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Summary of Major Us Export ______________________________________________________________________________ June 2016 NSD WWW.JUSTICE.GOV (202) 514-2007 SUMMARY OF MAJOR U.S. EXPORT ENFORCEMENT, ECONOMIC ESPIONAGE, TRADE SECRET AND EMBARGO-RELATED CRIMINAL CASES (January 2010 to the present: updated June 27, 2016) Below is a brief description of some of the major export enforcement, economic espionage, theft of trade secrets, and embargo-related criminal prosecutions by the Justice Department since January 2010. These cases resulted from investigations by the Homeland Security Investigations (HSI) [formerly Immigration and Customs Enforcement (ICE)], the Federal Bureau of Investigation (FBI), the Department of Commerce's Bureau of Industry and Security (BIS), the Pentagon's Defense Criminal Investigative Service (DCIS), and other law enforcement agencies. This list of cases is not exhaustive and only represents select cases. Firearm Parts to the Republic of Turkey – On June 24, 2016, the Court in the Eastern District of Virginia issued Findings of Fact and Conclusions of Law finding Hamza Kolsuz, a citizen of the Republic of Turkey, guilty of all three counts in the indictment pending against him. The Court’s ruling followed a two-day bench trial on May 18-19, 2016. On March 2, 2016, after having previously been charged in a Criminal Complaint, a grand jury in the Eastern District of Virginia returned a three-count indictment against Kolsuz, charging him with: (1) conspiring to violate the Arms Export Control Act (the “AECA”) and 18 U.S.C. § 554(a), in violation of 18 U.S.C. § 371; (2) attempting to export defense articles on the United States Munitions List (“USML”) without a license or other written authorization from the United States Department of State’s Directorate of Defense Trade Controls (the “DDTC”), in violation of the AECA; and (3) attempting to smuggle goods out of the United States, in violation of 18 U.S.C. § 554(a). The charges stemmed from Kolsuz’s attempt to export firearms parts—specifically, eighteen handgun barrels, twenty-two 9mm handgun magazines, four .45 caliber handgun magazines, one .357 caliber handgun magazine and one .22 caliber Glock caliber conversion kit—to the Republic of Turkey, and his involvement in a years-long conspiracy to export firearms parts to the Republic of Turkey. Kolsuz arrived in the United States at Miami International Airport on January 25, 2016 on a B-2 visitor’s visa. While in Florida, Kolsuz and one of his co-conspirators visited gun stores and a gun show where they purchased firearms parts. On February 2, 2016, Kolsuz began his return trip to Istanbul, Republic of Turkey by checking in at Miami International Airport for a flight that took him to Cleveland Hopkins International Airport. He then checked in for a flight that was to take him and his checked luggage through Cleveland Hopkins International Airport and Washington Dulles International Airport before embarking for Istanbul, Republic of Turkey on Turkish Airlines. When Kolsuz arrived at Dulles, his luggage was searched and the firearms parts were discovered. The eighteen handgun barrels, twenty-two 9mm handgun magazines, four .45 caliber handgun magazines, one .357 caliber handgun magazine, and one .22 caliber Glock caliber conversion kit were and are each defense articles listed on the USML, and a license or other written authorization from the DDTC was and is therefore required for the firearms parts to 1 be lawfully exported from the United States. However, Kolsuz and his co-conspirators have never registered with the DDTC, or applied to register with the DDTC, to export defense articles from the United States, and they have never applied for and have never received any licenses or other written authorization from the DDTC to export defense articles from the United States. A bench trial was held on May 18, 2016 and May 19, 2016, but a verdict has not yet been rendered. This case was investigated by the Department of Homeland Security, Immigration and Customs Enforcement, Homeland Security Investigations. High-Tech Material Used in Missile Production and Nuclear Applications to Iran – On June 14, 2016, in the Eastern District of New York, Erdal Kuyumcu, the CEO of Global Metallurgy LLC, a company based in Woodside, New York, pleaded guilty to one count of conspiring to violate the International Emergency Economic Powers Act, in connection with the export of specialty metals from the United States to Iran. As detailed in the criminal information to which he pleaded guilty and other court filings, Kuyumcu, a U.S. citizen, conspired to export from the United States to Iran a metallic powder composed of cobalt and nickel, without having obtained the required license from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). The metallic powder can be used to coat gas turbine components, including turbine blades, and can be used in aerospace, missile production and nuclear applications. Such specialized metals are closely regulated by the U.S. Department of Commerce to combat nuclear proliferation and protect national security, and exporting them without an OFAC license is illegal. Kuyumcu and others conspired to obtain over 1,000 pounds of the metallic powder from a U.S.