, and its capability to conduct such investigations has grown. In 2010, 11 Chinese espionage cases were prosecuted in the United States, the highest number yet, and they featured a wide range of espionage targets.

Ten of the 11 cases involved technology acquisition, and five were overt attempts to purchase and illegally export encryption devices, mobile-phone components, high-end analog-to-digital converters, microchips designed for aerospace applications and radiation-hardened semiconductors. These technologies can be used in a wide range of Chinese industries. While the mobile-phone technology would be limited to Chinese state-owned enterprises (SOEs) such as China Mobile, the aerospace-related microchips could be used in anything from rockets to fighter jets. Xian Hongwei and someone known as “Li Li” were arrested in September 2010 for allegedly attempting to purchase those aerospace-related microchips from BAE Systems, which is one of the companies involved in the development of the F-35 Joint Strike Fighter.

Similar espionage may have played a role in China’s development of the new J-20 fifth-generation fighter, but that is only speculation.


(click here to enlarge image)

Five other cases in 2010 involved stealing trade secrets. These included organic light- emitting diode processes from Dupont, hybrid vehicle technology from GM, insecticide formulas from the Dow Chemical Company, paint formulas from Valspar and various vehicle design specifications from Ford. These types of Chinese cases, while often encouraged by state officials, are more similar to industrial espionage conducted by corporations. Since many of the major car companies in China are state-run, these technologies benefit both industry and the state.

But that does not mean these efforts are directed from Beijing. History shows that such espionage activities are not well coordinated. Various Chinese company executives (who are also Communist Party officials) have different requirements for their industrial espionage. In cases where two SOEs are competing to sell similar products, they may both try to recruit agents to steal the same technology. There are also a growing number of private Chinese companies getting involved in espionage. One notable example was when Du Shanshan and Qin Yu passed on technology from GM to Chery Automobile, a private, rather than state-run, manufacturer. In the five trade-secret cases in 2010, most of the suspects were caught because of poor tradecraft. They stored data on their hard drives, sent e-mails on company computers and had obvious communications with companies in China. This is not the kind of tradecraft we would expect from trained intelligence officers. Most of these cases probably involved ad hoc agents, some of whom were likely recruited while working in the United States and offered jobs back in China when they were found to have access to important technology.

These cases show how Chinese state-run companies can have an interest in espionage in order to improve their own products, both for the success of their companies and in the national interest of China. The U.S. Department of Justice has not provided specific details on how the stolen defense-related technologies were intended to be used in China, so it is hard to tell whether they would have enhanced China’s military capability.

First-generation Chinese carried out 10 of the 11 publicized cases in the United States last year. Some were living or working temporarily in the United States, others had become naturalized American citizens (with the exception of Xian and Li, who were caught in Hungary). The Chinese intelligence services rely on ethnic Chinese agents because the services do not generally trust outsiders. When recruiting, they also use threats against family members or the individuals themselves. Second- and third-generation Chinese who have assimilated in a new culture are rarely willing to spy, and the Chinese government has much less leverage over this segment of the ethnic-Chinese population living overseas.

In the 11 cases in 2010, it is not clear what payments, if any, the agents might have received. In some cases, such as those involving the trade secrets from Valspar and Ford, the information likely helped the agents land better jobs and/or receive promotions back in China. Cash does not typically rule the effectiveness of newly recruited Chinese spies, as it might with Western recruits. Instead, new Chinese agents are usually motivated by intelligence-service coercion or ideological affinity for China.

The outlier in 2010 was Glenn Duffie Shriver, an American student with no Chinese heritage who applied to work at both the U.S. State Department and the CIA. His was the first publicized case of the Chinese trying to develop an agent in place in the United States since Larry Chin.

Shriver studied in China in 2002 and 2003. The recruitment process began when he returned to China in 2004 to seek employment and improve his language capabilities. After responding to an ad for someone with an English-language background to write a political paper, Shriver was paid $120 for producing an article on U.S.-Chinese relations regarding Taiwan and North Korea.

The woman who hired him then introduced him to two Chinese intelligence officers named Wu and Tang. They paid Shriver a total of $70,000 in three payments while he tried to land a job with the U.S. government. Shriver failed the exams to become a foreign service officer and began pursuing a career with the CIA. He was accused of lying on his CIA application by not mentioning at least one trip to China and at least 20 meetings with Chinese intelligence officers. It is not clear how he was exposed, but customs records and passport stamps would have easily revealed any trips to China that he did not report in his CIA application. On Oct. 22, 2010, Shriver pleaded guilty to conspiring to provide national defense information to intelligence officers of the People’s Republic of China and was sentenced to 48 months in prison in accordance with his plea agreement.

A few Americans have been accused of being Chinese agents before, such as former Defense Department official James Fondren, who was caught and convicted in 2009. These cases are rare, though they may increase as Beijing tries to reach higher levels of infiltration. It is also possible that the FBI has been reaching only for low-hanging fruit and that Chinese espionage involving Americans at higher levels is going undetected. If this were the case, it would not be consistent with the general Chinese espionage MO.

China takes a mosaic approach to intelligence, which is a wholly different paradigm than that of the West. Instead of recruiting a few high-level sources, the Chinese recruit as many low-level operatives as possible who are charged with vacuuming up all available open-source information and compiling and analyzing the innumerable bits of intelligence to assemble a complete picture. This method fits well with Chinese demographics, which are characterized by countless thousands of capable and industrious people working overseas as well as thousands more analyzing various pieces of the mosaic back home.

Another case in 2010 was an alleged China-based cyber-attack against Google, in which servers were hacked and customer account information was accessed. Last year, more than 30 other major companies reported similar infiltration attempts occurring in 2009, though we do not know how widespread the effort really is. China’s cyber-espionage capabilities are well known and no doubt will continue to provide more valuable information for China’s intelligence services.

The Renault Case

Few details have been released about the Renault case, which will likely remain confidential until French prosecutors finish their investigation. But enough information has trickled in to give us some idea of the kind of operation that would have targeted Renault’s electric-vehicle program.

Three Renault managers were accused: Matthieu Tenenbaum, who was deputy director of Renault’s electric-vehicle program; Michel Balthazard, who was a member of the Renault management board; and Bertrand Rochette, a subordinate of Balthazard who was responsible for pilot projects. Various media reports — mostly from Le Figaro — claim that the State Grid Corporation of China opened bank accounts for two of the three managers (it is unknown which two). Money was allegedly wired through Malta, and Renault’s investigators found deposits of 500,000 euros (about $665,000) and 130,000 euros (about $175,000) respectively in Swiss and Liechtenstein bank accounts.

Assuming this is true, it is still unclear what the money was for. Given that the three executives had positions close to the electric-vehicle program, it seems that some related technology was the target. Patrick Pelata, Renault’s chief operating officer, said that “not the smallest nugget of technical or strategic information on the innovation plan has filtered out of the enterprise.” In other words, Renault uncovered the operation before any technology was leaked — or it is intentionally trying to downplay the damage done in order to reassure investors and protect stock prices. But Pelata also called the operation “a system organized to collect economic, technological and strategic information to serve interests abroad.”

Renault is convinced a foreign entity was involved in a sophisticated intelligence operation against the company. The question is, what foreign entity? On Jan. 13, Renault filed an official complaint with French authorities, saying it was the victim of organized industrial espionage, among other things, committed by “persons unknown.” French Industry Minister Eric Besson clarified Jan. 14 that there was no information to suggest Chinese involvement in the case, though he previously said France was facing “economic war,” presuming that the culprits came from outside France. The source for the original rumors of Chinese involvement is unclear, but the French clearly backed away from the accusation, especially after Chinese Foreign Ministry spokesman Hong Lei called the accusation “baseless and irresponsible” on Jan. 11 (of course, even if the Chinese were the culprits they would certainly not admit it).

The Chinese have definitely targeted energy-efficient motor vehicle technology in the past, in addition to the Ford and GM cases, and Renault itself is no stranger to industrial espionage activities. In 2007, Li Li Whuang was charged with breach of trust and fraudulent access to a computer system while working as a trainee at Valeo, a French automotive components manufacturer, in 2005. The 24-year-old was studying in Paris when she was offered the trainee position at Valeo. Investigators found files on her computer related to a project with BMW and another with Renault.

The new Renault case, however, is very different from most Chinese espionage cases. First, it involved recruiting three French nationals with no ethnic ties to China, rather than first-generation Chinese. Second, the alleged payments to two of three Renault employees were much larger than Chinese agents usually receive, even those who are not ethnic Chinese. The one notable exception is the case of Larry Chin, who is believed to have received more than $1 million in the 30 years he spied for China as a translator for U.S. intelligence services. Renault executives would also be paid as much or more in salaries than what was found in these bank accounts, though we don’t know if more money was transferred in and out of the accounts. This may not be unprecedented, however; STRATFOR sources have reported being offered many millions of dollars to work for the Chinese government.

Another problem is the alleged use of a Chinese state-owned company to funnel payments to the Renault executives. Using a company traceable not only to China but to the government itself is a huge error in tradecraft. This is not likely a mistake that the Chinese intelligence services would make. In Chin’s case, all payments were made in cash and were exchanged in careful meetings outside the United States, in places where there was no surveillance.

Thus, STRATFOR doubts that the Renault theft was perpetrated by the Chinese. The leak suggesting otherwise was likely an assumption based on China’s frequent involvement in industrial espionage. Still, it could be a sign of new methods in Chinese spycraft.
Higher-level Recruitment?

