U.S. Commited to Fighting Economic Espionage

The FBI is ramping up its efforts locally and across the country to protect the technology and trade secrets of American businesses and universities through a recently unveiled program focused on economic espionage.^[1]

This is because the United States is a prime target of foreign spies seeking to steal away critical information -- not only military plans and national security secrets but also valuable technological and business trade secrets.^[2]

Through two recently launched initiatives, called the Business Alliance and the Academic Alliance, FBI officials are now reaching out to area universities and businesses to inform them about what they can do to help protect their research and development.^[3] Both efforts are being run out of the Bureau's Counterintelligence Domain Program.^[4]

FBI counterintel experts have developed materials outlining the risk factors and what business and university leaders can do to protect their trade secrets. Agents will also visit area businesses and universities to present the information to employees and students.^[5]

Eldredge says other countries know that American technologies, trade and military secrets will help them modernize their militaries and build their economies.^[6] He adds that their interest can range from big innovations that give the United States the leg up in the global marketplace to common or harmless technologies that could actually be used in developing or improving weapons.^[7]

"The way to protect our country is through awareness and education," Eldredge says.
According to information provided by the FBI, trade secrets involve all forms and types of financial, business, scientific, technical, economic or engineering information or data.^[8]

President Clinton signed the Economic Espionage Act into law in 1996 to protect intellectual property, especially trade secret theft.^[9] Under 18 U.S.C. § 1831 it is a crime for a foreign government or a foreign government controlled company to engage in economic espionage.^[10] 18 U.S.C. § 1832 prohibits foreign or domestic commercial theft of trade secrets.^[11]

Under section 1832, the Government must prove beyond a reasonable doubt that: (1) the defendant stole, or without the owner's authorization obtained, sent, destroyed, or conveyed information; (2) the defendant knew or believed that the information was a trade secret; (3) the information was in fact a trade secret; (4) the defendant intended to convert the trade secret to the economic benefit of somebody other than the owner; (5) the defendant knew or intended that the owner of the trade secret would be injured; and (6) the trade secret was related to, or was included in, a product that was produced or placed in interstate or foreign commerce. It is also illegal to attempt to steal a trade secret, or to receive, purchase, destroy, or possess a trade secret which the defendant knew was stolen.^[12]

The penalty for a conviction under section 1832 is a sentence of up to ten years and fines of up to $250,000 for an individual.^[13]

Economic Espionage
In order for one to be convicted of this statute, the government prosecutor, Assistant United States Attorney (AUSA), must prove beyond a reasonable doubt: 1) That the defendant stole, duplicated, communicated, bought, or otherwise obtained or provided access to trade secrets, without authorization; or 2) That the defendant conspired with one or more person to commit any of the above mentioned acts; 3) That the defendant knew or intended for the acts to benefit any foreign government, entity, or agent.^[14]

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^[1] Catherine Dominguez, FBI launches education campaign targeting 'economic espionage', San Antonio Business Journal, January 21, 2008, available at http://www.mlive.com/business/ambizdaily/bizjournals/index.ssf?/base/abd-3/120090121147510.xml (last visited January 28, 2008).
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Also partnering with the FBI in this effort to educate the business and university communities are the Defense Security Service; Army Counterintelligence; the Naval Criminal Investigative Service; the Air Force Office of Special Investigations, Counterintelligence Field Activity; and the Department of Commerce.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] U.S. Dept. of Justice Cybercrimes Manual
^[10] Id.
^[11] Id.
^[12] 18 U.S.C. § 1832(2008).
^[13] Id.
^[14] 18 U.S.C. § 1831 (2007)

Mak Denied Rehearing

67-year-old engineer Chi Mak was found guiltyof a very serious federal national security crime; he and his family stole secrets from his employer, L-3 Communications Holdings Inc. ^[1]The alleged target was data about Navy submarine engines that run silently to avoid detection.^[2]

The engineer lost his battle to overturn the conviction Monday, after a federal judge denied a motion for a new trial. Mak faces up to 45 years in prison and he is scheduled to be sentenced March 24 by U.S. District Court Judge Cormac J. Carney.^[3]

In May, a jury convicted Mak of exporting sensitive defense technology to China by giving his brother three encrypted files containing protected naval technology to take to China; a search of his house also yielded other documents containing military technology.^[4]

One of Mak’s contentions was that his constitutional rights were violated because prosecutors did not offer immunity to one of his co-workers to testify.^[5] The co-worker, Dr. Yuri Khersonsky, presented a paper on technology similar to that which led to Mak's arrest during an international conference, though he did not obtain approval to do so.^[6] Khersonsky ended up declining to testify in the case and taking the Fifth Amendment, partly because he could have incriminated himself during Mak's trial.^[7]

Mak's federal criminal defense attorney, Ronald Kaye, alleged Khersonsky's testimony would have been vital to exonerating Mak, and would have shown jurors the material was already in the public eye.^[8] He alleged prosecutors should have offered Khersonsky immunity, allowing him to take the stand because this effectively cost them their “best witness.”^[9]

But the judge pushed aside Mak’s arguments, ruling that the testimony would not have dispositive regarding the trial’s outcome and specifically could not have shown if Mak intended to break the law.^[10]

Under 18 U.S.C. § 794, Gathering or Delivering Defense Information to Aid a Foreign Government, the government must prove that the defendant provided, communicated, transmitted, or attempted to do the same, any document, material, or information to a foreign government; or that the defendant provided, communicated, transmitted, or attempted to do the same, any document, material, or information to a foreign government; or that during a time of war, the defendant collected, recorded, published, or communicated information relative to the Armed Forces to the enemy; That the defendant intended, knew, or should reasonably have known, that the information was to be used to in some way injure the United States.^[11]

