http://www.usatoday.com/money/world/2007-07-23-china-spy-2_N.htm
FBI goes on offensive against China's tech spies
By David J. Lynch, USA TODAY
Michigan auto-parts maker Metaldyne was one of
just two companies in the world that could turn
powdered metal into high-performance engine
components — until one of its engineers handed
"hundreds of confidential" computer files to
potential Chinese competitors, the Justice Department says.
A federal grand jury last year indicted the
engineer, Michael Haehnel, 51; his wife, Anne
Lockwood, 53, Metaldyne's former vice president
for sales; and their Chinese partner Fuping Liu,
42, a former company metallurgist, on 64 counts
of stealing trade secrets and related crimes. The
three pleaded not guilty and are scheduled to face trial starting Oct. 9.
In his office about 25 miles west of Detroit,
Haehnel accessed company computers and copied the
details of Metaldyne's proprietary manufacturing
process onto compact disks, which he gave to his
wife, the indictment charges. Lockwood, who quit
Metaldyne in early 2004, quietly plotted with
Shanghai-based Liu, according to the indictment,
to develop two Chinese companies as Metaldyne
competitors in return for a commission on their U.S. sales.
Left unchecked, such economic espionage threatens
the foundations of U.S. prosperity, say current
and former counterintelligence officials. In an
era of globalization, competitors in low-wage
developing countries can produce most products
less expensively. The United States' economic
advantage revolves around the sophisticated
technology and unique know-how residing in
corporate laboratories and research institutes.
So that's where the corporate thieves and foreign
spies concentrate their efforts.
"The days when everything that was worth
stealing, every secret that was worth stealing in
the United States, was a government secret —
those days are long done," says Joel Brenner,
national counterintelligence executive. "Much of
what makes the country tick, much of our
strategic advantage in the world is economic."
Now, the FBI, which is responsible for combating
economic espionage, wants to awaken Corporate
America to the danger. Over the past year, the
bureau's 56 field offices each identified the 10
highest-value corporate targets in their areas
and spoke with their top executives about the
potential threat they confront — mostly from
their own employees. Companies such as General
Electric, DuPont and Corning — as well as the
nation's leading weapons makers — have met with
FBI representatives, the bureau says.
"Significant internal and external
counterintelligence weaknesses Â… make U.S.
companies easy prey for foreign intelligence
services, foreign organizations and foreign
competitors," says an FBI briefing document for the private sector.
At seminars, such as a June 7 session in North
Carolina's Research Triangle high-tech cluster,
G-men tell CEOs about the "insider" danger,
especially that posed by their foreign-born
employees. A tiny minority could do devastating
damage by stealing secrets for either a foreign
government or more often as part of a purely commercial scheme.
The FBI is pursuing 143 economic espionage cases,
up from 122 the previous year, according to its
most recent statistics. "Our message is: There's
risk here. You could be giving away the future. Â…
The threat's in-house," says Thomas Mahlik, an
FBI counterintelligence specialist who heads the outreach effort.
Daunting challenges
But the bureau's efforts to protect trade secrets
face vexing challenges. Some question whether
globalized companies really can regard every
foreign-born engineer or executive as a potential
spy without running afoul of civil liberties or crippling innovation.
High-tech companies depend on open information
flows and access to the world's best brains to
fuel breakout ideas. Treating every scientist
without a U.S. passport as a traitor-in-waiting
raises questions of racial profiling — and is
unlikely to be effective, says Michael Gelles, a
Deloitte consultant who spent 16 years as chief
psychologist for the Naval Criminal Investigative
Service working on counterintelligence cases.
The FBI insists it doesn't encourage stereotyping
and recognizes that spies historically have come
from every ethnic background. But "we can only go
by what the trends tell us," Mahlik says,
referring to several cases in recent years that have involved non-citizens.
Fueling concern: Globalization is giving
foreigners "unprecedented access" to U.S.
companies while digital technology makes it
easier for would-be spies to pilfer secrets with
handheld devices such as external hard drives,
memory sticks and compact disks, according to the
office of the national counterintelligence executive.
It's no longer just classified information that
the bureau seeks to protect. Once the nation's
most advanced systems belonged to the military,
but today, the technological breakthroughs that
differentiate American companies from foreign
rivals reside in unclassified settings.
Mahlik points to a 2006 collaboration between IBM
and Georgia Tech, which produced a
silicon-germanium computer chip operating at 500
billion cycles per second — 250 times faster than
existing cellphone chips. The team that produced
this cutting-edge achievement — expected to have
uses in commercial communications, defense
electronics and space exploration — included
graduate students from China and India.
For now, that research is unclassified, but U.S.
officials worry that such breakthroughs are
occurring in scores of corporate and university
facilities across the country. Determining which
advances to protect, and at what stage of their
development, is a daunting task.
"You can't expect the government to be perfect at
this," Brenner says. "This is what the stock
market is trying to do day in and day out. It's
what venture capitalists do for a living. It's handicapping technology."
China, which lacks a tradition of protecting
intellectual property, represents the most
aggressive threat, officials say. The Communist
leadership is determined to increase the nation's
technological sophistication while fiercely
competitive Chinese business executives seek to
leapfrog Western rivals by marrying their low
labor costs with purloined technology.
"It's a serious problem to Corporate America and
our economic interests," says Rudy Guerin, former
head of the FBI's East Asia branch. "And it's going to get worse."