The Shriver and Renault cases could suggest that some Chinese intelligence operations are so sophisticated that counterintelligence officers are unaware of their activities. They could mean that the Chinese are recruiting higher-level sources and offering them large sums of money. Chin, who got his start working for the U.S. Army during the Korean War, remained undetected until 1985, when a defector exposed him. There may be others who are just as well hidden. However, according to STRATFOR sources, including current and former counterintelligence officers, the vast majority of Chinese espionage operations are perpetrated at low levels by untrained agents.
There is little indication that the Chinese have switched from the high-quantity, low-quality mosaic intelligence method, and cyber-espionage activities such as hacking Google demonstrate that the mosaic method is only growing. The Internet allows China to recruit from its large base of capable computer users to find valuable information in the national interest. It provides even more opportunities to vacuum up information for intelligence analysis. Indeed, cyber-espionage is being used as another form of “insurance,” a way to ensure that the information collected by the intelligence services from other sources is accurate.

If China is responsible for the Renault penetration, the case would represent a change in the Chinese espionage MO, one aiming at a higher level and willing to spend more money, even though most of the cases prosecuted in the United States pointed to a continuation of the mosaic paradigm. Nevertheless, counterintelligence officers are likely watching carefully for higher-level recruits, fearing that others like Chin and Shriver may have remained undetected for years. These cases may be an indication of new resources made available to Western counterintelligence agencies and not new efforts by the Chinese.

One thing is certain: Chinese espionage activities will continue apace in 2011, and it will be interesting to see what targets are picked.

[Ryan Ruck]

How China Spies On US

57 accused of espionage since 2008

May 8, 2011

The young man stood before the judge, his usually neatly trimmed hair now long enough to brush the collar of his prison jumpsuit. Glenn Duffie Shriver had confessed his transgressions and was here, in a federal courtroom with his mother watching, to receive his sentence and to try, somehow, to explain it all.

When the time came for him to address the court, he spoke of the many dreams he’d had to work on behalf of his country.

“Mine was to be a life of service,” he said. “I could have been very valuable. That was originally my plan.”

He had been a seemingly all-American, clean-cut guy: No criminal record. Engaged to be married. A job teaching English overseas. In letters to the judge, loved ones described the 29-year-old Midwesterner as honest and caring — a good citizen. His fiancee called him “Mr. Patriot.”

Such descriptions make the one that culminated in the courtroom all the more baffling: Glenn Shriver was also a spy recruit for China. He took $70,000 from individuals he knew to be Chinese intelligence officers to try to land a job with a US government agency — first the State Department and later the CIA.

And Shriver is just one of at least 57 defendants in federal prosecutions since 2008 charging espionage conspiracies with China or efforts to pass classified information, sensitive technology or trade secrets to intelligence operatives, state-sponsored entities, private individuals or businesses in China, according to an Associated Press review of US Justice Department cases.

Of those, nine are awaiting trial, and two are considered fugitives. The other defendants have been convicted, though some are yet to be sentenced.

Most of these prosecutions have received little public attention — especially compared with the headline splash that followed last summer’s arrest of 10 Russian “sleeper agents” who’d been living in suburban America for more than a decade but, according to Attorney General Eric Holder, passed no secrets.

Contrast that with this snapshot:

n In Honolulu, a former B-2 bomber engineer and one-time professor at Purdue gets 32 years in prison for working with the Chinese to develop a vital part for a cruise missile in a case that a high-ranking Justice Department official said resulted in the leak of “some of our country’s most sensitive weapons-related designs.”

n In Boston, a Harvard-educated businessman is sent to prison, along with his ex-wife, for conspiring for a decade to illegally export parts used in military radar and electronic warfare systems to research institutes that manufacture items for the Chinese military. The Department of Defense concluded the illegal exports “represented a serious threat to U.S. national and regional defense security interests.”

In Los Angeles, a man goes to jail for selling Raytheon-manufactured thermal imaging cameras to a buyer in Shanghai whose company develops infrared technology. The cameras are supposed to be restricted for export to China because of “their potential use in a wide variety of military and civilian applications,” according to court documents.

n And in Alexandra, Va., there is Shriver, who told the judge quite simply: “Somewhere along the way, I climbed into bed with the wrong people.”

All five of these defendants were sentenced over just an 11-day span earlier this year.

In Shriver’s case, when once he asked his Chinese handlers — “What, exactly, do you guys want?” — the response, as detailed in court documents, was straightforward.

“If it’s possible,” they told him, “we want you to get us some secrets or classified information.”

Despite denials from Beijing, counterintelligence experts say the cases reveal the Chinese as among the most active espionage offenders in America today, paying more money and going to greater lengths to glean whatever information they can from the United States.

Earlier this year, retired FBI agent I.C. Smith gave a speech called “China’s Mole” at the International Spy Museum in Washington, DC. It was about a man who landed a job with the Central Intelligence Agency and later turned out to be a spy for China. As Smith told a rapt audience: “The intelligence community had been penetrated.”

He was referring to one of the most damaging Chinese espionage cases of all time: the infiltration of Larry Chin, a naturalized US citizen who in 1986 admitted to spying for China during his almost three decades with the CIA. As a former Chinese counterintelligence supervisor, Smith helped investigate Chin, who later committed suicide.

Smith was stunned to learn of the 5 1/2-year recruitment of Glenn Shriver and China’s “run at the front door” of America’s pre-eminent intelligence agency. “The Chinese,” Smith said, “still have the capacity to surprise.”

How did they do it in Shriver’s case? Standing before a federal judge on a blustery day in January, Shriver tried to explain how he went down the path to betrayal.

“It started out fairly innocuous,” he recalled. During a college study-abroad program in Shanghai, he was taken with Chinese culture and became proficient in Mandarin. After graduating from Grand Valley State University in Michigan in 2004, he returned to China to look for work.

Shriver was just 22 years old when, in October 2004, he first met a woman in Shanghai who would introduce him to the Chinese intelligence officers who persuaded him to consider turning against his own country. According to court documents, he’d responded to an English-language ad looking for scholars of East Asian studies to write political papers.

He met several times with a woman called “Amanda,” delivered to her a paper about US-China relations regarding North Korea and Taiwan, and was paid $120.

She later asked Shriver if he’d be interested in meeting some other people — two men he came to know as “Mr. Wu” and “Mr. Tang.” Over the next several years, they would meet at least 20 times.

Six months after first meeting “Amanda,” Shriver applied for a job as a foreign service officer with the US State Department. Though he failed the foreign service exam, the intelligence officers paid him $10,000. A year later, in April 2006, he took the exam a second time but again failed. He was nevertheless paid $20,000. Then, in June 2007, Shriver applied for a position in the clandestine branch of the CIA. A few months later, he asked the Chinese intelligence officers for $40,000 for his efforts.

In June 2010, Shriver underwent a series of final security screening interviews at the CIA in Virginia, during which he lied in response to questions about any previous affiliation with foreign intelligence officers. A week later, he was arrested — US officials wouldn’t disclose what led them to him — and his clandestine life unraveled.

“Nobody knew. Nobody,” said his mother, Karen Chavez. “He was a good kid. Worked, earned money, was respectful. ... I don’t know what he was thinking.”

The closest her son came to an explanation was when he told the sentencing judge: “I think I was motivated by greed.”

[Toad]

Toad~ Long article, but very interesting and a good read, spot on.

http://the-diplomat.com/2011/09/19/c...reat/?all=true

China’s Growing Spy Threat

By Alex Newman
September 19, 2011
The Chinese government’s ‘vacuum cleaner’ approach to espionage is worrying foreign governments, companies and overseas dissidents. They’re right to be concerned.

Beijing fiercely denies it. Much of the world ignores it. But according to analysts and officials, the communist-controlled People’s Republic of China operates the single largest intelligence-gathering apparatus in the world—and its growing appetite for secrets has apparently become insatiable.

From economic and military espionage to keeping tabs on exiled dissidents, China’s global spying operations are rapidly expanding. And, therefore, so is the threat. Some analysts even argue the regime—which is also gobbling up such key natural resources as farmland, energy, and minerals—has an eye on dominating the world.

Estimates on the number of spies and agents employed by the communist state vary widely. According to public statements by French author and investigative journalist Roger Faligot, who has written several books about the regime’s security services, there are around two million Chinese working directly or indirectly for China’s intelligence apparatus.

Other analysts say it would be impossible to count the exact number. ‘I doubt they know themselves,’ says Richard Fisher, a senior fellow on Asian military affairs at the Washington-based International Assessment and Strategy Center. Regardless, the number is undoubtedly extraordinary. ‘China can rightly claim to have the world’s largest, most amorphous, but also most active intelligence sector,’ he says.

That’s partly because it operates very differently from most. ‘When you consider that China’s intelligence community views any foreign-deployed Chinese citizen, any Chinese delegation, all Chinese criminal networks, and all overseas Chinese with any tangible affinity or connection to the Motherland as a target for recruitment, then you have to find a different way to measure,’ Fisher explains. ‘This has to start with the consideration that any Chinese, especially those from China, from student to CEO, are potential active intelligence assets.’

Other analysts echo his concerns, and a simple fact: the regime’s spies are increasingly active across the globe. Since 2008, more and more intelligence-training colleges—‘spy schools’—have been popping up at universities across the country. Meanwhile, Chinese satellite-reconnaissance and cyber espionage capabilities are expanding at an unprecedented speed.

Officials are, probably for good reason, skittish when discussing China and its intelligence collection operations. But there’s near unanimous agreement—and court convictions in countries around the globe support the premise—that, in terms of sophistication, scope, and international capabilities, the perils of Chinese espionage are on the rise.

‘The danger is pronounced,’ warns Charles Viar, chairman of the Washington, D.C.-based Center for Intelligence Studies. ‘In my view, no one is really doing enough to deal with the Chinese threat. It is too large, and by Western standards, too unconventional.’

