U.S.'s 5,025,817 Chinese Spies

FBI spied on Chinese students and scientists, new book reveals
By Bethany Allen-Ebrahimian


In 1967, at the height of the Cold War, the FBI began collecting information on thousands of Chinese "scientists and students" in cities across the U.S.
The Scientist and the Spy, a book publishing in February, reveals the existence of this former program for the first time.

Why it matters: Recent FBI indictments and investigations, targeting Chinese researchers in the U.S. and aimed at stemming the unauthorized flow of science and tech secrets to China, have raised American public's awareness of massive Chinese espionage efforts.
In The Scientist and the Spy, out Feb. 4, former China correspondent Mara Hvistendahl traces the history of China's theft of trade secrets through the case of a Chinese scientist imprisoned in 2016 for stealing corn seed from Monsanto and DuPont Pioneer.
In the process, Hvistendahal exposes a classified FBI program that tracked Chinese scientists and science students in the U.S. beginning in 1967 and at least through the 1970s.
A letter sent to FBI agents in 1967 "ordered agents to cull names of ethnically Chinese researchers, including U.S. citizens from the membership records of scientific organizations," Hvistendahl writes.


 
Chinese spy Mak Chi

The result: A "rolodex of an estimated four thousand ethnically Chinese scientists under surveillance."
Chinese science students were also targeted.
In New York City, 200 students were surveilled; in San Francisco, up to 75.
"In their haste to follow orders, some offices followed shaky leads," writes Hvistendahl.
Some scientists targeted by the program had only loose ties to China; others were repeatedly interrogated by the FBI.
Hvistendahl spoke with the family of one such Sino-American scientist, Harry Sheng, who was permanently shut out of his career.

Background: Chinese scientists in the U.S. have faced several extended periods of surveillance.
Some of their cases offer cautionary tales.
In the 1950s, Qian Xuesen, a Chinese scientist who helped the U.S. develop the world’s first atomic weapon, was accused of harboring communist sympathies and spent five years under house arrest. After he was released, he fled to China, eventually helping develop China’s nuclear weapons program.
In 1999, a Taiwanese-American nuclear scientist, Wen Ho Lee, was indicted on 59 counts for theft of state secrets and held in solitary confinement for 278 days.

Our thought bubble: The spate of investigations and indictments is a response to a real problem.
In recent years, a massive, unlawful transfer of intellectual property from the U.S. to China has unquestionably occurred.

The bottom line: “If China is shaped by systematic theft of Western technology,” Hvistendahl writes, “America is locked in its own internal struggle, between openness and security.”

Chinese theft of trade secrets on the rise

• The Justice Department launched the “China Initiative” with the aim of countering Chinese national security threats.
• “The issue is that their industrial policy, the way they try to accomplish that, is state-sponsored theft or creating an environment that rewards it,” U.S. Deputy Assistant Attorney General Adam Hickey told CNBC.

By Nancy Hungerford


China’s legal environment rewards intellectual property theft: DOJ

As President Donald Trump puts pressure on Beijing to end unfair business practices, the Department of Justice has a warning for companies: Bolster your defenses.
“More cases are being opened that implicate trade secret theft” — and more of them point to China, said U.S. Deputy Assistant Attorney General Adam Hickey.
Since 2012, more than 80% of economic espionage cases brought by the department’s National Security Division have implicated China. 

The frequency of cases has been rising in recent years, according to Hickey.
“That may be because the victims are more attentive to what’s happening, which is a good thing,” Hickey told CNBC in Singapore on Saturday. 

“They may be more comfortable reporting to law enforcement, which is a good thing. They may be fed up, which is also a good thing.”
The Justice Department launched the “China Initiative” in November 2018 with the aim of countering Chinese national security threats. 

It does so by identifying and prosecuting trade-secret and intellectual property (IP) theft, hacking and economic espionage.

‘State-sponsored theft’
Hickey is unequivocal in his defense of the Justice Department’s motives.
“We expect other nations will want to become self-sufficient in critical technologies. That’s what we’d expect of a responsible government,” he said. 