Anyone convicted under this statute shall be fined and may be imprisoned for life. In those instances in which a jury finds that the actions of the defendant led to the death of any person, or directly concerned nuclear weaponry, military spacecraft or satellites, early warning systems, other means of defense or retaliation against large-scale attack, war plans, COMINT, or any other major weapons system or major element of defense strategy, then the death penalty may be sought. Additionally, any and all material, money, or possessions involved in the violation of this statute will be seized by the government.^[12]

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^[1] Jeff Bliss, China's Spying Overwhelms U.S. Counterintelligence, Bloomberg, Apr. 2, 2007, available at http://www.bloomberg.com/apps/news?pid=20601087&sid=ab2PiDl1qW9Q&refer=home (last visited Apr. 2, 2007).
^[2] Id.
^[3] Rachanee Srisavasdi, Judge denies new trial for ex-Anaheim engineer-spy, The Orange County Register, Monday, January 7, 2008, available at http://www.ocregister.com/news/mak-trial-prosecutors-1955318-khersonsky-technology (last visited January 8, 2008).
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] Id.
^[10] Id.
^[11] 18 U.S.C. § 794 (2005).
^[12] Id.

Isreal May Have Been Spying On U.S. Nuclear Tech

Sunday January 6, allegations were made by a former FBI translator that Israel has planted "moles" in United States institutions dealing with nuclear technology.^[1] According to a report in the British Sunday Times, Sibel Edmonds worked on translating "thousands of hours of conversations by Turkish diplomatic and political targets" that had been secretly taped by the FBI.^[2]

The report asserts that the recordings, which go back more than 10 years, were used in an FBI investigation "into links between the Turks and Pakistani, Israeli and U.S. targets."^[3] It is asserted that Edmonds had claimed there were "senior officials in the Pentagon" who had provided assistance to Israeli and Turkish agents.^[4]

The "moles," mainly PhD students, received assistance from a "high-ranking State Department official" who gave them security clearance to work in "sensitive nuclear research facilities."^[5] Among these institutions was the Los Alamos nuclear laboratory in New Mexico, which is a security risk we have previously blogged about, here.

The FBI investigation also stretches to the Pentagon; former Pentagon analyst Lawrence Franklin was jailed in 2006 for delivering U.S. defense information to lobbyists and sharing classified information with an Israeli diplomat.^[6] It is alleged that Franklin "was one of the top people providing information and packages during 2000 and 2001."^[7]

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^[1] Yossi Melman, Report: FBI translator says Israel planted nuclear 'moles' in U.S., Haaretz Service, January 6, 2008, available at http://www.haaretz.com/hasen/spages/942027.html (last visited January 7, 2008).
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.

Koval Posthumously Given Top Russian Honor

George Koval seemed normal: born in Iowa, college in Manhattan, Army buddies with whom he played baseball.^[1] But there was something different, he had a secret that precluded him from being the normal American. During World War II, he was a top Soviet spy, code named Delmar and trained by Stalin’s bureau of military intelligence.^[2] Atomic spies are out of fashion these days, but historians say that the relatively unknown Dr. Koval, who died last year in Moscow, was probably one of the most important spies of the 20th century.^[3]

On Nov. 2, the Kremlin startled Western scholars by announcing that President Vladimir V. Putin had posthumously given the highest Russian award to a Soviet agent who penetrated the Manhattan Project to build the atom bomb.^[4] The announcement hailed Dr. Koval as “the only Soviet intelligence officer [to infiltrate the project’s secret plants, his work] helped speed up considerably the time it took for the Soviet Union to develop an atomic bomb of its own,” asserted Putin.^[5]

While publicly unknown, American intelligence agencies have known of his betrayal at least since the early 1950s, when investigators interviewed his fellow scientists and swore them to secrecy.^[6] Koval’s success hinged on an unusual family history of migration from Russia to Iowa and back, that gave him a strong commitment to Communism, a relaxed familiarity with American mores and no foreign accent.^[7]

Over the years, scholars and federal agents have identified a half-dozen individuals who spied on the bomb project for the Soviets, especially at Los Alamos in New Mexico.^[8] However unlike most “walk-in spies,” Dr. Koval was a mole groomed in the Soviet Union by G.R.U., then he gained wide access to America’s atomic plants, a feat unknown for any other Soviet spy.^[9]

Nuclear experts say the secrets of bomb manufacturing can be more important than those of design.^[10] Los Alamos devised the bomb, while its parts and fuel were made at secret plants in such places as Oak Ridge, Tenn., and Dayton, Ohio — sites Dr. Koval not only penetrated, but also assessed as an Army sergeant with wide responsibilities and authority.^[11] “He had access to everything…He [even] had his own Jeep. Very few of us had our own Jeeps. He was clever. He was a trained G.R.U. spy.” said Dr. Arnold Kramish, who worked with Dr. Koval at Oak Ridge.^[12]

Historians say Mr. Putin may have cited Dr. Koval’s accomplishments as a way to rekindle Russian pride. This is somewhat troubling given the recent rise in Russian spying. Federal criminal defense attorney Douglas McNabb has previously spoken about the influx of Russian spies, here and here.

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^[1] William J. Broad, A Spy’s Path: Iowa to A-Bomb to Kremlin Honor, The New York Times, November 12, 2007, available at http://www.nytimes.com/2007/11/12/us/12koval.html?ei=5087&em=&en=44e3118651e5a4a0&ex=1195016400&pagewanted=all (last visited November 13, 2007).
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] Id.
^[10] Id.
^[11] Id.
^[12] Id.