Among the array of growing dangers associated with Chinese spying: the regime’s increasingly advanced cyber capabilities. While the techniques are used to steal ever more information of all sorts, the potential for devastating offensive operations exists as well. Leaked US diplomatic cables and cyber-security analysts suggest that Chinese military intelligence has been involved in countless network penetrations in recent years. In some instances, evidence suggests that the regime is even able to remotely control sensitive systems.

Consider one example: In 2009, senior US officials reported that cyber spies—at least some of whom were Chinese—infiltrated the US electrical grid. And after breaking in, they left software behind that could be used to cause disruptions or possibly even shut the system down.


The Evolution of the Menace
Though the evolving threats are more advanced and dangerous today than ever before, Chinese espionage is nothing new. In fact, it began centuries ago—well before the communist regime rose to power.
‘China has a history of organized intelligence-gathering operations that goes back to the 15th century—perhaps even earlier,’ says Joseph Fitsanakis, a senior editor with Intel News who teaches classes on espionage, intelligence, and covert action at King College’s Department of History and Political Science. The Chinese, however, took it to a new level.

Up until two to three decades ago, the regime’s spying was largely domestic in nature, Fitsanakis explains—primarily targeting perceived enemies and dissidents within China. But in the post-1980s era, with economic reforms and growing affluence pacifying much of the internal unrest, Chinese intelligence collection efforts began to focus more on the outside world.

Today, according to experts and former counterintelligence officials, Chinese spying represents one of the largest threats to US security. And the sheer size of the regime’s espionage apparatus ‘is proving a good match for the more advanced automated systems used by its less populous regional rivals, including Taiwan, South Korea, and Japan,’ adds Fitsanakis.

Public awareness of the hidden menace is indeed on the rise. But available evidence indicates that the danger is still underestimated—and growing quickly.

‘The Chinese are the biggest problem we have with respect to the level of effort that they’re devoting against us versus the level of attention we are giving to them,’ former US counterintelligence chief Michelle Van Cleave told CBS during an interview. Officials with the US Immigration and Customs Enforcement (ICE), meanwhile, labelled China’s ‘aggressive and wide-ranging espionage’ the ‘leading threat to US technology.’
According to former Chinese intelligence officials who defected to the West, the United States is indeed China’s main target for espionage. But as China steps up its spying around the world, it’s becoming clear that no nation, company, military, or exiled dissident is immune.


Espionage & Influence
Like the intelligence services of most large and powerful countries, a significant segment of China’s spying apparatus is devoted to collecting information on foreign governments—particularly in terms of their military and political systems. Vast numbers of Chinese spies have been caught stealing such secrets.

In fact, it’s known that the regime has already acquired some of the United States’ most sensitive secrets. A US Congressional Committee and then-Director of National Intelligence George Tenet found as early as the late-1990s that China had even obtained information on the United States’ most advanced nuclear weapons.

That’s not all. ‘China has managed to gather a great deal of information on US stealth technology, naval propulsion systems, electronic warfare systems, and nuclear weapons through espionage,’ says Larry Wortzel, a commissioner and former chairman on the US-China Economic and Security Review Commission, and the ex-director of the US Army War College’s Strategic Studies Institute. ‘That is documented in convictions in US courts.’

The regime, however, wants more. A few Chinese espionage cases have made headlines recently, such as the scandal involving former weapons analyst Gregg Bergersen with the US Defense Security Cooperation Agency. A leaked video of him selling sensitive information about US military collaboration with Taiwan—a nation which the communist regime considers a breakaway territory—sparked a new level of public interest in Chinese espionage just last year.

But most cases barely cause a stir. According to an analysis of US Justice Department records by the Associated Press, there have been at least 58 defendants charged in federal court for China-related espionage since 2008. Most have been convicted, while the rest are awaiting trial or on the run. Hundreds of investigations are ongoing.

A leaked diplomatic cable from the US embassy in Santiago, Chile, also revealed that US officials were worried about Chinese espionage against the US military even in Latin America. ‘There’s concern that the Chinese could be using Chilean officers and access to the Army training school to learn more about joint programs, priorities, and techniques that the Chileans have developed with their US counterparts,’ noted the 2005 cable signed by then-Ambassador Craig Kelly, adding that even Chinese journalists were ‘assumed’ to be involved in some kind of collection activity.

‘(A)s the (US government) augments its support to the Chilean Armed Forces, Chinese interest in USG activities in the Southern Cone will most assuredly increase,’ according to the document released earlier this year by WikiLeaks. ‘The Chinese will likely attempt to learn more about US military strategies and techniques via Chilean participation in bilateral training programs and joint exercises.’


And while experts agree that the United States is the single most important target, Chinese agents involved in military and political espionage have been convicted all over the world. In late July, for example, Taiwanese General Lo Hsien-che was sentenced to life in prison for handing over military secrets to Beijing. The case shocked the nation. But it wasn’t necessarily surprising to some observers.

‘Anyone who has followed developments in Taiwan over the years knows how deeply Chinese forces have infiltrated Taiwan’s military, especially its senior officers,’ noted Taiwan-based journalist and security analyst J. Michael Cole in a recent opinion piece for the Wall Street Journal. He noted that, because Taiwan is so infested with Chinese spies, any US weapons sales to the nation could result in sensitive military secrets ending up in Beijing.

Europe isn’t immune either. In Belgium, headquarters of NATO and the European Union, the Minister of Justice and the Minister of Foreign Affairs separately accused China of cyber spying and attempting to compromise critical government networks in 2008. The next year, reports of Chinese intelligence efforts directed at top Australian officials, including the prime minister, made headlines worldwide.

Even in Russia, widely considered at least a tenuous ally of the Chinese regime, Chinese spies have been convicted in recent years. One man, Igor Reshetin, was found guilty of providing information useful in designing nuclear missiles to a Chinese state-owned firm. In early September, Russian prosecutors charged two more academics with selling military secrets to China.

Aside from stealing political and military information, another important goal of Chinese intelligence agents is to gain influence among members of a target country’s political elite. According to experts, China uses bribes, blackmail, women, lavish vacations in China, and other means to compromise officials worldwide.

Even former US President Bill Clinton was widely accused of being too close to Beijing for comfort. ‘President Clinton promised to restrain those who ordered the Tiananmen Square massacre, but he has now allowed these men whose hands are stained with the blood of martyrs of freedom into the highest reaches of our military defences, and made available to them significant portions of our advanced military technology,’ charged former US Joint Chiefs of Staff Chairman Admiral Thomas Moorer in a letter to congressional leaders.

Indeed, one of the prime targets of Chinese intelligence, according to analysts, is information to create comprehensive databases on current and future leaders of free countries. ‘They want to arm their diplomats and businessmen with the inside scoop to be able to expand their political and economic allies to help foster ruling elites that will never challenge the legitimacy of the Chinese Communist regime,’ says Fisher.

In Canada, the issue was raised just last year. During a TV interview, Canadian Security Intelligence Service (CSIS) Director Richard Fadden suggested that some politicians in Canada were connected to certain foreign governments—almost universally assumed to mean China.

After causing an uproar among some sectors, however, the Canadian spy chief tried to downplay the remarks. ‘He was very rapidly shut down by some irresponsible—almost suspicious’—officials, who denied that there was any problem, says Michel Juneau-Katsuya, the former Asia-Pacific head of CSIS.

‘Actually, Mr. Fadden was talking about something that has been happening for decades,’ Juneau-Katsuya says. The strategy of gaining influence among foreign power brokers is an important tool in China’s espionage arsenal, he says. It’s also one that is rarely discussed.


Theft of Trade Secrets
The theft of trade secrets, technology, and corporate information is another one of China’s specialties. ‘When it comes to economic espionage, China is universally recognized as at the top,’ says Juneau-Katsuya, who now serves as the CEO of security consulting firm The Northgate Group. ‘What we know is that, by far, they are at the top when it comes to stealing information.’

Oftentimes the line between military and economic espionage is blurry. The case of engineer Dongfan ‘Greg’ Chung, sentenced last year, is just one example among many. Chung was caught passing sensitive US aerospace and rocket secrets to China that he stole while working for defence contractors Boeing and Rockwell International.

In other cases, the foreign technology stolen by Chinese spies is used to further oppress the population. A revealing lawsuit filed by US software maker Cybersitter, seeking more than $2 billion in damages, accused China and other conspirators of stealing its proprietary filtering code. The software was then apparently used to help censor the web in China.
‘They have a multitude of goals all at once: To catch up on the difference in technology, to gain influence around the world, to know more about where the competition is, and definitely to not have to pay for research and development,’ says Juneau-Katsuya. The R&D element is key.
Often, the motivation for stealing trade secrets is purely economic. In addition to saving unfathomable amounts of time and capital, using stolen information crucial to a company’s survival can actually lead to shutting down China’s foreign competition.

So, partly because the return on investment from spying is so much greater than from R&D, experts say the budgets of Chinese intelligence agencies have soared in recent years. That trend is expected to continue indefinitely.

But while it may be cost effective for China, the price tag paid by others is massive. Precise figures are, of course, impossible to calculate. But in 1995, when Juneau-Katsuya was at CSIS, he tried to get an estimate: It was somewhere in the neighbourhood of $10 billion to $12 billion per year. Since then the problem has only grown.

In Germany, the cost is high, too, Berthold Stoppelkamp of the German Association for Security in Industry and Commerce (ASW) told the press in 2009. He estimated the damages from economic espionage—primarily Russian and Chinese—at around €20 billion every year. But it could be closer to €50 billion, he noted.

An estimate on the cost of economic espionage to the US economy was offered by FBI Director Robert Mueller in 2003: over $250 billion per year. And counterintelligence officials with the Bureau and other experts agree that China is by far the most serious threat.