“The issue isn’t that China has set out to do that. It’s that part of their industrial policy, part of the way they try to accomplish that, is state-sponsored theft or creating an environment that rewards or turns a blind eye to it.”
He pointed to evidence of such behavior linked to the “Made in China 2025” strategic plan. 

The Chinese government introduced the plan in 2015, designed to reduce dependence on imported technology in 10 priority industries including robotics, IT, aviation, railway transport and biopharma. “We’ve charged cases, I believe, in eight of those 10 sectors, IP theft cases,” Hickey said.
The Justice Department’s China Initiative also puts an emphasis on cybersecurity threats and telecommunication vulnerabilities.
Hickey declined to comment on Chinese telecommunication giant Huawei as it is currently the subject of two prosecutions in the United States.
However, he weighed in on the threat to national security from telecom companies and supply chains more broadly. 

“It’s going to matter where that company is located and whether they can be leveraged to comply with an intelligence service without regard to the rule of law that has to be relevant,” he said.

Huawei CEO and founder, Ren Zhengfei, told CNBC in April that his company would “never install a back door” on its equipment — even if ordered by the Chinese government to do so. 

Ren said: “It would be impossible for us to provide customer information to any third party.”

Experts, however, have told CNBC that Huawei will have no choice but to comply with the Chinese government’s requests.
Hickey stressed the need to look not only at whether there is a so-called back door or an intentional vulnerability, but also at whether there’s intent and capability of a government to leverage that company.
“If you are looking for a smoking gun and you wait for it, you might end up with a gunshot,” Hickey warned.

Justice Department Details Charges Against Chinese Huawei and Its CFO

By MICHAEL BALSAMO 

FBI Director Christopher Wray, standing with Commerce Secretary Wilbur Ross (left) and Acting Attorney General Matthew Whitaker, remarks on the charges against Huawei during a press conference today at the Department of Justice in Washington, D.C.

WASHINGTON — The Justice Department unsealed criminal charges Monday against Chinese tech giant Huawei, two of its subsidiaries and a top executive, who are accused of misleading banks about the company’s business and violating U.S. sanctions.
The company is also charged in a separate case with stealing trade secrets from T-Mobile, according to federal prosecutors.
Prosecutors are seeking to extradite the company’s chief financial officer, Meng Wanzhou, and allege she committed fraud by misleading banks about Huawei’s business dealings in Iran.

She was arrested on Dec. 1 in Canada.
The criminal charges in Brooklyn and Seattle come as trade talks between China and the U.S. are scheduled for this week.
“As I told high-level Chinese law enforcement officials in August we need more law enforcement cooperation with China,” acting Attorney General Matt Whitaker said at a news conference with other Cabinet officials, including Commerce Secretary Wilbur Ross and Homeland Security Secretary Kirstjen Nielsen. 

“China should be concerned about criminal activities by Chinese companies and China should take action.”
U.S. prosecutors charge that Huawei used a Hong Kong shell company to sell equipment in Iran in violation of U.S. sanctions. 

Huawei had done business in Iran through a Hong Kong company called Skycom and Meng misled U.S. banks into believing the two companies were separate, according to the Justice Department.
The announcement Monday includes a 10-count grand jury indictment in Seattle, and a separate 13-count case from prosecutors in the Eastern District of New York.
“As you can tell from the number and magnitude of the charges, Huawei and its senior executives repeatedly refused to respect U.S. law and standard international business practices,” said FBI Director Chris Wray.
A Huawei spokesman did not immediately return phone messages seeking comment.
Huawei is the world’s biggest supplier of network gear used by phone and internet companies and has long been a front for spying by the Chinese military and security services.
Prosecutors also allege that Huawei stole trade secrets, including the technology behind a robotic device that T-Mobile used to test smartphones, prosecutors said. 