Rare Order Issued in AIPAC case: Update

A federal judge yesterday issued a rare ruling that ordered U.S. Secretary of State Condoleezza Rice and more than 10 other prominent current and former government officials to testify on behalf of two pro-Israel lobbyists who are accused of violating the Espionage Act at their upcoming criminal trial.^[1]

Their testimony has been sought by attorneys for Steven J. Rosen and Keith Weissman, former employees of the American Israel Public Affairs Committee, or AIPAC, who are accused of conspiring to obtain classified information and pass it to members of the media and the Israeli government.^[2]

Federal criminal attorneys for Rosen and Weissman assert that Rice and the other officials could help clear them because they provided the former lobbyists with sensitive information similar to what they were charged for, according to Ellis's ruling and lawyers familiar with the case.^[3] Despite the efforts of the Prosecutors, who have been trying to quash the subpoena, Judge Ellis wrote that the testimony could help "exculpate the defendants by negating the criminal states of mind the government must prove.''^[4]

"It's certainly been a long time, if ever, since a district court ordered the government to produce witnesses who currently occupy such sensitive national security positions to testify at trial in a matter of this sensitivity,'' said David Laufman, a Washington lawyer who previously handled national security cases in the U.S. attorney's office in Alexandria.^[5]

Prosecutors also might try to invoke a state secrets based privilege to block the officials from testifying on the grounds that it could reveal sensitive information about national security and U.S. foreign policy. ^[6]

Rosen and Weissman were indicted in 2005 on charges of conspiring to violate the Espionage Act by receiving national defense information and transmitting it to journalists and employees of the Israeli Embassy who were not entitled to receive it.^[7] They are the first non-government civilians charged under the 1917 espionage statute with verbally receiving and transmitting national defense information.^[8] The topics allegedly ranged from the activities of al-Qaeda to information about possible attacks on U.S. forces in Iraq, according to court documents.^[9]

Federal criminal attorney Douglas McNabb has also previously discussed this case here, and here.

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^[1] Jerry Markon, Rice, Others Told to Testify in AIPAC Case, Washington Post, November 3, 2007, Page A06, available at http://www.washingtonpost.com/wp-dyn/content/article/2007/11/02/AR2007110201554.html?hpid=sec-politics (last visited November 5, 2007) (The opinion by U.S. District Judge T.S. Ellis III in Alexandria directed that subpoenas be issued to officials who include Rice, national security adviser Stephen J. Hadley, former high-level Department of Defense officials Paul D. Wolfowitz and Douglas J. Feith, and Richard L. Armitage, the former deputy secretary of state, William Burns, the U.S. ambassador to Russia; Elliot Abrams, deputy national security adviser; and Kenneth Pollack, former director of Persian Gulf affairs for the National Security Council).
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.; Former president Ronald Reagan and former attorney general Edwin I. Meese III testified at a trial arising from the Iran-contra affair in the 1980s. However this is very rare because judges usually decline to grant such subpoenas on the grounds that high-level officials are too busy or that the information can be obtained from other sources.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] Id.

Former Taiwanese Spy Denies Affair with State Department Officer

Isabelle Cheng, a former Taiwanese spy has denied allegations that she used a personal relationship with a veteran U.S. State Department officer in order to gather intelligence for Taiwan.^[1]

Cheng, a former agent of Taiwan's National Security Bureau in Washington D.C., who became visibly upset, discussed the alleged links which led to the arrest of Donald Keyser in September 2004.^[2]

Keyser, a State Department veteran of 30 years service, was sentenced to one year in jail January on charges of concealing his personal relationship with Cheng and of unauthorized possession of classified documents.^[3]

Cheng has been quoted asserting that misleading news reports about the spy incident unfairly caused damage to Keyser and herself.^[4] ''He (Keyser) was such a patriotic person, and now he's even stripped of his pension,” she also fervently denied that the Taiwanese spy agency ever used sex to help gather intelligence.^[5]

Despite denying that there had been a sexual relationship, Keyser was said to have frequently expressed his infatuation with Cheng, and federal agents said they witnessed the pair in compromising positions.^[6] It has also been asserted that Taiwanese intelligence considered its contact with Keyser valuable, and they believed he could provide insight into the sensitive relations between China, Taiwan and the United States.^[7]

However the National Security Bureau (NSB) clarified yesterday that it did not engage in intelligence work in the United States and that Cheng has resigned for family reasons.^[8]

The bureau clarified that the U.S. had not, in fact, convicted Keyser of espionage charges in the Cheng case – he was sentenced for illegally removing classified documents without reporting to authorities in accordance with due process.^[9] The NSB said the verdict showed that they did not get involved in intelligence operations in the U.S.^[10]

As for Cheng, they said she had voluntarily tendered resignation for family reasons and the bureau respects her decision. The bureau, however, stressed that it still provides necessarily assistance to Cheng whenever is needed, based on the spirit that the NSB remains a big family for all incumbent and former colleagues.^[11]

Federal criminal defense attorney Douglas McNabb has previously spoken about spies, at length, here.

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^[1] AP Staff, Ex-Taiwan spy denies alleged links with a former senior US official, Associated Press Newswire, October 14, 2007, available Associated Press Newswire, July 19, 2007, LEXIS, News Library, Wire News Services File.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] The China Post news staff, NSB clarifies 'not involved' in intelligence work in United States, China Post, October 16, 2007, available at http://www.chinapost.com.tw/taiwan/2007/10/16/126885/NSB-clarifies.htm (last visited October 16, 2007).
^[9] Id.
^[10] Id.
^[11] Id.

Two Engineers Charged with Rare Economic Espionage

Lan Lee and Yuefei Ge are about to go on trial for allegedly stealing confidential computer chip designs from their Silicon Valley employers.^[1] They were indicted Wednesday on the rare and serious charge of economic espionage.^[2]

The indictment was returned by a grand jury in U.S. District Court in San Jose, and accuses Lee and Ge of orchestrating theft of computer-chips so they could go into business with the Chinese military.^[3] It has been alleged that the two men stole secret data sheets and other confidential documents from NetLogic Microsystems Inc., which designs processors for use in networking equipment such as Internet routers and switches, and Taiwan Semiconductor Manufacturing Co., a Taiwan-based company that operates chip-making factories.^[4]

The indictment alleges Lee and Ge formed a company called SICO Microsystems Inc. to develop chips based on the stolen designs; then they allegedly reached out to Chinese government agencies for help funding the business.^[5] Lee and Ge were charged with five felony counts each, including two counts of economic espionage, two counts of theft of trade secrets and one count of conspiracy.^[6]

Only three people have ever been convicted in the U.S. of economic espionage.^[7] The theft of trade secrets to benefit a foreign government is, by a large margin, the most serious crime outlined under the Economic Espionage Act of 1996.