‘This espionage saps US companies of their industrial lead in the new technologies and materials,’ notes Wortzel. ‘And often the Chinese incorporate what they have learned into new weapon systems that can be used against the US, its allies, and friends.’

And because the threat is continually evolving and comes from multiple directions, it’s difficult to deal with, experts say. China uses all known means of stealing information even as it develops ever more ingenious schemes.


Traditional methods, such as infiltrating companies and compromising existing employees, are still widely used. Academic and educational institutions play a crucial role as well—as do the regime’s ‘front companies’ set up in the United States, estimated to number in the thousands by the FBI. Foreign companies with operations in China are said to be particularly vulnerable to losing their secrets.

Meanwhile, more advanced tools like computer hacking are becoming an increasingly important weapon in the regime’s economic-spying arsenal. ‘Their cyber activities have increased in the last ten years quite significantly,’ says Juneau-Katsuya. ‘They are devoting university departments and entire sections of the (People’s Liberation Army) just to that.’

Another key but underestimated strategy employed in China’s quest for trade secrets—corporate acquisitions and joint ventures—makes use of the regime’s vast empire of well-funded, state-owned companies. By purchasing even a significant percentage of a firm, China often obtains important technological know-how. It also buys political influence.

‘China continues to leverage foreign investments, commercial joint ventures, academic exchanges, the experience of repatriated Chinese students and researchers, and state-sponsored industrial/technical espionage to increase the level of technologies and expertise available to support military research, development, and acquisition,’ notes a 2011 US Defense Department report to Congress on Chinese military and security developments.

Especially following the recent recession, the Chinese regime has been on a global shopping spree using its vast cash reserves—buying up all sorts of companies, from car manufacturers to technology enterprises. But countless examples of the use of this tactic have been documented for well over a decade.

Even more alarming for some: A secret 1997 investigation by CSIS and the Royal Canadian Mounted Police entitled ‘Sidewinder’ found that criminal networks affiliated with Chinese intelligence were also intimately involved. The Canadian government essentially dismissed the report, but many analysts believe the collaboration has only grown since then.

In general, firms and universities are simply not doing enough to protect their secrets and technology from China, says Center for Intelligence Studies Chairman Charles Viar. ‘That said, the larger problem involves contractual agreements in which Western companies voluntarily transfer sensitive technologies—often illegally—in order to win contracts with China,’ he points out.

Fisher has similar concerns. He says firms and educational institutions around the world are not simply targets—in many cases they have become ‘compliant victims’ of Chinese intelligence agencies’ designs.

‘Companies and universities must first reach an understanding of how they are aiding and abetting the Chinese Communist dictatorship,’ says Fisher, noting that as long as they crave Chinese money, they will continue bending over backwards to satisfy the regime. ‘This scandal is compounded by the fact that Chinese allies in the capitals of most democracies are succeeding in avoiding or averting the level of critical review that would also lead to defensive action.’


Persecuting Dissidents, Even Abroad
One of the top priorities of Chinese espionage efforts—foreign and domestic—is monitoring and disrupting dissidents, according to defectors, experts, and official documents. In the crosshairs overseas are Chinese democracy activists, Tibetans, the exiled Uighur community, Falun Gong practitioners, supporters of Taiwanese independence, and countless others—essentially anybody who disagrees with the regime or paints a negative image of it abroad.

In 2009, for example, a massive and sophisticated cyber espionage network was discovered by Canadian researchers. The system, known as ‘GhostNet,’ had reportedly penetrated computers belonging to multiple governments, the exiled Dalai Lama, and a number of other dissidents and critics. Investigators traced the operation to China.

Last year, after a ‘highly sophisticated and targeted attack’ originating in China, Google announced that a primary goal of the operation was to gain access to Chinese human rights activists’ e-mail accounts. ‘Dozens’ of such accounts had already been compromised through other means before the attack in question, the company also said in a statement.

It’s not just human rights campaigners and pro-Tibetan activists who are under constant attack, however. Among the most viciously persecuted are individuals associated with Falun Gong, also known as Falun Dafa. The spiritual and philosophical movement was banned by the Communist regime in 1999 after officialdom decided it might represent a threat to the Communist Party.

Labelling it an ‘evil cult,’ China then created an extra-legal apparatus known as the 6-10 Office to quash the discipline domestically—and around the world. An unprecedented campaign of terror and brainwashing has since been unleashed, including a vast network of ‘re-education’ camps, disappearances, torture, harvesting organs from practitioners, and more.
And the regime’s tentacles have truly spread worldwide in pursuit of its goal. ‘The war against Falun Gong is one of the main tasks of the Chinese mission overseas,’ Chen Yonglin, a senior official at the Chinese Consulate in Sydney told a US Congressional committee in 2005 after his defection.
A vast body of evidence, and even recent court cases, support the claim. In June, for example, a Chinese man in Germany was convicted of spying on members of the Falun Gong community for China. A few years earlier, a senior Chinese embassy official in Ottawa was expelled after being caught spying on practitioners there.

In the United States, officials also regularly highlight the problem. The House of Representatives has blasted the regime for similar illegal activities inside the United States on at least four occasions. A House resolution passed last year and a separate measure adopted in 2004, for instance, recognized the seriousness of the problem, called for the regime to stop, and urged US authorities to take action.

According to the resolutions, China’s diplomatic corps is actively ‘harassing and persecuting’ Chinese dissidents in the United States, breaking into the homes of prominent activists, pressuring US officials with threats, spreading lies, and more. In addition to the well-known persecution going on within China, ‘the Chinese Government has also attempted to silence the Falun Gong movement and Chinese pro-democracy groups inside the United States,’ the measures state.

More than a few US Representatives have been even more direct. Foreign Affairs Committee Chair Ileana Ros-Lehtinen (R-FL), speaking in support of the resolution, said last year that ‘clear evidence’ shows Chinese diplomats were colluding with secret agents and ‘thugs’ to suppress the constitutionally protected rights of Americans. She called on the State Department to ‘get tough’ on the regime’s functionaries within US borders.

‘First is the issue of the penetration of agents of an alien Communist regime right here inside the United States to wage a campaign of repression against US citizens,’ Ros-Lehtinen said before the House, citing examples and noting that Chinese agents were ‘persecuting American Falun Gong practitioners in our own country.’ And the well-documented ‘bloody harvest’ and ‘coercive organ transplants’ from Falun Gong practitioners within China, she added, ‘is almost too ghoulish to imagine.’

One prominent analyst on the issue of Falun Gong persecution, David Kilgour, is a former Canadian member of parliament and served as Canada’s secretary of state for Asia-Pacific in 2002 and 2003. He recently co-authored a book entitled ‘Bloody Harvest—The killing of Falun Gong for their organs,’ which closely examines the brutality and takes a look at the regime’s illegal persecution of exiled practitioners.

‘The espionage and intimidation the party-state deploys against Falun Gong abroad is outrageous,’ Kilgour says, calling it an extension of the ‘very severe persecution’ in China. ‘It’s unconscionable for a repressive government to use the freedom of a democracy to project abroad its persecution of its chosen victims.’

Among the examples he cites is a 2003 case in which two Chinese diplomatic officials in Edmonton were caught handing out pamphlets inciting hatred against the Falun Gong—a crime in Canada. But there’s much more, he says.

Chinese defectors have told Kilgour that the effort spent monitoring and repressing dissidents overseas actually outweighs all other functions of Chinese diplomatic missions combined, he says. Apparently the regime doesn’t want the international community to realize what has been perpetrated in China.

One victim of that persecution, author and human rights activist Jennifer Zeng, fled China in 2001 after being tortured at one of the regime’s ‘Re-Education-Through-Labour’ camps. ‘The PRC espionage and intimidation against FG practitioners overseas is so common that many of us have become accustomed to it,’ she says.

But while Falun Gong practitioners may be at the top of the regime’s list of perceived enemies, they are far from the only victims of anti-dissident Chinese operations abroad. Another extensively targeted group is the exiled Uighur community, an ethnic minority—primarily Muslim—that has been systematically oppressed within China for decades. China has also been very active in tracking and disrupting the activities of those who managed to flee.

Last year, for example, a man was convicted of ‘aggravated illegal espionage’ against the Uighur refugee community in Sweden. ‘He reported all he could about them,’ says Sweden’s chief national security prosecutor Tomas Lindstram, who prosecuted the case. The information included everything from the targets’ political views and activities to details about their health and travel habits.

Using a ‘rather tricky’ method to communicate with his handlers—a Chinese ‘journalist’ and a diplomatic official—the convicted spy ‘fooled most of his fellow countrymen,’ says Lindstram. The court and the prosecutor recognized the seriousness of the crime—especially because it was to benefit a ‘totalitarian’ government that does not respect human rights. Incredibly, however, the spy was sentenced to less than two years.

Lindstram admits he thought the short sentence was ‘odd’ and didn’t correctly account for the severity of the crime. The government is now apparently looking into the sentencing length question. But for many Uighur activists, the penalty was almost an outrage.

‘There should be a tougher punishment for a crime like this in order to send a strong signal to other possible spies around the world,’ says Mehmet Tohti, the Special Representative of the World Uighur Congress to the European Union. And it isn’t just Sweden that could use improvement.
Tohti says the West in general isn’t doing enough to protect and support exiled Chinese dissidents—even though it is in the free world’s own interest to do so. In Germany, for example, there have also been several incidents of Chinese espionage against Uighurs in recent years. Little has been done.