A jury in Seattle ruled that Huawei had misappropriated the robotic technology from T-Mobile’s lab in Washington state.
Meng was arrested in Canada because the U.S. and China don’t have an extradition treaty. 

But new rules enacted in the past few years have made it easier for U.S. prosecutors to indict overseas corporate defendants without coordinating with foreign governments, said Ronald Cheng, a partner with the O’Melveny and Myers law office in Los Angeles and former U.S. judicial attache in Beijing.
Because it’s usually difficult to go after corporate officers, Chinese companies accused of IP theft need to worry more about asset forfeiture, which has in some cases been considerable. 

In July, the Chinese wind turbine maker Sinovel Wind Group LLC was ordered to pay more than $50 million in restitution after being convicted of stealing trade secrets from the U.S. company AMSC.
Cheng, who was reached in Hong Kong, said there’s considerable concern among Chinese business executives about stepped up enforcement in such cases, which began in earnest with the Obama administration, including a 2014 indictment alleging theft of solar power trade secrets.
“I think the government would say that this is part of a large pattern of conduct” by Chinese companies, Cheng said of Monday’s indictments.
The Huawei case has set off a diplomatic spat with the three nations, which has threatened to complicate ties between the U.S. and Canada. 

Donald Trump said he would get involved in the Huawei case if it would help produce a trade agreement with China and told Reuters in an interview in December that he would “intervene if I thought it was necessary.”
The arrest of Meng, the daughter of Huawei’s founder at Vancouver’s airport, has in particular led to the worst relations between Canada and China since the Tiananmen Square massacre in 1989. 

China detained two Canadians shortly after Meng’s arrest in an apparent attempt to pressure Canada to release her. 

A Chinese court also sentenced a third Canadian to death in a sudden retrial of a drug case, overturning a 15-year prison term handed down earlier.
David Martin, Meng’s lawyer in Canada, didn’t immediately respond to a message seeking comment. 

Meng is out on bail in Vancouver and is due back in court Feb. 6 as she awaits extradition proceedings to begin.
Canada arrested Meng at the request of the United States. 

The Chinese have been furious at Canada ever since and arrested Canadian ex-diplomat Michael Kovrig and businessman Michael Spavor on Dec. 10 on vague allegations of endangering national security.

Chinese Theft of Trade Secrets

America’s overt payback for China’s covert espionage
By David Ignatius

Chinese dictator Xi Jinping in Beijing on Nov. 2. 

While the U.S.-China trade war has been getting the headlines, U.S. intelligence and law enforcement agencies have been waging a quieter battle to combat Chinese theft of trade secrets from American companies — a practice so widespread that even boosters of trade with China regard it as egregious.
The Trump administration’s campaign of tariffs will eventually produce some version of a truce.
But the battle against Beijing’s economic espionage is still accelerating, and it may prove more important over time in leveling the playing field between the two countries.
To combat Chinese spying and hacking, U.S. intelligence agencies are increasingly sharing with the Justice Department revelatory information about Chinese operations.
That has led to a string of recent indictments and, in one case, the arrest abroad of a Chinese spy and his extradition to the United States to face trial.
The indictments don’t just charge violations of law; they also expose details of Chinese spycraft.
And there’s a hidden threat: The Chinese must consider whether the United States has blown the covers of not just the people and organizations named in the criminal charges but also others with whom they came in contact.
This law enforcement approach to counterespionage requires public disclosure of sensitive information, something that intelligence agencies often resist.
But it seems to be an emerging U.S. strategy.
The Justice Department has pursued a similar open assault on Russian cyberespionage, with three recent indictments naming a score of Russian operatives and disclosing their hacking techniques, malware tools and planned targets.
China, like Russia, is displaying an increasingly freewheeling and entrepreneurial approach to espionage. 
Several indictments unsealed since September reveal how the Ministry of State Security, the Chinese spy service, has operated through its regional bureaus — in this case the Jiangsu provincial office of the MSS — to obtain precious U.S. technology.
The indictments allege that from 2010 to 2015, the Jiangsu branch ran a team of nine hackers who tried to steal U.S. techniques for making jet engines. 
This is a subtle and highly valuable aspect of aerospace technology, one of the few that China hasn’t yet mastered or stolen, and the Chinese evidently wanted to obtain by stealth what they couldn’t produce on their own.
“The concerted effort to steal, rather than simply purchase, commercially available products should offend every company that invests talent, energy and shareholder money into the development of products,” said Adam Braverman, the U.S. attorney in San Diego who helped prosecute the cases.
The San Diego indictment lists the hacker names used by the conspirators, handles such as “Cobain,” “sxpdlcl” and “mer4en7y.”