All previous convictions have been from Silicon Valley, an area that investigators describe as a hotbed for intellectual property theft to benefit foreign nations.^[8] According to the head of an FBI counterintelligence unit in San Jose, “Silicon Valley is a hotbed of economic espionage…..[the] valley is home to many of the estimated 3,000 Chinese front companies nationwide set up to steal secrets and acquire technology.”^[9] It has become such an issue that the FBI recently established an economic espionage counterintelligence unit in San Jose, to go along with the one already functioning in Palo Alto.^[10]

Economic espionage requires the government to prove beyond a reasonable doubt that the defendant stole, duplicated, communicated, or otherwise provided access to trade secrets without authorization, and that the defendant intended for the acts to benefit any foreign government.^[11] The punishment for economic espionage is very steep: a fine of up to $500,000 ($10,000,000 if committed by an organization), imprisonment for up to 15 years, or both.^[12]

In August, Xiaodong Sheldon Meng pleaded guilty to one count of economic espionage for stealing software used to train military fighter pilots and trying to sell it to the Chinese Navy.^[13] We have discussed Meng’s case in this blog previously; this post can be found here. Federal criminal defense attorney Douglas McNabb has also previously discussed this case, here. Additionally blogs on the national security crimes involving espionage can be found here.

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^[1] Jordan Robertson, Economic espionage alleged in chip theft, Associated Press Newswire, September 26, 2007, available at LEXIS, News Library, Wire News Services.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] AP Staff, Guilty plea in economic espionage case, Associated Press Newswire, August 2, 2007, available at LEXIS, News Library, Wire News Services File
^[8] Robertson, supra note 1.
^[9] K. Oanh Ha, Stealing a Head Start, San Jose Mercury News, Sep. 28, 2006, available at LEXIS, News Library, Periodical News Services File.
^[10] FBI Website, Focus on Economic Espionage, Investigative Programs—Counterintelligence Division, available at http://www.fbi.gov/hq/ci/economic.htm (last visited Oct. 3, 2007).
^[11] 18 U.S.C. § 1831 (2007).
^[12] Id.
^[13] Robertson, supra note 1.

Cuban Five Ready New Appeal

“The Cuban Five” are men who have been involved in a controversial case of five men convicted of spying for communist Cuba came before a federal appeals court for the third time Monday, with federal defense attorneys alleging that prosecutors overemphasized Fidel Castro and committed other attorney misconduct to win convictions, based on the emotions of the jury.^[1]

Defense attorneys seeking a new trial claim the government wrongly used ``Castro's evil'' to push for convictions on what they say are overblown charges of conspiracy to commit espionage and murder.^[2]

The ``Cuban Five'' have been branded as natinoal heroes in Cuba, where Castro's government sent Gerardo Hernandez, Ramon Labanino, Rene Gonzalez, Antonio Guerrero and Fernando Gonzalez to South Florida to gather information about anti-communist exile groups and send it back to the island using encrypted software, high-frequency radio transmissions and coded electronic phone messages.^[3]

The five were convicted of being unregistered foreign agents, and three were found guilty of espionage conspiracy for failed efforts to obtain military secrets.^[4] Hernandez was also convicted of murder conspiracy in the deaths of four Miami-based pilots whose small, private planes were shot down in February 1996 by a Cuban MiG in international waters off Cuba's northern coast.^[5]

They were sentenced to terms ranging from 10 years to life in December 2001, but during the appeals process the verdicts were eventually thrown out in August 2005. The 11th U.S. Circuit Court of Appeals in Atlanta threw out the verdicts, asserting that the five men did not receive a fair trial because of massive anti-Castro bias in Miami; the convictions were reinstated exactly a year later by the full 11th Circuit.^[6]

Monday's arguments before another three-judge panel of the court offered the five another appeal.^[7] Federal criminal defense attorney Richard Klugh focused his arguments on Guerrero, who was accused of sending detailed reports on the Naval Air Station at Key West.^[8]

He said his client could have used public information - not clandestine espionage - to piece together the reports saying, “an enterprising reporter could have obtained the same info that Antonio Guerrero obtained on that base…..he's doing a life sentence for something that could have been published in the Miami Herald.''^[9]

Although the five men's so-called ``Wasp Network'' spy ring recovered no U.S. secrets, federal prosecutors argued for stiff penalties, saying they were well-trained spies who broke federal law by failing to inform the U.S. government of their presence.^[10] Defense lawyers asserted that they were trying to gather information that might prevent exile groups from waging more attacks, such as the bombings at Havana hotels that killed an Italian tourist in 1997.^[11]

The five Cubans are charged conspiracy to commit espionage which is covered under 18 U.S.C. § 794. That section provides that if two or more persons conspire to commit espionage and one or more of such persons do any act to effect the object of the conspiracy, each of the parties to such conspiracy shall be subject to the punishment provided for the offense which is the object of such conspiracy.^[12]

Espionage its self is covered under §794(a) wherein it states that whoever, with intent or reason to believe that it is to be used to the injury of the United States or to the advantage of a foreign nation, communicates, delivers, or transmits, or attempts to communicate, deliver, or transmit, to any foreign government, or to any faction or party or military or naval force within a foreign country, whether recognized or unrecognized by the United States, or to any representative, officer, agent, employee, subject, or citizen thereof, either directly or indirectly, any document, writing, code book, signal book, sketch, photograph, photographic negative, blueprint, plan, map, model, note, instrument, appliance, or information relating to the national defense, shall be punished by death or by imprisonment for any term of years or for life, except that the sentence of death shall not be imposed unless the jury or, if there is no jury, the court, further finds that the offense resulted in the identification by a foreign power (as defined in section 101(a) of the Foreign Intelligence Surveillance Act of 1978) of an individual acting as an agent of the United States and consequently in the death of that individual, or directly concerned nuclear weaponry, military spacecraft or satellites, early warning systems, or other means of defense or retaliation against large-scale attack; war plans; communications intelligence or cryptographic information; or any other major weapons system or major element of defense strategy.^[13]

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^[1] Greg Bluestein, 'Cuban Five' Plea for Freedom, Associated Press Newswire, August 21, 2007, available at LEXIS, News Library, Wire News Services File.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] Id.
^[10] Id.
^[11] Id.
^[12] 18 U.S.C. §794(c) (2007).
^[13] Id., at §794(a).