‘Chinese spying is a big problem for the Uighur community—especially for Uighur organizational leaders,’ says Tohti. But they are hardly alone.
Other victims of Chinese intimidation, wiretapping, and e-mail theft—Tibetan activists and pro-democracy advocates, for example—are fiercely persecuted by the regime outside of China, too. According to Tohti, one of the goals is to minimize the impact of anti-China protests because they are ‘exposing China’s gross and systematic violation of human rights’ to the world.

Beyond Intelligence: Offensive Capabilities
Chinese intelligence agencies are clearly involved in collecting information on a massive scale. Some analysts even refer to the regime’s strategy as the ‘Vacuum Cleaner’ approach. But intelligence gathering is only one piece of the puzzle.

Perhaps even more alarming than monitoring dissidents and stealing trade secrets, analysts say, is mounting evidence of the regime’s increasing ability and willingness to employ its spy services offensively. The number of examples is growing rapidly.

In the cyber realm, China’s use of offensive tactics was highlighted again just last month. As The Diplomat reported on August 25, a video on cyber warfare broadcast over China’s military state TV channel included a brief segment that raised eyebrows worldwide.

The footage apparently showed an old computer programme from the People’s Liberation Army Electronic Engineering Institute being used to ‘attack’ a US-based website tied to the Falun Gong via a US university’s network. And, while the short clip featured outdated and unsophisticated methodology, analysts say it was important for several reasons—providing more evidence of China’s offensive cyber activities being chief among them.

A 2009 report prepared for the US-China Economic and Security Review Commission on China’s cyber capabilities also suggests that the regime’s information-warfare strategy features offensive operations prominently. According to the authors’ analysis of the regime’s strategy, the tools ‘will be widely employed in the earliest phases of a conflict, and possibly pre-emptively.’

The study also notes that faculty members at China’s National University of Defense Technology ‘are actively engaged in research on offensive network operations techniques or exploits.’ Research and development on ‘a variety of offensive information warfare technologies’ is also being conducted by institutes overseen by the PLA’s General Staff Department Fourth Department.


Another area of concern is covert Chinese activism overseas. ‘Their objectives know no limit,’ says Fisher. ‘If China has targeted a country for its resources and has decided to sustain a noisome regime to defend those interests, it will give that regime the means to, as it will also collect a comprehensive data base to help that regime to avoid threats.’

This strategy—secretly propping up friendly dictators—was illustrated recently when China was apparently caught quietly arming Gaddafi after the civil war in Libya began. In violation of international sanctions, China was reportedly offering weapons to the Libyan dictator even in the final weeks of battle, documents leaked in early September indicate.

The move—a carefully calculated risk, to be sure—clearly required intimate knowledge of potential US and NATO reactions. ‘This kind of very targeted power projection will become the order of the day when China builds its power projection Navy and Air Force, due to come online by the early 2020s,’ Fisher warns.

And even though Gaddafi’s regime may have crumbled, he notes, China has a growing international network of support, including the regimes ruling North Korea, Pakistan, Iran, Cuba, Venezuela, and Zimbabwe. Other key players in the Chinese intelligence community’s expanding network of friends are global criminal organizations and freelance cyber warriors—or ‘sub-contractors’ and ‘pirates,’ as Fisher refers to them.

Links with organized crime and so-called ‘Patriotic hackers’ allow the regime some degree of plausible deniability in covert operations and cyber attacks. But between backing socialist strongmen, penetrating critical infrastructure, and sabotaging computer systems, China’s aggressive foreign intelligence operations are increasingly arousing suspicion worldwide.

According to Juneau-Katsuya, the overall designs aren’t all that complex. ‘If you want to understand the strategy that Chinese intelligence and the Chinese government are using, you’ve got to refer yourself to the game of Go,’ he says, noting that it is popular among China’s military top brass.

The ancient game is fairly simple: The object is to encircle one’s opponent and take control of the most territory. ‘That’s exactly the strategy they’re using,’ Juneau-Katsuya says, citing the regime’s increasingly active presence around the world—particularly in Africa—as an example of the plan in action.

Guarding against the Threat
There’s some disagreement among experts about whether governments are doing enough to protect themselves and their people from the threat of Chinese espionage. But overwhelmingly, insiders say nations from Canada and Australia to European states and India need to do more—much more. Small countries in the vicinity of China are probably among the most vulnerable.

Regardless, what is certain, according to analysts, is that most companies and institutions aren’t keeping up with the Chinese regime’s rapidly evolving espionage capabilities. And the PRC is taking full advantage of the opportunities.

‘They understand very well that the Western world is sleeping at the switch when it comes to all this, and the majority of people are not paying attention to the security of their systems,’ says Juneau-Katsuya. ‘That is the weakest link.’

FBI spokesman Bill Carter says that after terrorism, counterintelligence ‘is the number two priority in the FBI, and significant resources are devoted to our counterespionage activities.’ The exact figures are classified, he adds. ‘You don’t like to tell the opposition what your capabilities are.’

The US Department of Justice didn’t respond to requests for comment. Neither did Japan’s Public Security Intelligence Agency. But reports do suggest that at least some governments are getting serious about counterintelligence and the threat of Chinese espionage.

Many more governments, for example, have recently started to take action against state-owned Chinese firms attempting to buy up sensitive or strategic companies. And growing concerns about using Chinese technology—especially in the realm of telecommunications—have been expressed by officials around the world.

By raising public awareness of their plight, the fears of exiled dissidents are being taken more seriously, too. The victims of the Communist regime’s foreign persecution, however, still say much more needs to be done.

Strategies to deal with the threat proposed by analysts interviewed by The Diplomat varied widely, from restricting the number of Chinese nationals allowed into other countries to developing new multilateral institutions to address the problem. More resources dedicated to counterintelligence, tougher punishments for convicted spies, better encryption systems, and more private sector involvement were also all mentioned.

But one point in particular was repeated over and over again. By far the most crucial element in the battle, analysts say, is greater awareness.

Alex Newman is a freelance writer and correspondent for The New American magazine

[Ryan Ruck]

Interesting piece Toad. Thanks for posting!

[American Patriot]

Did Bill Gertz authorize this? LOL

[Ryan Ruck]

US Defence Contractor, 59, 'Gave Classified Information To 27-Year-Old Chinese Lover In Honeytrap'

March 19, 2013

A defence contractor and former US Army officer has been arrested and charged with giving his younger Chinese lover secret information about existing war plans and American nuclear weapons.

Benjamin Pierce Bishop, 59, who worked in intelligence in Hawaii, appeared in court to face one count of communicating national defence information to a person not entitled to receive it and one count of unlawfully retaining national defence documents and plans.

According to the complaint filed in Honolulu, Bishop met the woman at a conference on international military defence issues and passed her the information by email after beginning a romantic relationship with her.

The complaint said the 27-year-old woman 'may have been at the conference in order to target individuals such as Bishop', who had top secret security clearance since 2002.

Bishop was arrested on Friday at Pacific Command headquarters at Camp H.M. Smith in Hawaii and appeared in court yesterday.

Authorities did not say when the conference took place but said the Chinese woman, whose identity has not been released, was in the US on a student visa at the time.

She allegedly began an intimate relationship with Bishop in June 2011, and the authorities say he passed on the information to her in an email in May, and also in a phone call in September, when he told the woman about the deployment of US strategic nuclear systems and about the ability of the US to detect other nations' low- and medium-range ballistic missiles.

Bishop is accused of hiding the relationship from the government even though his position and security clearance requires him to report contact with foreign nationals.

Authorities conducting a covert search of Bishop's home in the Honolulu suburb of Kapolei found 12 individual documents marked 'secret' although he was not authorised to keep classified papers at home, court documents said.

The woman asked Bishop last month what western countries knew about 'the operation of a particular naval asset of People's Republic of China', the complaint said, though the topic fell outside Bishop's regular work assignments.

Bishop researched the issued using open source records and was observed collecting and reviewing classified information on the topic, according to the complaint.

At one point, when he travelled to the UK to visit the woman, Bishop tried to hide her identify on a request to leave for travel form 'by slightly changing her given name to a masculine form of the same name and by adding a letter to the surname,' according to an FBI agent's affidavit.

US Magistrate Judge Richard Puglisi conditionally appointed Bishop an attorney after hearing arguments that his finances weren't sufficient to cover the costs of defending himself.

Bishop's court-appointed attorney Birney Bervar, said Bishop was a lieutenant colonel in the US Army Reserve.

He said: 'Colonel Bishop has served this country for 29 years. He would never do anything to harm the United States.'

Bart DaSilva, a neighbour of Bishop's, said the man lived alone and was initially friendly when he moved in about three years ago.

DaSilva said Bishop once brought over a woman and a girl he said were his wife and daughter from Thailand.

But he said he never saw Bishop with other visitors, and noticed that Bishop increasingly began to keep to himself.

'I kind of felt: "What did we do?"' DaSilva said. 'It was almost like he switched off.'

No-one was available for comment at Bishop's brown, two-storey home in a hilly neighbourhood overlooking Pearl Harbor and downtown Honolulu.

Bishop, who faces a maximum potential sentence of 20 years in prison if convicted, was scheduled to appear in court this Friday for a hearing on whether he will remain in detention during the case. A preliminary hearing was scheduled for April 1.

[Ryan Ruck]

A Spy At NASA? FBI Investigating Chinese Man Arrested Fleeing Country

March 19, 2013

The FBI said Tuesday it is actively investigating a Chinese man arrested Saturday with a one-way ticket out of U.S. -- a scientist potentially carrying highly confidential military secrets and rocket technology from NASA labs.

Bo Jiang, a contractor at the National Institute of Aerospace (NIA) who had been working at NASA-Langley, was arrested at Dulles International Airport on Saturday by FBI and DHS agents as he was trying to leave the country, Fox News has confirmed.

Bill Daly, a former FBI investigator, said Tuesday that the agency is currently investigating Jiang to determine whether there was actual espionage going on.