The FBI has increased the number of agents
assigned to counter alleged Chinese espionage
from about 150 in 2001 to more than 350 today,
says Bruce Carlson, who leads the bureau's
counterintelligence efforts against China.
Wang Baodong, a spokesman for the Chinese embassy
in Washington, says: "The allegations made by a
handful of people in this country that China is
engaged in espionage activities in the U.S. are groundless."
FBI changes its Cold War habits
Countering industrial spies in an era of
globalization is forcing the FBI to modify habits
acquired battling Cold War spies. Then, there was
little ambiguity about the identity and nature of
the Soviet enemy. Today, though the FBI links
China to about one-third of all economic
espionage cases, the country is a major U.S.
trading partner. So enormous amounts of technical
information and manufacturing know-how flows —
routinely and legally — to Chinese factories and suppliers.
To help agents understand the world CEOs face,
the bureau two years ago purchased 500 copies of
the globalization bible, The World Is Flat, and
brought the author, New York Times columnist
Thomas Friedman, to headquarters to meet with counterintelligence pros.
The Chinese reach out to ethnic Chinese
scientists and executives in the USA, appealing
to any latent affinity for their land of origin,
according to counterintelligence officials. The
FBI says up to 3,000 technology brokers
facilitate China's access to sensitive commercial
secrets, a figure private experts question. "One
sees legitimate Chinese companies sometimes
appealed to by a Chinese government agent
enlisting its effort. And one also sees front
companies. Â… There are companies established as
front companies for this purpose," Brenner insists.
But the notion that China concentrates its
recruitment on Chinese-Americans is "heavily
overplayed," says James Mulvenon, director of the
Center for Intelligence Research and Analysis, a
Washington, D.C., think tank. He questions the
practicality of scrutinizing foreign-born
employees especially closely. "What they're
pushing is completely unrealistic," he says.
FBI advice to U.S. businesses
As part of its ongoing effort to boost corporate
awareness, the FBI is distributing a 12-page
"counterintelligence vulnerability assessment"
for companies to assess their internal
safeguards. The bureau wants businesses to
institute counterintelligence programs that go
beyond traditional corporate security practices.
All three of the individuals in the Metaldyne
case, for example, had signed standard corporate
confidentiality agreements, which they allegedly ignored.
Companies should identify the proprietary data
that would cause the most damage if stolen or
compromised, identify the employees with access
to that information and designate a senior
official with responsibility for countering any
effort to recruit an employee as a corporate spy.
At DuPont, which employs about 2,000 scientists
and researchers in 75 global centers, that would
be Ray Mislock, the corporation's chief security
officer. The Wilmington, Del.-based corporation
spends more than $1 billion annually on research
and development pursuing advanced materials such
as Teflon or Kevlar. This year, every DuPont
employee is required to complete a new online
training course, which specifically addresses the insider threat.
The company performs almost no classified
research, so the overwhelming majority of its
sensitive information is protected only by its
internal procedures and safeguards. Trade secrets
involve both the chemical formulas behind novel
materials as well as the step-by-step
manufacturing instructions for reliably producing
them in commercial quantities. "Innovation really
occurs at the unclassified level," says Mislock,
who spent 25 years in the FBI and served briefly
as the CIA's security director.
Several times each year, DuPont employees are
approached by someone outside the company seeking
confidential information, he says. Sometimes, the
contacts represent legitimate business
opportunities. Sometimes, they don't. DuPont
alerted the FBI to one suspicious inquiry as
recently as last year, Mislock said.
Indeed, the FBI bridge-building to the corporate
world already is paying dividends: Tips from
executives led the bureau to open 27 cases
involving potential theft of trade secrets and
related crimes from November 2006 to March.
At least one major prosecution has resulted: a
2006 guilty plea by a former DuPont research
chemist, who was charged with stealing technical
secrets valued at more than $400 million,
according to a statement by Colm Connolly, U.S.
Attorney for the district of Delaware.
Gary Min, a specialist in heat- and
chemical-resistant polymers, accepted a job with
a United Kingdom-based competitor in October 2005
but didn't give notice to DuPont for two months.
During that time, he downloaded about 22,000
abstracts and 16,706 technical documents from the
company's in-house electronic library — 15 times
as many as the next-highest user, according to the Justice Department.
In December 2005, DuPont informed the FBI of its
suspicions that Min had stolen "a significant
volume of confidential and proprietary"
information on a wide variety of sensitive
research projects. When FBI and Commerce
Department agents raided Min's Ohio home on
Valentine's Day last year, they discovered
several computers with company documents marked "confidential."
A software erasure program was wiping clean an
external hard drive as the agents entered the
home, where they found "numerous garbage bags"
filled with shredded DuPont documents. In the
fireplace were charred fragments of additional
company documents that had been burned, the Justice Department says.
Min pleaded guilty in November to one felony
count of stealing trade secrets. He faces up to
10 years in prison when he is sentenced on Oct. 18.
Though the incident was disturbing for DuPont,
the research giant may have escaped permanent
harm. The Justice Department found no sign that
Min distributed the secret information beyond
uploading it to his new employer's computer,
which is in the FBI's possession. Likewise,
Metaldyne weathered its brush with alleged
in-house betrayal, increasing sales to $1.9
billion in 2005 from $1.7 billion the year
before, according to a financial briefing on its website.
Mislock sees a silver lining in the episode's
impact on his efforts to get employees to take
economic espionage more seriously. "Sometimes
having a real-life example," he says, "makes
everything you've been saying resonate with people."
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Received on Sat Mar 02 2024 - 00:57:25 CST