Chinese hackers secured a trove of highly sensitive data on submarine warfare

Chinese Hackers Steal Unclassified Data From Navy Contractor

By Helene Cooper

Defense Secretary Jim Mattis recently disinvited the Chinese military from a large, multinational naval exercise this summer.

WASHINGTON — China has stolen sensitive data related to naval warfare from the computers of a Navy contractor, American officials said on Friday, in another step in the long-running cyberwar between two global adversaries.
The breach occurred this year, the officials said, when Chinese government hackers infiltrated the computers of a company working on a Navy submarine and underwater programs contract. 

The company, which was not identified, was doing work for the Naval Undersea Warfare Center, which is based in Newport, R.I.
Officials said that the data gleaned by China was unclassified.
Navy officials declined to speak publicly about the hack, which was first reported by The Washington Post.
But in a statement, Lt. Marycate Walsh, a Navy spokeswoman, cited “measures in place that require companies to notify the government when a cyberincident has occurred that has actual or potential adverse effects on their networks that contain controlled unclassified information.”
She said it would be “inappropriate to discuss further details at this time.”
China and the United States have been locked in an escalating fight over cyber and military technology, with Beijing making rapid gains in recent years. 

American officials — from both the Trump administration and the Obama administration before it — concede that Washington has struggled to deter Chinese hacking, and have predicted the cyberattacks will increase until the United States finds a way to curb them.
The theft of the Navy system is hardly the largest, or the most sensitive, of the designs and systems stolen by Chinese hackers over the years. 

But it underscores a lesson the American government keeps learning: No matter how fast the government moves to shore up it cyberdefenses, and those of the defense industrial base, the cyberattackers move faster.
The plans for the F-35, the nation’s most expensive fighter jet in history, were taken more than a decade ago, and the Chinese model looks like an almost exact replica of its American inspiration.
A People’s Liberation Army unit, known as Unit 61398, was filled with skilled hackers who purloined corporate trade secrets to benefit Chinese state-owned industry. 

But many of its targets were defense related as well. 

Members of the unit were indicted in the last two years of the Obama administration, but none are likely to come back to the United States to stand trial.
The most sophisticated hack of American data took place at the Office of Personnel Management. 

It lost the files of about 21.5 million Americans who had filed extensive questionnaires for their security clearances. 

The forms listed far more than Social Security numbers and birth dates. 

They detailed medical and financial histories; past relationships; and details about children, parents and friends, particularly non-United States citizens.

The office stored much of the data at the Interior Department and encrypted nearly none of it. 

So when the Chinese copied it in a highly sophisticated operation, they were prepared to use big data techniques to draw a map of the American elite, who worked on which projects and who knew whom. 

The loss was so severe that American intelligence agencies canceled the deployment of new officers to China.

Lieutenant Walsh said that the Navy treated “the broader intrusion against our contractors very seriously.”
“If such an intrusion were to occur, the appropriate parties would be looking at the specific incident, taking measures to protect current info, and mitigating the impacts that might result from any information that might have been compromised,” she said.
The United States and China are wrangling over trade issues but also jointly looking to rein in North Korea’s nuclear ambitions. 

Donald Trump is headed to Singapore this weekend for a June 12 summit meeting with North Korea’s leader, Kim Jong-un.
The United States and China are also tangling over Beijing’s militarization of disputed islands in the South China Sea.
Last week, Defense Secretary Jim Mattis harshly criticized the Chinese government for continuing to militarize a string of islands in the South China Sea, calling the presence of advanced military equipment and missiles there a flagrant show of military power.
To add muscle to American complaints, Mr. Mattis recently disinvited the Chinese military from a large, multinational naval exercise this summer — in part because of the anti-ship and surface-to-air missiles, and other weapons, that China has positioned on the Spratly Islands.
A United States official, speaking on the condition of anonymity because he was not allowed to be identified in discussing the issue, said the Navy was investigating the breach with the help of the F.B.I.

Ex-CIA Officer’s Case Highlights Fears About Reach of Chinese Spying

China is seeking to cultivate former U.S. intelligence officers with security clearances—and personal problems
By Aruna Viswanatha and Dustin Volz

China is targeting former U.S. intelligence officers with security clearances—and personal problems to obtain access to sensitive information. 