Meng Pleads Guilty to Economic Espionage

Engineer Xiaodong Sheldon Meng pleaded guilty to stealing military training software and trying to sell it to the Chinese Navy, becoming only the third person to be convicted on the very rare charge of economic espionage.^[1]

Meng pleaded guilty in San Jose federal court Wednesday to one count of economic espionage for trying to sell stolen software to China's Navy Research Center, and one count of violating U.S. arms control regulations for illegally exporting software used to train military fighter pilots.^[2] Under the terms of the plea agreement, he faces a reduced sentence of up to two years in prison and a $1.5 million fine.^[3]

Meng was indicted in December on 36 felony counts alleging he stole code for software made by his former employer, San Jose-based Quantum3D Inc., and attempted to sell it to the Royal Thai Air Force, the Royal Malaysian Air Force and the Navy Research Center in China.^[4]

Jay Rorty, Meng's federal criminal defense attorney, said the plea agreement resolves potential charges in Alabama, Florida and Minnesota.^[5] "Mr. Meng remains free of custody and is glad to put these charges behind him," Rorty said in a statement.^[6]

While authorities say Silicon Valley is a hotbed for trade-secret thefts motivated by the desire to fuel technological and military development in countries like China and Iran, the indictment is only the third time prosecutors have ever charged someone with economic espionage.^[7] Economic espionage is the most serious crime under the Economic Espionage Act of 1996 which alleges the theft of trade secrets with the intent to benefit a foreign government; however, the charge of economic espionage is hard to prove, and many defendants are charged with the lesser offense of theft of trade secrets.^[8]

The Economic Espionage Act of 1996^[9] makes the theft or misappropriation of a trade secret a federal crime. 18 U.S.C. § 1831(a), criminalizes the theft of trade secrets to benefit foreign powers; in General the code states that whoever, intending or knowing that the offense will benefit any foreign government, foreign instrumentality, or foreign agent, 1)knowingly steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains a trade secret;^[10] 2) without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys a trade secret;^[11] 3) receives, buys, or possesses a trade secret, knowing the same to have been stolen or appropriated, obtained, or converted without authorization;^[12] 4) attempts to commit any offense described in any of paragraphs (1) through (3);^[13] or 5) conspires with one or more other persons to commit any offense described in any of paragraphs (1) through (3), and one or more of such persons do any act to effect the object of the conspiracy,[14] shall, except as provided in subsection (b), be fined not more than $500,000 or imprisoned not more than 15 years, or both.

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^[1] AP Staff, Guilty plea in economic espionage case, Associated Press Newswire, August 2, 2007, available at LEXIS, News Library, Wire News Services File.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] 18 U.S.C. §§ 1831-1839 (2007).
^[10] 18 U.S.C. § 1831(a)(1)(2007).
^[11] Id., at §1831(a)(2).
^[12] Id., at §1831(a)(3).
^[13] Id., at §1831(a)(4).
^[14] Id., at §1831(a)(5).

Aragoncillo Pleads Guilty to Espionage

Leandro Aragoncillo, a former Marine who worked at times under two administrations in the Office of the Vice President of the United States was sentenced July 18, to 10 years in prison for espionage and other charges for taking and transferring classified information to senior political and government officials of the Philippines in an attempt to destabilize and overthrow that country's government, Assistant Attorney General for National Security, Kenneth L. Wainstein and U.S. Attorney Christopher J. Christie announced.^[1]

U.S. District Judge William H. Walls sentenced Aragoncillo, for his guilty pleas to espionage charges on May 4, 2006.^[2] There is no parole in the federal system, and Aragoncillo can be expected to serve nearly the entire sentence except for potential good-inmate credits. Judge Walls also fined Aragoncillo $40,000.^[3]

At his plea hearing last year, Aragoncillo admitted that he regularly transferred to his Philippine contacts national security documents classified as Secret, and that the information he transferred could be used to injure the United States or be advantageous to a foreign nation.^[4]

Aragoncillo admitted that some of the classified information he removed from of the Office of the Vice President between approximately October 2000 and February 2002 included information marked Top Secret that related to terrorist threats to United States government interests in the Philippines.^[5]

Aragoncillo pleaded guilty to four national security crimes: Conspiracy to Transmit National Defense Information; Transmission of National Defense Information; Unlawful Retention of National Defense Information; and Unlawful Use of a Government Computer.^[6]

Gathering, transmitting or losing defense information
Is covered under 18 U.S.C. § 793(e) where in it states that whoever having unauthorized possession of, access to, or control over any document, writing, code book, signal book, sketch, photograph, photographic negative, blueprint, plan, map, model, instrument, appliance, or note relating to the national defense, or information relating to the national defense which information the possessor has reason to believe could be used to the injury of the United States or to the advantage of any foreign nation, willfully communicates, delivers, transmits or causes to be communicated, delivered, or transmitted, or attempts to communicate, deliver, transmit or cause to be communicated, delivered, or transmitted the same to any person not entitled to receive it, or willfully retains the same and fails to deliver it to the officer or employee of the United States entitled to receive it. Shall be fined under this title or imprisoned not more than ten years, or both.