- based supplier for export to Iran. To hide the true destination of the goods from the U.S. supplier, Kuyumcu and a co-conspirator arranged for the metallic powder to be shipped first to Turkey and then to Iran. At sentencing, Kuyumcu faces up to 20 years in prison and a $1 million fine. This case was investigated by the Commerce Department and the FBI. Theft Of Valuable Source Code – On June 14, 2016, Jiaqiang Xu was charged in the Southern District of New York in a six-count superseding indictment with economic espionage and theft of trade secrets, in connection with Xu’s theft of proprietary source code from his former employer, with the intent to benefit the National Health and Family Planning Commission of the People’s Republic of China. Xu was initially arrested by the FBI on Dec. 7, 2015, and was previously charged on Jan. 6, 2016 by indictment with one count of theft of trade secrets. According to court documents, from November 2010 to May 2014, Xu worked as a developer for a particular U.S. company (the “Victim Company”). As a developer, Xu enjoyed access to certain proprietary software (the “Proprietary Software”), as well as that software’s underlying source code (the “Proprietary Source Code”). The Proprietary Software is a clustered file system developed and marketed by the Victim Company in the U.S. and other countries. A clustered file system facilitates faster computer performance by coordinating work among multiple servers. The Victim Company takes significant precautions to protect the Proprietary Source Code as a trade secret. Among other things, the Proprietary Source Code is stored behind a company firewall and can only be accessed by a small subset of the Victim Company’s employees. Before receiving Proprietary Source Code access, Victim Company employees must first request and receive approval from a particular Victim Company official. Victim Company employees must also agree in writing at both the outset and the conclusion of their employment that they will maintain the confidentiality of any proprietary information. The Victim Company takes these and other precautions in part because the Proprietary Software and the Proprietary Source Code are economically valuable, which value depends in part on the Proprietary Source Code’s secrecy. In May 2014, Xu voluntarily resigned from the Victim Company. Xu subsequently communicated with one undercover law enforcement officer (“UC-1”), who posed as a financial investor aiming to start a large-data storage technology company, and another undercover law enforcement officer (“UC-2”), who posed as a project manager, working for UC-1. In these communications, Xu 2 discussed his past experience with the Victim Company and indicated that he had experience with the Proprietary Software and the Proprietary Source Code. On March 6, 2015, Xu sent UC-1 and UC-2 a code, which Xu stated was a sample of Xu’s prior work with the Victim Company. A Victim Company employee (“Employee-1”) later confirmed that the code sent by Xu included proprietary Victim Company material that related to the Proprietary Source Code. Xu subsequently informed UC-2 that Xu was willing to consider providing UC-2’s company with the Proprietary Source Code as a platform for UC-2’s company to facilitate the development of UC- 2’s company’s own data storage system. Xu informed UC-2 that if UC-2 set up several computers as a small network, then Xu would remotely install the Proprietary Software so that UC-1 and UC-2 could test it and confirm its functionality. In or around early August 2015, the FBI arranged for a computer network to be set up, consistent with Xu’s specifications. Files were then remotely uploaded to the FBI-arranged computer network (the “Xu Upload”). Thereafter, on or about August 26, 2015, Xu and UC-2 confirmed that UC-2 had received the Xu Upload. In September 2015, the FBI made the Xu Upload available to a Victim Company employee who has expertise regarding the Proprietary Software and the Proprietary Source Code (“Employee-2”). Based on Employee-2’s analysis of technical features of the Xu Upload, it appeared to Employee- 2 that the Xu Upload contained a functioning copy of the Proprietary Software. It further appeared to Employee-2 that the Xu Upload had been built by someone with access to the Proprietary Source Code who was not working within the Victim Company or otherwise at the Victim Company’s direction. On December 7, 2015, Xu met with UC-2 at a hotel in White Plains, New York (the “Hotel”).
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