“The fact that people can take information, bring it back to their home country, get a fast forward on our dime, on the money we’ve spent and the time we’ve spent developing technology, and move their programs that much further along …” Daly told Fox News.

Rep. Frank Wolf, R-Va., chairman of the House Appropriations subcommittee that funds NASA, held a press conference on Monday to reveal the security breach. Jiang was arrested carrying several data storage devices, including hard drives, flash drives and computers that likely contained sensitive information.

“What they did here potentially could be a direct threat to our country,” Wolf told Discovery News. “The Chinese have the most comprehensive spying program in Washington that has ever been. They make the KGB look like they were the junior varsity or freshman team.”

Jiang is reportedly affiliated with an institution in China that has been designated as an “entity of concern” by other U.S. government agencies, Wolf said. The FBI is “investigating conspiracies and substantive violations of the Arms Export Control Act,” he explained.

The case against Jiang was opened on March 13; on March 15, federal agents learned that he was leaving the United States "abruptly to return to China on a one-way ticket." On March 16, he was picked up at Dulles on a plane to Beijing.

“Although we won’t know the nature of the information on the hard drives until the FBI fully reviews it, we know that Mr. Jiang has in the past taken sensitive information back to China that he should not have been allowed to remove from Langley,” Wolf said.

NASA has an unfortunate history of security lapses, Daly told FoxNews.com.

“It’s very sad, especially for those of us that grew up with NASA and the space program and those great moments you saw them strive for to now see that they have a series of big security compromises,” he told Fox News.

Daly -- currently a senior vice president with security consultancy Control Risks Security Consulting -- noted that between 2010 and 2011, there were over 5,000 breaches of computer security by the agency’s own admission.

In October of 2012, a NASA employee had his unencrypted laptop stolen from his car outside of Washington with sensitive information on it.

“People out in Pasadena at the Jet Propulsion Laboratory were in an uproar over it, because it had very personal data -- background information -- on it,” he said.

[American Patriot]

Is that the guy from the song? "Mr. Bo Jangios"?

/grin

[Ryan Ruck]

China Again Tops Foreign Visitor Rolls At ORNL

February 27, 2013

Oak Ridge National Laboratory is an important player in the world of science, and scientists from more than 100 foreign countries visited the Oak Ridge campus last year, led — once again — by a large contingent from China.

Nearly a fourth of ORNL’s 7,706 foreign visitors in 2012 came from China. The 1,760 guests from China were more than twice as many as the next country, India, and far more than any other country — a situation that has existed for at least five years, perhaps longer.

Chinese scientists come to Oak Ridge to collaborate and exchange ideas with researchers from around the globe and to take advantage of the Spallation Neutron Source and other world-leading research facilities. ORNL works on open science projects with a number of institutions in China’s burgeoning research-and-development enterprise, which is pouring billions of dollars into nanoscience labs, high-end supercomputing and development of nuclear and alternative-energy sources.

Now more than ever, however, China is being accused of broad-based cyber espionage, and there are hints that the cyber attacks to gain economic advantage could begin to erode science relationships.

Lab Director Thom Mason said as much this week when asked about the strong presence of Chinese scientists at Oak Ridge, as well as the possibility that China could have been behind a disruptive cyber attack on ORNL systems in 2011.

“We are interested in collaborative R&D in scientific areas (of) mutual interest, but it becomes increasingly difficult in an environment where we are under attack,” Mason said.

Mason said the lab needs to work with the best in order to achieve great science, but also said lab officials need to “have open eyes about the risks.”

Concerns were validated by a report released last week by U.S. information security firm Mandiant, which implicated teams based in China with attacks on more than 140 U.S. and English-speaking businesses and organizations and suggested the Chinese government was aware of the activities and likely supporting them. The Mandiant report focused particular attention on one of the so-called Advanced Persistent Threat units, which the cybersecurity firm referred to as APT1.

More than 20 APT groups conducting attacks and stealing information allegedly have their origins in China, and Mandiant said the prolific APT1 team may be affiliated with the People’s Liberation Army in China.

“The activity we have directly observed likely represents only a small fraction of the cyber espionage that APT1 has conducted,” the report said. “Though our visibility of APT1’s activities is incomplete, we have analyzed the group’s intrusions against nearly 150 victims over seven years ... Our analysis has led us to conclude that APT1 is likely government-sponsored and one of the most persistent of China’s cyber threat actors.”

Mason noted that there were “similarities” between the sophisticated Advanced Persistent Threat attack at ORNL in 2011, which forced the lab to shut down Internet access for days and take other extraordinary measures to cleanse the computer systems. Experts from the nation’s top cybersecurity units joined in the investigation. Asked if they concluded ATP1 was responsible for the ORNL attack, Mason indicated that’s hard to say.

“Everyone uses different nicknames for things so I have no idea if what Mandiant called APT1 and ‘comment crew’ is the same as our APT or the same set of actors,” Mason said. “But the overall pattern is consistent. As we said at the time, the attack had all the hallmarks of a sophisticated nation-state activity. There are a limited number of countries that have such capabilities and, as the recent reports have highlighted, China is a major player (if not the major player) in this area.

“I think one of the messages to China coming out of the recent attention on this topic is that the level of activity has reached a point where there are starting to be consequences for the relationships with government and industry in the U.S.”

Mason said ORNL was fortunate in 2011 that it intervened before there was a major removal of data from the lab’s systems.

The reality of today’s world is if you have valuable information, somebody is going to come after it, the ORNL director said. “If no one was trying to get into our systems then I’d know we had fallen off the pace of innovative science and technology to the point we had nothing of value. Hopefully, sequestration notwithstanding, we’ll never get to that state.”

Working with visitors from China and other countries is important, especially in areas of science where results will eventually be published in the open literature, Mason said. He noted that foreign visitors, especially those from sensitive countries such as China, are subject to background checks in advance of visits and have restrictions on where they can go during their time at ORNL.

“So, having people visit the lab under that rubric doesn’t really represent any additional vulnerability,” he said.

Mason concluded: “In some sense, it’s better to have a structured collaboration where we understand who’s doing what and where we choose to collaborate and where not to collaborate. Because closing ourselves off to a significant and growing chunk of the world’s R&D would be more harmful to us in the long run.”

[Ryan Ruck]

US Judge Jails Chinese Man Who Exported Military Secrets

March 26, 2013

A U.S. judge has sentenced a Chinese national to more than five years in prison for illegally exporting sensitive defense-related information to China.

Liu Sixing was convicted in a federal court last year on charges including exporting technical military data without a license and lying to authorities.

The 49-year-old, also known as Steve Liu, was a senior staff engineer for a division of the New Jersey-based L-3 Communications, which was working on guidance systems for missiles, rockets and drones.

Prosecutors say he stole thousands of restricted military files and shared them during several presentations in China in 2009 and 2010, including one at a Chinese government-organized technology conference.

Liu says he was only trying to use the presentations to get a job in China. He argued that the case against him was politically motivated.

The presiding judge disagreed. In addition to the jail sentence, Liu was ordered to pay a $15,000 fine.

Liu, who has lived in the U.S. for 19 years, has been in custody since the verdict in September. Prosecutors said he was a risk to flee the country. His attorney says he plans to appeal the verdict and sentence.

[Ryan Ruck]

Wisconsin Researcher Accused of Economic Spying for China

April 2, 2013

A Medical College of Wisconsin researcher was charged with economic espionage for stealing a patented cancer-research compound to give to a university in China.

Hua Jun Zhao, 42, may have stolen the compound from a Medical College office in Milwaukee and taken steps to deliver it to Zhejiang University, according to a Federal Bureau of Investigation agent’s affidavit in support of a criminal complaint dated March 29.

A copy of the complaint against Zhao was obtained today from the office of Milwaukee U.S. Attorney James L. Santelle.

“There is probable cause to believe that Hua Jun Zhao has committed the crime of economic espionage,” FBI Special Agent Gerald Shinneman wrote in his nine-page affidavit.

Zhao joins a Motorola Inc. engineer and a researcher at Dow AgroSciences LLC who, in separate cases, have been accused by the U.S. of economic espionage or stealing on behalf of Chinese entities.

Zhao is in the Milwaukee County Jail and no bail has been set, said Fran McLaughlin, a spokeswoman for the Milwaukee County Sheriff’s Department.

Hearing Set

Dean Puschnig, a spokesman for Santelle, declined to comment on the status of Zhao’s case. Theft of trade secrets to benefit a foreign government is punishable by as long as 15 years’ imprisonment. A preliminary hearing for Zhao is set for April 11 before Magistrate Judge Patricia Gorence in Milwaukee.

Juval Scott, a federal public defender representing Zhao, said in a phone interview today that her office had no information beyond what is contained in the criminal complaint.

“We’re looking forward to discovery,” Scott said. “This is an unusual case. Nationwide there have only been a few cases.”

Hanjuan Jin, a former Motorola software engineer, last year was sentenced to four years in prison for stealing trade secrets from the company. While accused of planning to share that information with a company that had ties to the Chinese military, she was acquitted of economic espionage.

A former Dow AgroSciences researcher, Kexue Huang, was sentenced to seven years and three months in federal prison in 2011 after pleading guilty in two consolidated cases to stealing trade secrets to benefit a Chinese university.

Three Bottles

Zhao had been conducting pharmacology research at the university as an assistant to Dr. Marshall Anderson, according to Shinneman’s affidavit.

On Feb. 22, Anderson reported to university security that three bottles of a powdery compound identified only as C-25, for which he held the patent, had disappeared from his office, the FBI agent said. The vials were worth about $8,000, Shinneman said.