ALEXANDRIA, Va.—Former U.S. intelligence officer Kevin Mallory was months behind on his mortgage, $30,000 in debt, and getting financial help from his church, when Chinese agents approached him in 2017 to work for them, according to testimony at his espionage trial this past week.
“This is the choice Mallory made,” Assistant U.S. Attorney Jennifer Gellie said, telling jurors that the military veteran, who has worked for the Central Intelligence Agency and the Defense Intelligence Agency, sold top secret information about DIA’s priorities to a Chinese intelligence agent.
Mallory has pleaded not guilty and said he only developed the relationship with the Chinese agent so he could turn him over to his former colleagues.
The case highlights a concern by U.S. officials that China is employing increasingly targeted efforts to cultivate former U.S. intelligence officers with security clearances—and personal problems—in an effort to obtain access to sensitive information.
Earlier this week, another former DIA officer, Ron Hansen of Utah, was charged with trying to provide classified information to Chinese agents and smuggling technology to them.
Hansen—who served in the Army for more than 20 years, worked as a DIA case officer and spoke fluent Mandarin and Russian—was arrested near Seattle-Tacoma International Airport on Saturday as he was on his way to board a flight to China.
Prosecutors accused Hansen, 58, of working with two Chinese intelligence officers to try to elicit classified information from his former DIA colleagues.
Hansen couldn’t be reached to comment, and a lawyer hasn’t yet appeared in court on his behalf.
Like Mallory, Hansen was deeply in debt. 
One of his companies, which prosecutors described as providing cloud-computing IT services, reported $1.1 million in losses in 2014, and Hansen had carried more than $150,000 in personal debt since 2012, according to the complaint filed against him.
In late 2016, he started borrowing funds against the credit cards of his family members, prosecutors said.
Dean Boyd, spokesman for the National Counterintelligence and Security Center, said Chinese intelligence services are targeting current and former U.S. intelligence officials “with money, business opportunities and other methods of recruitment.”
“Although a spate of espionage-related investigations and prosecutions have hit the news of late, this is not a new problem, but one that remains a persistent and constant challenge,” Mr. Boyd said, adding that China’s intelligence services “are particularly aggressive actors.”
The Chinese government has vast resources for this purpose, said Larry Pfeiffer, a former chief of staff at the CIA and now a senior adviser at the Chertoff Group, a security consulting firm.
Other countries, including Russia, often have similar intent but lack Beijing’s limitless supply of intelligence officers and money.
“Money is one of the classic enticements,” Mr. Pfeiffer said.
“There are a handful of things that people will turn against their country for, and money is one of them.”
Mr. Pfeiffer and other former U.S. intelligence officials said China is further aided by its theft of sensitive data on current and former government employees from the Office of Personnel Management. 
The breach of the federal agency by Chinese hackers, disclosed in 2015, boosted Chinese efforts to zero in on U.S. intelligence officers. 
There is no public indication that Chinese agents targeted Mallory or Hansen with information specifically from the OPM breach.
An FBI spokesman declined to comment.
China has generally avoided commenting specifically on the cases.
DIA is an intelligence agency that provides the Defense Department with military intelligence information.
Over a week of testimony in the Mallory case, prosecutors have laid out a case they said shows the former CIA officer was approached in a textbook manner by Chinese intelligence agents and responded as a recruited spy would.
Ms. Gellie, the prosecutor, read messages that Mallory allegedly exchanged with the Chinese agent, who described how he would reimburse Mallory and said he was concerned about Mallory’s safety. Former DIA official Michael Higgins, on the witness stand, said this fit the pattern of Chinese intelligence operations.
“It makes perfect sense,” he said, repeatedly, as Ms. Gellie recounted the messages.
In an opening statement and through cross-examination, Mallory’s lawyers acknowledged his financial troubles.
A CIA employee whom Mallory contacted about the Chinese agent testified against him last week, saying he knew of Mallory’s financial troubles because they attended the same Chinese congregation of the Church of Jesus Christ of Latter-day Saints.
“I wrote the checks,” said the witness, Ralph Stephenson, referring to checks from the church to needy members that Mallory had received.
He also said he found Mallory’s outreach extremely inappropriate and informed security.
Mallory’s lawyers argued that Mallory had good intentions in continuing to meet with the Chinese agent and that he had spoken to CIA employees to inform them of his relationship to the agent.
“Mallory knocked on the front door to tell the CIA what he knew,” said his lawyer, Geremy Kamens.
“If he was motivated by money, he would have kept his mouth shut.”
Hansen, too, was arrested after discussing his Chinese contacts with FBI and DIA officials.
He approached FBI agents in 2015 and proposed acting as a double agent of sorts, providing the U.S. with information about Chinese intelligence, the complaint against him said.
The FBI had already begun an investigation into Hansen in 2014, the document said.
The investigation picked up in 2016 after Hansen approached a former DIA associate, who reported the outreach and became a confidential informant for the FBI.
Prosecutors said Hansen tried to get this informant to provide information on “U.S. positions related to North Korea, South Korea and China,” telling the informant that Chinese agents could pay for the information.
The informant met with Hansen and provided him with classified information just moments before Hansen was arrested, prosecutors said.