Yanjun Xu, who also uses the names Qu Hui and Zhang Hui, was extradited to the US with help from Belgian authorities for seeking to steal trade secrets and other sensitive information from GE Aviation, an American company that leads the way in aerospace.

A separate indictment charged an MSS officer named Yanjun Xu, a deputy division director in the Jiangsu bureau, with trying to steal jet engine secrets from GE Aviation; Xu was arrested in April in Belgium after he began trying to penetrate the company’s operations, and he was extradited to the United States last month.

Ji Chaoqun: US army reservist accused of trying to recruit Chinese spies

The United States in September arrested a U.S. Army reservist named Ji Chaoqun and charged that he had helped the Chinese gain information about aerospace industry targets.
This month, the Justice Department also unsealed a September indictment that accused a Chinese company and its Taiwanese partner, both funded by the Chinese government, of trying to steal eight trade secrets for a memory-chip technology known as DRAM from Micron Technology Inc., based in Silicon Valley.
The indictment notes that the Chinese government had identified DRAM as “a national economic priority” that Beijing was determined to obtain.
The indictment, brought by the U.S. attorney in San Jose, uses blunt language to describe the plot: “In order to develop DRAM technology and production capabilities without investing years of research and development and the expenditure of many millions of dollars,” the defendants “conspired to circumvent Micron’s restrictions on its proprietary technology.”
What gives these indictments extra bite is that Xi Jinping had promised back in 2015 that China wouldn’t conduct economic cyberespionage anymore.
That pledge followed an indictment the previous year that revealed an elaborate plot by Chinese military hackers to steal U.S. commercial secrets.
But in the espionage world, promises not to spy are dubious at best. 

Jerry Chun Shing Lee: ex-CIA officer at the centre of one of the largest US intelligence breaches in decades.

Over the past three years, the Justice Department has charged former CIA officer Jerry Chun Shing Lee and five other Americans with stealing secrets on behalf of Beijing.
As a rising power, China is also a rising threat in the intelligence sphere.
The U.S. counterattack, in part, seems to be a public revelation of just how and why Beijing is stealing America’s secrets — overt payback for covert espionage.

Chinese spy arrested in Belgium and extradited to US on charges of stealing aviation secrets

By Katie Benner

Yanjun Xu, Chinese intelligence official, was charged with espionage and extradited from Belgium to the United States, law enforcement officials said on Wednesday.

WASHINGTON — A Chinese intelligence official was arrested in Belgium and extradited to the United States to face espionage charges, Justice Department officials said on Wednesday, a major escalation of the Trump administration’s effort to crack down on Chinese spying.
The extradition on Tuesday of the officer, Yanjun Xu, a deputy division director in China’s main spy agency, the Ministry of State Security, is the first time that a Chinese intelligence official has been brought to the United States to be prosecuted and tried in open court. 

Law enforcement officials said that Xu tried to steal trade secrets from companies including GE Aviation outside Cincinnati, in Evendale, Ohio, one of the world’s top jet engine suppliers for commercial and military aircraft.
A 16-page indictment details what appears to be a dramatic international sting operation to lure Xu to what he believed was a meeting in Belgium to obtain proprietary information about jet fan blade designs from a GE Aviation employee, only to be met by Belgian authorities and put on a plane to the United States.
China has for years used spycraft and cyberattacks to steal American corporate, academic and military information to bolster its growing economic power and political influence. 