A review of security video showed Zhao was the only person to enter or leave Anderson’s office around the time the bottles disappeared, according to the affidavit.

University security also learned Zhao had been in China from December to February and stated on his resume that he was an assistant professor at Zhejiang University, Shinneman said.

Zhao also claimed on the website ResearchGate that he had discovered a cancer-fighting compound and wanted to bring it to China, the FBI agent said.

Plane Tickets

Federal agents, with a search warrant for Zhao’s residence on March 28, found a receipt for a package sent to his wife in China a month earlier, together with plane tickets for a flight from Chicago to China, scheduled to depart today, Shinneman said.

At a detention hearing yesterday in Milwaukee, Assistant U.S. Attorney Tracy M. Johnson told Gorence that Zhao had sold his car prior to his arrest. Johnson told the judge that in addition to his wife, Zhao has a son living in China.

While Zhao may not have known about the case, “he had an inkling there was a problem,” Gorence said at the hearing.

The case is U.S. v. Zhao, 13-mj-00220, U.S. District Court for the Eastern District of Wisconsin (Milwaukee).

[vector7]

Special Report: How China's weapon snatchers are penetrating U.S. defenses

By John Shiffman and Duff Wilson

OAKLAND, California Tue Dec 17, 2013 8:38pm IST







1 of 9. Craig Healy, the U.S. government's chief law enforcement officer for counter-proliferation, displays a set of confiscated American-made radiation-hardened microchips in his office at the Export Enforcement Coordination Center, a joint Homeland Security/FBI/Commerce operation in Northern Virginia November 21, 2013.
Credit: Reuters/Kevin Lamarque

Craig Healy, the U.S. government's chief law enforcement officer for counter-proliferation, displays a set of confiscated American-made radiation-hardened microchips in his office at the Export Enforcement Coordination Center, a joint Homeland Security-FBI-Commerce operation in Northern Virginia November 21, 2013. REUTERS-Kevin Lamarque

Craig Healy, the U.S. government's chief law enforcement officer for counter-proliferation, holds seized radiation hardened integrated circuits in his office at the Export Enforcement Coordination Center, a joint Homeland Security-FBI-Commerce operation in Northern Virginia November 21, 2013. REUTERS-Kevin Lamarque

U.S. Homeland Security Investigations agents found 200 radiation-hardened microchips worth $300,000 in this baby formula tub, seen in an evidence photo provided by Homeland Security Investigations, during an attempt to smuggle the chips out of the United States to China on December 11, 2011 in Long Beach, California. REUTERS-U.S. Homeland Security Investigations-Handout

1 of 9. Craig Healy, the U.S. government's chief law enforcement officer for counter-proliferation, displays a set of confiscated American-made radiation-hardened microchips in his office at the Export Enforcement Coordination Center, a joint Homeland Security/FBI/Commerce operation in Northern Virginia November 21, 2013.


(Reuters) - Agents from Homeland Security sneaked into a tiny office in Oakland's Chinatown before sunrise on December 4, 2011. They tread carefully, quickly snapping digital pictures so they could put everything back in place. They didn't want Philip Chaohui He, the businessman who rented the space, to learn they had been there.

Seven months had passed since they'd launched an undercover operation against a suspected Chinese arms-trafficking network - one of scores operating in support of Beijing's ambitious military expansion into outer space.

The agents had allowed a Colorado manufacturer to ship He a type of technology that China covets but cannot replicate: radiation-hardened microchips. Known as rad-chips, the dime-sized devices are critical for operating satellites, for guiding ballistic missiles, and for protecting military hardware from nuclear and solar radiation.

It was a gamble. This was a chance to take down an entire Chinese smuggling ring. But if He succeeded in trafficking the rad-chips to China, the devices might someday be turned against U.S. sailors, soldiers or pilots, deployed on satellites providing the battlefield eyes and ears for the People's Liberation Army.

Entering He's office at 2:30 that December morning, the agents looked inside the FedEx boxes. The microchips were gone. The supervisor on the case, Greg Slavens, recoiled.

"There are a bunch of rad-chips headed to China," Slavens recalls thinking, "and I'm responsible.'"

In the past 20 years, the United States has spent trillions of dollars to create and deploy the world's best military technology. It also has enacted laws and regulations aimed at keeping that technology away from potential adversaries such as Iran, North Korea and the nation that poses perhaps the most significant long-term threat to U.S. military supremacy, China.

China's efforts to obtain U.S. technology have tracked its accelerated defense buildup. The Chinese military budget - second only to America's - has soared to close to $200 billion.

President Xi Jinping is championing a renaissance aimed at China's asserting its dominance in the region and beyond. In recent weeks, Beijing has declared control over air space in the contested East China Sea and launched China's first rover mission to the moon.

IMMEDIATE THREAT

As China rises to challenge the United States as a power in the Pacific, American officials say Beijing is penetrating the U.S. defense industry in ways that not only compromise weapons systems but also enable it to secure some of the best and most dangerous technology. A classified Pentagon advisory-board report this year, for instance, asserted that Chinese hackers had gained access to plans for two dozen U.S. weapons systems, according to the Washington Post.

But the smuggling of technology such as radiation-hardened microchips out of America may present a more immediate challenge to the U.S. military, Reuters has found. If China hacks into a sensitive blueprint, years might pass before a weapon can be manufactured. Ready-made components and weapons systems can be - and are - used immediately.

Beijing says its efforts to modernize its military are above-board. "China has mainly relied on itself for research and development and manufacturing," the Chinese defense ministry said in a statement to Reuters. "China always complies with relevant laws and cooperation agreements and protects intellectual property rights."

How often the Chinese succeed at acquiring U.S.-made weaponry or components is unclear. U.S. government officials say they don't know, in part because the problem is too widespread and difficult to track. By its very definition, black market smuggling is hard to monitor and quantify. Quite often, sensitive U.S. technology is legally shipped to friendly nations and then immediately and illegally reshipped to China.

China also presents a special challenge: It is both the largest destination for legally exported American-made goods outside North America and the most or second-most frequent destination for smuggled U.S. technology. A 2010 classified Pentagon assessment showed a spike in legal shipments to China of "dual-use" technology - products that have civilian and military purposes, a person involved in the study said.

The technology products the Chinese military seeks tend to be miniaturized, and thus aren't easily identifiable to U.S. border agents - unlike drugs, for example. And trafficking in these goods isn't technically illegal until someone tries to export them.

"When you think about how many legitimate transactions go to a place like China, it makes it very difficult to track," said Craig Healy, a senior Homeland Security official who directs the U.S. export enforcement center.

Officially published U.S. estimates of how frequently American arms technology gets smuggled are incomplete. By one Pentagon calculation, suspicious queries to U.S. defense manufacturers by entities linked to China increased 88 percent from 2011 to 2012. The government won't disclose the number of cases that underlie that percentage.

U.S. defense and intelligence officials said that although they closely monitor the Chinese buildup, they believe China remains at least a decade behind America. "They still have a long way to go," said one senior U.S. defense official.

Reuters analyzed court records from 280 arms-smuggling cases brought by the U.S. government from October 1, 2005 to October 1, 2013. Reporters also interviewed two dozen counter-proliferation agents and reviewed hundreds of internal Federal Bureau of Investigation, Homeland Security and Commerce Department documents.

The number of counter-proliferation arrests related to all countries quadrupled from 54 to 226 from 2010 to 2012, internal law enforcement records show. Since 2008, the number of China-related space-technology investigations - like the undercover case against the Oakland man - has increased approximately 75 percent, U.S. law enforcement sources said. Since late 2012, federal agents say they have begun nearly 80 space-and-satellite-related investigations.

"I think we're getting better at this, but this stuff is rampant," said FBI assistant director for counter-intelligence Robert Anderson Jr. Anderson was referring to cases involving all potentially hostile nations, not just China. "The more you dig in these cases," he said, "the more potential investigations you find."

Said a U.S. diplomat based in China: "I think we do a good job on the cases that we learn about, but it's really just a finger in the dike."

A MAN NAMED "HOPE"

U.S. counter-proliferation agents say the 2011 Oakland sting is typical of dozens launched recently against people trying to acquire space and missile technology for China. It also demonstrates the difficulty in dismantling smuggling networks, even when a target appears patently suspicious from the outset.

The Oakland investigation began in spring 2011. The manufacturer, Aeroflex of Colorado Springs, Colorado, received an email from a man who called himself Philip Hope of Oakland. The man wanted to buy two kinds of rad-chips - 112 of one type and 200 of the other. The total cost:

$549,654.

The initial email triggered suspicion.

People and companies who buy these kinds of rad-chips are usually well-established, repeat customers - more multinational corporation than mom & pop. Aeroflex salesmen had never heard of "Philip Hope" or his company, "Sierra Electronic Instruments."

Most suspicious of all, just days after placing the order, Hope sent Aeroflex a certified check for the full amount, $549,654. That was rare. Buyers were expected to make a deposit, but nobody paid up front.

The suspicious Aeroflex employees contacted Homeland Security Investigations (HSI), a division of Immigration and Customs Enforcement, which keeps a special counter-proliferation office in the space technology hub of Colorado Springs.

Based on quick record checks, the HSI agents drew a portrait of "Philip Hope." The man was a Chinese immigrant and legal permanent resident, Philip Chaohui He, an engineer for the state of California assigned to a Bay Bridge renovation project. Sierra Electronic Instruments was a start-up run from the one-room office in Chinatown.

The HSI agents concluded that He was buying the rad-chips on behalf of someone else. Someone rich. Someone who couldn't legally acquire them. Probably someone in China - likely the China Aerospace Science and Technology Corp, a state-run entity that operates nearly all of China's military and civilian space projects.