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^[1] US Dep’t Justice Press Release, Former Marine and FBI Analyst Sentenced to 10 Years for Transferring Classified Information to Assist in Overthrow of Philippine Government, PRNewswire-USNewswire, July 18, 2007, available at http://www.justice.gov/opa/pr/2007/July/07_nsd_512.html (last visited July 20, 2007); see also http://www.webwire.com/ViewPressRel.asp?aId=42638 (last visited July 20, 2007).
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.

FBI warns Businesses To Be On the Lookout for Spies

The FBI has warned businesses to keep a weather eye out for spies amongst their H1-B^[1] hires.^[2] The FBI asserts that foreign-born, American-educated engineers might actually be foriegn spies trying to purloin our country's most valuable trade or military secrets.^[3] The FBI listed "students and educators" as one of the favorite disguises used by foreign agents.^[4] other disguises to be on the look out for include Representatives at supposed “research institutes”; visiting business professionals and scientists who want to tour your state-of-the-art plants and operations worldwide (a great place to take pictures and make friends); tourists or visitors on non-immigrant visas; Diplomatic officials; and False front companies.^[5]

Two examples of the four possible "collection strategies" the FBI said spies use to get their hands on American technology secrets are: a recently hired foreign-born engineer who has been educated in this country. Over a 10-15 year period, she rises to mid-level management. Then, she returns to her home country—where she gets paid by that government to set up a business that competes with yours.^[6] Or perhaps a series of university students and professors from overseas take jobs in research labs on campus and get involved in related military projects. Individually, they learn only bits and pieces. But collectively, when they pass that information back to their home country, it paints a telling picture of our country’s defense initiatives.^[7]

To see the full list of espionage warnings, go here.
To see our previous blogs about spies, go here.

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^[1] The H-1B visa is a non-immigrant visa category in the United States under the Immigration & Nationality Act, section 101(a)(15)(H). It allows U.S. employers to seek temporary help from skilled foreigners who have the equivalent U.S. bachelor's degree education.
^[2] Luke O'Brien, FBI Warns of Spies Disguised as Foreign Engineers, Wired, July 09, 2007, available at http://blog.wired.com/27bstroke6/2007/07/fbi-warns-of-sp.html ( last visited July 11, 2007).
^[3] Id.
^[4] Id.
^[5] FBI website, Spying Page, http://www.fbi.gov/page2/july07/spying070907.htm (last visited July 11, 2007)
^[6] Id.
^[7] Id.

BlackBerries Could Be New Tool for Spys

Privacy advocates are quick to warn that the shift to using handheld devices for e-mail, telephone calls, and Internet searches has created a global gold mine for government spooks, snoops and spies.^[1] Le Monde newspaper has reported that government officials in France are advised against using BlackBerry devices because the US National Security Agency (NSA) might steal information from e-mails sent wirelessly.^[2]

"It is good for a government to say that wireless information is less secure so be very cautious what you put out there.....People need to know this.^[3] We see various government agencies, like the FBI, have been using warrant-less searches and NSA letters that don't need approval," Electronic Privacy Information Center senior counsel Melissa Ngo said.^[4]

In response to an inquiry, BlackBerry maker Research In Motion (RIM) dismissed any concerns by the French government as needless reaction to a "rehashed two-year-old rumor" that U.S. spies peek into its network.^[5] "No one, including RIM, has the ability to view the content of any data communication sent using the BlackBerry Enterprise Solution because all the data is encrypted.....The origin of the e-mails cannot be traced or analyzed for content," RIM asserted. ^[6]

European officials have long suspected that a US-led program code-named Echelon established during the Cold War to intercept and decode electronic messages has been used to spy on their nations since the Iron Curtain's fall.^[7] However RIM contends that such speculation that the NSA or other spy organizations siphon information from BlackBerry e-mails routed through U.S. or Canadian servers is "false and misleading."^[8]

A federal judge in San Francisco is presiding over several civil cases accusing US telecom agencies of letting NSA agents secretly tap into cables used to carry e-mail messages.^[9] An AT&T worker testified in one case that AT&T diverted fiber optic lines in a San Francisco facility through a room reserved for NSA agents that assumedly scanned e-mails in the name of fighting terrorism.^[10] U.S. lawyers are trying to get the cases thrown out of court in the interest of national security.^[11]

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^[1] Glen Chapman, Mobile devices ripe targets for spies, Middle East Times, June 25, 2007 available at http://news.google.com/news?tab=wn&hl=en&ie=UTF-8&ncl=1117561005%20 (last visited June 26, 2007).
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] Id.
^[10] Id.
^[11] Id.

District Judge Criticizes Warrantless Wire-Taps

Royce Lamberth, a district judge in Washington, said Saturday it was proper for executive branch agencies to conduct such surveillance, however the federal judge, who used to authorize wiretaps in terrorist and espionage cases, criticized President Bush's decision to order warrantless surveillance after the 9/11 attacks.^[1]

"What we have found in the history of our country is that you can't trust the executive.........We have to understand you can fight the war (on terrorism) and lose everything if you have no civil liberties left when you get through fighting the war," he told the American Library Association convention.^[2] He continued saying, "[t]he executive has to fight and win the war at all costs. But judges understand the war has to be fought, but it can't be at all costs.....We still have to preserve our civil liberties. Judges are the kinds of people you want to entrust that kind of judgment to more than the executive."^[3]

He was named chief of the Foreign Intelligence Surveillance Court (FISA) and served until 2002. The court meets secretly to review applications from security agencies for warrants to wiretap or search the homes of people in the U.S. in terrorist or espionage cases.^[4] Each application is signed by the attorney general, thus far the court has approved more than 99 percent of them.^[5]

Shortly after the 2001 attacks, Bush authorized the NSA to spy on calls between people in the U.S. and suspected terrorists abroad without FISA warrants, citing time constraints as the reason, and asserting that the president had authority to order warrantless domestic spying.^[6]

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^[1] Michael J. Sniffen, Judge: Bush wrong on warrantless spying, Associated Press Newswire, June 24, 2007, available at LEXIS, News Library, Wire News Services.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.