But apprehending an accused Chinese spy — all others charged by the United States government are still at large — is an extraordinary development and a sign of the Trump administration’s continued crackdown on the Chinese theft of trade secrets.
The administration also outlined on Wednesday new restrictions on foreign investment aimed at keeping China from gaining access to American companies.
The arrest of Xu “shows that federal law enforcement authorities can not only detect and disrupt such espionage, but can also catch its perpetrators,” Benjamin C. Glassman, the United States attorney for the Southern District of Ohio, said in a statement.
The coming trial, in federal court in Cincinnati, could further expose China’s methods for stealing trade secrets and embarrass officials in Beijing — part of what current and former administration officials said was a long-term strategy to make stealing secrets costly and shameful for China. 

Federal prosecutors will have to present additional evidence to prove their case, which could include intercepted communications between government officials or even testimony from cooperating witnesses.
“If you can make it less expensive in terms of money and reputation to instead invest in R&D, the country’s behavior can and will change,” said John Carlin, the former head of the Justice Department’s National Security Division, referring to research and development.

The indictment outlines China’s courting of the GE Aviation employee starting in March 2017. 

The company, a subsidiary of General Electric, was a ripe target because it builds airplane and helicopter engines for the Pentagon.
An individual identified as an unindicted co-conspirator invited the GE Aviation employee on an all-expense trip to China to meet with scientists at Nanjing University of Aeronautics and Astronautics. 

Once there, the employee was introduced to Xu, who continued to be in touch by email after the trip.
In January, Xu invited the employee back to China and told him that he should bring information about GE Aviation’s “system specification, design process.” 

Over the next two months, Xu asked the employee for more details, including what the indictment said was proprietary information about fan blade design.
Xu and the GE Aviation employee discussed increasingly specific pieces of data that Xu wanted, and the employee even sent Xu a file directory of documents on the employee’s company-issued laptop.
The two never met again in China, but set up a meeting in Belgium for the employee to pass more secrets to Xu. 

In preparation for the employee’s trip to Europe, Xu asked the employee if he would use an external thumb drive to transfer information from the employee’s work computer when they met in person.
It is unclear from the indictment if the employee at this point was cooperating with the F.B.I. as part of the sting operation, and it is unclear if the employee ever traveled to Belgium. 

On Wednesday, the Justice Department praised GE Aviation for its cooperation in the investigation and internal controls that the department said “protected GE Aviation’s proprietary information.’’
Xu was arrested on April 1 in Belgium and remained in custody there until Tuesday. 

He is now being held in Cincinnati.
Employees of large American corporations traveling to countries like China are often targets for information theft because their devices can be hacked remotely and because they can speak too revealingly of their work while being wined and dined, said Joseph S. Campbell, the former head of the F.B.I.’s criminal investigative division who is now a director at Navigant Consulting.
“Employees who think they’re sharing unimportant information don’t realize that they’re adding to a broad matrix of knowledge,’’ Mr. Campbell said. 

“Even with unclassified information, China can put together a fuller picture of a company’s sensitive information.”
The government indictment against Xu leaves open the possibility that the government investigation is continuing. 

The document says that an unindicted co-conspirator referred to as CF brokered the meeting between Xu and the GE Aviation employee; it mentions that Xu was communicating with other Ministry of State Security agents about the spy operation.
The Justice Department is pursuing other thefts of trade secrets for prosecution, said John C. Demers, the head of the Justice Department’s National Security Division. 

Together, he said, they show that China has a policy of developing its economy to the detriment of the United States.
“This case is not an isolated incident,” Mr. Demers said. 

“It is part of an overall economic policy of developing China at American expense. We cannot tolerate a nation’s stealing our firepower and the fruits of our brainpower.”
China has also been targeting General Electric’s turbine technology. 

The F.B.I. arrested in August a dual citizen of the United States and China who worked at General Electric, charging him with stealing the company’s technology for the purpose of helping Chinese companies.