China Aerospace officials did not respond to requests for comment. An official at a Shanghai subsidiary said he was unaware of the He purchases.

The rad-chips He ordered from Aeroflex are not the most powerful on the market, and could not operate a sophisticated military satellite on their own. But experts say they have few uses other than as one of the many components of a sophisticated satellite.

"You wouldn't spend that kind of money on those microchips unless you intended to use them in much bigger satellites," said Alvar Saenz-Otero, associate director of the Space Systems Lab at the Massachusetts Institute of Technology. "They fit the design of a satellite that you'd want to stay in space for a reasonably long time, and therefore are likely small parts of a bigger satellite."

Despite the concerns about where and how the components might be used, He's order of 312 rad-chips violated no law. These chips may be legally sold domestically, and to foreign buyers who obtain a State Department license. They may not be exported outside the United States to certain nations, including China. He had the chips sent to his office address in Oakland, making the deal legal. If He tried to take them abroad, he'd be breaking the law.

THE AGENTS' DILEMMA

The agents faced the key question that comes in almost every counter-proliferation case: Could they lure the suspect into a sting? If so, would it be worth the trouble?

Undercover operations are time-consuming, expensive and risky. If agents dangled rad-chips in front of the suspect and he got away, the components would probably end up on Chinese satellites. If they delivered the chips and watched him closely, he might lead them to a network traceable to Beijing.

The agents in the case faced another complication: At the time, Aeroflex - the very manufacturer enlisted to help with the sting - was itself under civil investigation for sending rad-chips to China.

Although that investigation was still under way, Aeroflex had already admitted that it sent more than 14,500 rad-chips to China between 2003 and 2008. Aeroflex exported more than half of those chips even after U.S. officials had directed it to stop doing so.

The company declined to comment. But documents show two mitigating factors - Aeroflex voluntarily disclosed the transgressions, and it blamed them in part on misreading complex and sometimes competing Commerce Department and State Department regulations.

Even so, State Department regulators would ultimately conclude: "The exports directly supported Chinese satellites and military aircraft, and caused harm to U.S. national security."

Thus, if the HSI agents wanted to attempt a sting against the man in Oakland, they would have to trust a company that had admitted aiding a potential enemy on a much larger scale.

On July 28, 2011, a federal agent posing as a Federal Express driver arrived at He's office building in Oakland. The agent handed He's wife a package containing the first order, 112 rad-chips. She leaned it against a wall.

The undercover agent wore a hidden camera that recorded the office's 10-by-12-foot interior. The place had sleeping bags and mattresses on the floor. There was no satellite research equipment.

The agent departed, but not before leaving a tiny surveillance device. For the next five weeks, the device indicated that the box didn't move. Agents also put a camera outside the office door, placed a keystroke-logger on He's computer and monitored his movements based on his cell phone location. They placed his name on an automated watch list at airports and border crossings.

But they didn't have the manpower to tail him. He slipped out of the country on September 6, taking a flight to San Diego and driving across the border at Tijuana.

The agents received an automated security alert only the following day, September 7. They also learned that He was booked on a flight from Tijuana to Shanghai that evening. It was too late. They'd missed him.

Was China about to receive 112 military-grade microchips for its space program? There was no way to know for sure.

The agents had two options: Drop the case, or send He the second batch of chips and try to catch him exporting those.

ANOTHER SURPRISE

On October 6, an undercover agent helped FedEx deliver the second shipment, 200 radiation-hardened chips. Once again, the agents waited and watched.

When two months passed with no indication that He had moved the microchips, Slavens sought the sneak-and-peak warrant. The late night search, on December 4, turned up empty boxes. Slavens then sought a warrant for He's home and renewed the airport and border look-outs.

On the morning of December 10 - before the agents could complete the search warrants - the smuggler surprised them again. An agent noticed He's cell phone on the move, far south of Oakland, heading toward Los Angeles - presumably to Tijuana again, and then on to China. Slavens scrambled Homeland Security Investigations agents near Los Angeles.

The L.A. agents followed the cell-tracker to a Best Western hotel south of the city. In the early evening, they located He's Honda sedan in the hotel parking lot. They confirmed that He had checked in, and they settled in for surveillance.

At about 8:45 a.m. on December 11, 2011, He left his hotel room with an unidentified traveling companion and pulled the Honda onto Interstate 110, driving south. Tijuana was two hours away. The HSI agents planned to stop him at the Mexico border.

But after just 3 miles, He pulled into the Port of Long Beach. Then, he used a Transportation Safety Administration pass - a badge he carried for his Bay Bridge repair assignment - to swiftly get through port security.

The agents caught up as the Honda drew near a red and white cargo ship flying a Chinese flag. Stenciled on the mast were the letters ZPMC. This was the same company with the Bay Bridge repair contract to which He had been assigned by the California transit agency. A coincidence? The agents couldn't be sure. (ZPMC did not respond to requests from Reuters for comment.)

HSI agents stopped He and his friend as they approached the ship captain. An agent opened the trunk. Stuffed inside a tub of Similac infant formula, authorities found 200 radiation-hardened Aeroflex microchips.

The agents say the captain told them that he expected to receive "household goods" and other consumer purchases from He for delivery to friends in China. The captain and He's driving companion were permitted to leave. He was handcuffed.

Under questioning, He told the agents that he'd started his Oakland business at the behest of a Shanghai electronics broker who promised to reward him with a condominium in China for his assistance.

THE MISSING CHIPS

In August, more than five years after Aeroflex admitted wrongdoing, the State Department announced an $8 million fine for the company's 2003 to 2008 satellite microchip shipments to China. If Aeroflex completes remedial measures, such as training employees to follow rules the company already should have been following, half of the fine will be suspended.

In September, He pleaded guilty in federal court in Colorado. He is scheduled to be sentenced Wednesday. Federal guidelines call for a sentence of 46 to 57 months.

In a court filing, his lawyer disputed the government's assertion that He knew the rad-chips were destined for use by the Chinese government. Assistant federal defender Robert Pepin said He believed they would be used for commercial mining satellites. Pepin said He deserves a sentence of no more than 24 months, noting that He faces certain deportation when his sentence concludes, and potential separation from his children, who are U.S.-born citizens.

"The life he knew and enjoyed is destroyed," Pepin said.

Despite the scope of the investigation, no one else was charged. The others in the suspected network - the ship captain, the Shanghai broker, the traveling partner and another Oakland suspect - were not arrested.

The fate of the first shipment of 112 radiation-hardened chips - the ones that got away - is unknown. U.S. officials strongly suspect they are either in China or orbiting the Earth aboard one of Beijing's satellites.

(Edited by Blake Morrison)

http://in.reuters.com/article/2013/1...9BG0TN20131217

[Ryan Ruck]

State Department Contractor Allegedly Paid By Chinese Agent To Spy On Americans – Yet No Charges Filed

April 22, 2015

Newly unsealed court documents obtained by Fox News show a State Department contractor allegedly was paid thousands by an individual thought to be a Chinese agent in exchange for information on Americans -- but despite an FBI probe, the Justice Department declined to prosecute.

A November 2014 FBI affidavit, filed in the U.S. District Court for the District of Maryland, shows the bureau investigated the contractor for her admitted contact with individuals she believed to be Chinese intelligence officers.

The affidavit from agent Timothy S. Pappa states the translator, Xiaoming Gao, was paid "thousands of dollars to provide information on U.S. persons and a U.S. government employee."

According to the documents, she admitted these meetings took place in hotel rooms in China for years, where she reported on her "social contacts" in the U.S. to an individual who went by the name of "Teacher Zhao."

The detailed affidavit even goes on to say the translator briefly lived, "for free," with a State Department employee -- who held a top-secret clearance and designed high-security embassies, including the U.S. compound in Islamabad, Pakistan.

The State Department employee, who was not named, initially told the FBI he didn't discuss his job with Gao, but later changed his statement.

According to the documents, Gao also told the FBI -- during interviews in 2013 -- that she once told "Teacher Zhao" about the travel plans of an American and ethnic Tibetan. This person told the FBI he ended up being interrogated by Chinese intelligence officers during a trip to Tibet, and a member of his family was imprisoned.

Yet the U.S. attorney's office in Washington, D.C., which oversaw the case, recently declined to prosecute, allowing the documents to be unsealed. The office offered no further comment. The FBI also is saying nothing beyond the court documents that were filed to search a storage unit in suburban Washington, D.C.

On its face, a former senior Justice Department official said the decision not to prosecute is perplexing, because the case was unlikely to reveal investigative sources and methods.

"It's not clear to me, based on the court files that were unsealed, how a prosecution of this person could possibly have compromised U.S. intelligence gathering," Thomas Dupree, former deputy assistant attorney general under the George W. Bush administration, told Fox News. "If it jeopardizes or threatens to disrupt relations with another country, so be it. That you have to draw the line somewhere, and that we need to send a message that this sort of conduct and activity simply will not be tolerated."

The State Department confirmed Xiaoming Gao worked for the Office of Language Services over a four-year period beginning in June 2010. This would have covered the tenures of former Secretary of State Hillary Clinton and sitting Secretary John Kerry.

"She was employed as a contract interpreter until February 2014, is not employed here anymore. And so any additional questions on this, I'd refer you to the FBI," spokeswoman Marie Harf said.

When told the FBI was referring Fox News' questions back to State, Harf responded: "I'm referring you back to them."

The documents do not fully explain Gao's side of the story.

Emails and phone calls to the consulting firm, which the translator listed on the web as her employer, have gone unanswered. Fox News extended an invitation to discuss the allegations. No attorney of record was filed with the court.

[American Patriot]

No charges... yeah, cuz, you know, the Chinese are our friends (who's that Israeli they arrested again? Still in jail? Yeah, I thought so)