FBI warns Schools To Be On the Lookout for Spies

Federal agents are warning leaders at some of the New England's top universities to be on the lookout for foreign spies or potential terrorists trying to steal their research, the head of the FBI's Boston office warned yesterday.^[1]

FBI agents met recently with officials at Harvard University, Massachusetts Institute of Technology, the University of Massachusetts and other schools to train professors, students and security staff on how to recognize anyone who might be trying to exploit research, Special Agent in Charge Warren Bamford said.^[2] Agents plan to visit many more New England colleges in the coming months and are offering to provide briefings about what they call "espionage indicators" to faculty, students, or security staff as part of a national outreach to college campuses.^[3]

Bamford stressed that the FBI is not seeking to censor information or to stop the free flow of information, they just want to raise awareness because colleges, as open communities, are vulnerable to those looking to exploit the information they can gain and use it against the United States.^[4] "What we're most concerned about are those things that are not classified being developed by MIT, Worcester Polytech, and other universities....the academic community is designed to be open, and we just have to make the community aware [of the risks involved]," Bamford asserted.^[5]

Worcester Polytechnic Institute President Dennis Berkey said the FBI told researchers to protect laptops, especially in foreign countries, and to be wary about who contacts them about their work, "[t]he general point was, if there is unnatural or unexplained interest in your research and you're nervous about it, here's how to be in touch with us."^[6]

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^[1] Shelley Murphy and Marcella Bombardieri, FBI warns colleges of terror threat, Boston Globe, June 12, 2007, available at http://www.boston.com/news/local/articles/2007/06/12/fbi_warns_colleges_of_terror_threat// (last visited June 12, 2007).
^[2] AP Staff, FBI warns universities to watch out for spies, Associated Press Newswire, June 12, 2007, available at LEXIS, News Library, Wire News Services File.
^[3] Murphy and Bombardieri, supra note 1.
^[4] AP Staff, supra note 2.
^[5] Murphy and Bombardieri, supra note 1.
^[6] AP Staff, supra note 2.

President Demands Iran Release American Captives

President Bush on Friday demanded that Iran "immediately and unconditionally" release the four Iranian-American scholars and activists who have been arrested and held on suspicion of spying.^[1]

"I strongly condemn their detention at the hands of Iranian authorities," the president said in a statement.^[2] The United States has denied that the four are spies or employees of the U.S. government; the State Department on Thursday warned U.S. citizens against traveling to Iran, and further accused Islamic authorities in Iran of a "disturbing pattern" of harassment of Iranian-Americans.^[3]

The four detained scholars and activists are Haleh Esfandiari, director of the Middle East Program at the Washington-based Woodrow Wilson Center for Scholars; Kian Tajbakhsh with George Soros' Open Society Institute; journalist Parnaz Azima from the U.S.-funded Radio Farda; and Ali Shakeri, a peace activist and founding board member at the University of California, Irvine, Center for Citizen Peacebuilding.^[4] "These individuals have dedicated themselves to building bridges between the American and Iranian people, a goal the Iranian regime claims to support," Bush said. "Their presence in Iran — to visit their parents or to conduct humanitarian work — poses no threat."^[5]

State Department deputy spokesman Tom Casey asserted that Tehran has still not responded to repeated requests for access to the detainees by Swiss officials.^[6] The Swiss act as intermediaries for the United States in Iran because the two nations do not have diplomatic relations.^[7]

"This is hardly the stuff of espionage, this is hardly the stuff of government disputes…………….It is absolutely incredible to us to think that there could be any possible doubt in the Iranians' minds that these individuals are there simply to conduct normal, basic human interactions, including family visits," Casey said.^[8]

A fifth American citizen, former FBI agent Robert Levinson, has been missing in Iran since early March and Washington has cast severe doubts on Iranian claims to have no information about him in response to repeated requests through the Swiss and others.[9]


See our section on Intelligence Operatives and the classification thereof on our website, here.

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^[1] Jae-Soon Chang, Bush demands Iran release Americans, Associated Press Newswire, June 1, 2007, available at LEXIS, News Library, Wire News Services File.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] Id.
^[8] Id.
^[9] Matthew Lee, U.S. warns against Iran visits as fourth Iranian-American detained, Associated Press Newswire, June 1, 2007, available at LEXIS, News Library, Wire News Services File.

Lax Security at Los Alamos Leads to Possible Loss of Secrets

New Mexico police responded to a call about a domestic dispute in a trailer park near Los Alamos National Laboratory last year.^[1] However this was not the usual trailer, because within the trailer, strewn throughout, was paraphernalia for making the drug crystal meth; and thousands of pages of highly classified documents detailing the designs of U.S. nuclear weapons.^[2]

Investigators don't believe hostile governments have exploited this latest round of security lapses, but they don’t really know.^[3] Those with access to the nation's nuclear secrets would be priority targets of foreign intelligence services, and problems such as drug-abuse make them vulnerable, and easy to manipulate.^[4] Quintana's motive for breaching the rules appears to have been benign, but there is no way to be sure.^[5] By using flash drives, and at least one WIFI device, it would have been very easy to transfer secret material from classified computers to non-classified computers, and then feasibly to anyone who wanted them.^[6]

Jessica Quintana, the woman who lived in the trailer, began as an archivist at Los Alamos right out of high school.^[7] By her own admission, she was using drugs (marijuana) and drinking while under age even during the period of her security screening.^[8] But after promising to stop taking drugs (although not alcohol), and signing a written pledge to submit to drug-testing, she received a clearance to handle some of America's most sensitive secrets and no follow-up drug-tests were ever performed.^[9] It was only after several years on the job that she was caught with bomb designs in her trailer and fired.^[10] The ensuing investigation revealed that Quintana had taken her cell phone into a vault filled with secret documents where she worked; she also had access to a high-speed classified printer which she used to run off hundreds of copies of classified documents that she also brought home.^[11]

A report of a task force set up by Energy Secretary Bodman examined some of the security issues in the department.^[12] It details not only more extensive drug use among staff at Los Alamos, but describes a systematic lack of accountability and weaknesses in the safeguards surrounding nuclear secrets.^[13] Following its internal investigation, the DOE is proposing sweeping changes in security procedures and the issuance of clearances — and not just at Los Alamos.^[14] Given the stakes involved in protecting nuclear secrets in the post 9/11 world, compounded by the increasing number of hostile spies roaming the U.S., we need to be much more cautious with our secrets or we will not have any left.

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^[1] Adam Zagorin, A Breach in Nuclear Security, Time Magazine Online, Apr. 19, 2007, available at http://www.time.com/time/nation/article/0,8599,1612912,00.html (last visited Apr. 23, 2007).
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id. She asserts that she was falling behind on her work so she began scanning paper copies of nuclear-weapons designs into a digital format on her flash-drive and then take the material home to work on after hours. Although the practice of using flash-drives was specifically forbidden by then DOE secretary Bill Richardson in 1999, it is apparently not uncommon at Los Alamos.
^[6] Id. Since the discovery of Quintana's breach last fall, computer ports have been plugged with glue to prevent thumb drives being inserted.
^[7] Id.
^[8] Id.
^[9] Id.
^[10] Id.
^[11] Id.
^[12] Id.
^[13] Id.
^[14] Id.

Alger Hiss Case Under Review

Scholars probing into the Cold War's most famous espionage case have suggested Alger Hiss, was not the spy he was accused of being.^[1] Instead it was suggested that another U.S. diplomat was acting as Soviet agent code-name Ales.^[2] Furthermore, a stepson of Hiss asserted his chief accuser, Whittaker Chambers, had invented the spy allegations after his sexual advances were rejected.^[3]

Timothy Hobson, an 80-year-old retired surgeon and Hiss's stepson asserted that former Time magazine editor Chambers had lied about his personal relationship with Hiss and had never visited the family home as he claimed.^[4] ''He claimed to be a family friend, but he was never there….[he was an] unmitigated, pathological liar….It is my conviction that he was in love with Alger Hiss, that he was rejected by Alger Hiss and he took that rejection in a vindictive way,'' Hobson said.^[5]

Kai Bird, an author who has done new research on the case, asserts that the real spy was another U.S. official named Wilder Foote.^[6] Foote may be the man who was actually feeding secrets to the Soviet military intelligence agency GRU under the code name Ales.^[7] In a telephone interview, Bird said more research would be required to prove that Foote was Ales but based on information thus far, ''I am persuaded that Foote makes a better candidate than Hiss. He fits the itinerary in every way, and Hiss simply does not.''^[8]

Foote was a member of a well-known Boston family and died in 1974 after a career as a diplomat and owner of several Vermont newspapers; during World War II he was involved with U.S. lend-lease operations supplying the Soviets.^[9]

Chambers, however, actually had been a spy. He was a one-time American communist party member and spy for the Soviets during the 1930s.^[10] He defected before World War II and constantly accused others of being spies, but his claims did not attract FBI interest until after the war.^[11] He joined Time magazine in 1939 and as a writer and editor and harsh critic of communism; he died in 1961.^[12]

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^[1] Richard Pyle, Alger Hiss: Cold War's most famous spy case gets a new look, Associated Press Newswire, Apr. 5 2007, available at LEXIS, News Library, Wire News Services File.
^[2] Id.
^[3] Id., (The two claims were presented at a symposium titled ''Alger Hiss & History'' at New York University, provided enough information that, if true, could lead to a posthumous vindication of Hiss.); see also Allen Weinstein, PERJURY: THE HISS-CHAMBERS CASE 487, 493 (Random House 1978).
^[4] Pyle, supra note 1.
^[5] Id. Hobson was a 10-year-old boy at the time, he had broken his leg and was in a cast for months, during which time he met everybody who came to the house, noting that Chambers was never present. He also said an auto trip to New York, on which Chambers claimed to have been present, never happened.
^[6] Id.
^[7] Id. Bird had identified nine possible suspects among U.S. Department of State officials present at the U.S.-Soviet Yalta conference in 1945 based on their subsequent travels to Moscow and Mexico City had excluded eight of them, including Hiss. The key, was that Ales' contact at the Soviet embassy in Washington would have known that Hiss, a top-tier diplomat who later played a key role in founding the United Nations, had returned from Mexico City, whereas Ales was known to have remained there. That information was contained in a secret Soviet cable that was intercepted and decoded by U.S. intelligence agencies and is now part of the so-called Venona Papers, a collection of such documents made public several years ago.
^[8] Id.
^[9] Id.
^[10] Id.
^[11] Id.
^[12] Id.

Chinese Espionage Overwhelms U.S. Counter-Intelligence

In California, 66-year-old engineer Chi Mak is being prosecuted for federal national security crimes, the prosecutor has been describing how he and his family stole secrets from his employer, L-3 Communications Holdings Inc.^[1] The alleged target was data about Navy submarine engines that run silently to avoid detection.^[2]

U.S. intelligence officials say the Mak case is unusual -- not in the nature of the charges brought against him, but that charges were brought at all, because for everyone caught and accused of passing U.S. military and trade secrets to China, scores of others go unnoticed.^[3] The Chinese are taking advantage of a counterintelligence effort that is drained, outmanned and distracted by the wars in Iraq and on terror.^[4] Thus, China has methodically stolen catalogs of sensitive information on U.S. nuclear bombs and ship and missile designs.^[5]

Naturally the Chinese say the U.S. allegations are meritless, however of the 140 or so foreign intelligence services currently trying to penetrate U.S. agencies, China’s are the most aggressive, Brenner says.^[6] He describes China's activities as ``an intensifying and troublesome pattern.''