Spies of all stripes have discovered that there is life after the .

ESPIONAGE, the Sequel By James Kitfield

f there ever was a Golden Age was loaded with sensitive technologi- collection attempts for the Defense of international , the cal data. Department, the threat is growing. Cold War era was it. The super- Mak, whose case was reported in The most recent DSS report on tech- powers and their satellites and some detail by Newsweek last year, has nology collection trends, released Iallies maintained enormous spying es- pleaded not guilty to charges that he acted in January, notes that the number of tablishments, spending scores of billions as an agent for a foreign government. “suspicious” events is on the rise, as of dollars to employ thousands of profes- His case is pending, as are those of his are the number of countries involved. sional case officers, spies, and analysts family members. DSS also notes a “dramatic increase and finance their advanced equipment In pressing its charges, the govern- in incidents involving government and sophisticated infrastructure. ment claimed that the information on affiliated entities.” Even though the Cold War is over, the disk was linked to quiet “electronic- military espionage, at least, continues to drive” submarine propulsion systems. Record Numbers thrive. In fact, it never slackened at all. Access to such technology could help The National Increasingly, foreign spies are hidden China achieve one of its dearest strate- Executive says a record 108 nations were among us, recruited from among the gic goals: making US Navy operations involved in trying to steal sensitive US more than 30 million foreign business- in the Taiwan Strait so perilous that technologies in 2005, the last year for men, scientists, students, researchers, Washington would think twice about which full data are available. academics, and tourists entering the coming to the aid of Taiwan in a cross- That Chi Mak may have been spying each year. strait conflict. for China is suggestive of another trend: Take, for example, the case of The case is notable for a number Experts say China is far and away the Chi Mak, a Chinese-born electronics of reasons. It reveals how new tools most aggressive and resourceful state engineer working for a US defense commonly associated with the technol- sponsor of technological spying. (See contractor. According to the federal ogy revolution—cell phone cameras, “The China Problem,” August 1999, government, he was part of a family wireless personal digital assistants, p. 70.) that spied together and apparently tiny computer “thumb drives,” readily The FBI estimates that there are more hoped to prosper together. The FBI available encryption software—have than 3,000 Chinese “front companies” has alleged that Mak, along with his made it far easier for foreign govern- operating in the US with the express wife and brother, can be heard on FBI ments and companies to steal classified purpose of gathering intelligence and wiretaps discussing ways to smuggle information. technology. Much of this is “dual use,” an encrypted computer disk to China. According to the Defense Security with both civil and military uses. The disk in question, the bureau added, Service, which monitors technology The FBI has stated publicly that the

AIR FORCE Magazine / March 2007 71 number of Chinese counterintelligence ogy that US firms spent hundreds of their own spying operations to collect cases in alone is increasing millions of dollars developing.” technologies that commercial spies do by 20 to 30 percent each year. One case began in 2004, as a seem- not gather. Globalization—characterized by the ingly innocent meeting at a Japanese free flow of data, commodities, and trade show between two men who False Flags people across porous national bor- shared a common interest in electronic Often, it is simply not clear who is ders—has allowed these cases to be- gadgets. behind the spying. come utterly commonplace. Industrial One was a Japanese employee of “In many cases, we do not know espionage and military technology Nikon, the other a Russian working for how much of a nexus there is between is a thriving growth industry. Consider the Russian trade representative office the private and public sectors that are that, in 2005: in Tokyo. targeting our technologies,” conceded The FBI opened 89 economic espio- Over the course of subsequent dinners Van Cleave. nage cases and was working 122 active and drinks at various restaurants—the “Most foreign governments that are cases at year’s end. Russian always picked up the tab—the involved do not discourage such theft US Immigration and Customs En- discussion turned to infrared sensor and often benefit from [it],” she testi- forcement conducted more than 2,400 technologies that Nikon was work- fied. “It’s clear, however, that the major export investigations involving viola- ing on for its cameras, but which also threat countries continue to employ state tions of the Arms Export Control Act, had applications in advanced weapons organs—including their intelligence International Traffic in Arms Regula- systems. services—as well as commercial en- tions, the Trading With the Enemy Act, In February 2005 the Nikon employee terprises, particularly when seeking the and other laws. was persuaded to give his new friend a most sensitive and difficult-to-acquire According to the American Society prototype device designed to stabilize technologies.” for Industrial Security, economic and light signals in long-distance fiber-optic The leading state sponsors are an open cost US businesses networks, in exchange for a few hundred secret and include India, Pakistan, Iran, an estimated $59 billion. dollars and some presents. Japan, , and Israel. DSS reported 971 suspicious con- As was eventually reported in the Rus- By nearly all accounts, however, the tacts, an increase of nearly 43 percent sian publication Defense and Security, top two “threat nations” are in a class from a year before, though part of this the Tokyo police had long considered by themselves. Thus, US intelligence may be attributable to “greater threat the Russian trading office a wholly officers and investigators spend much awareness.” owned subsidiary of Russian military of their counterintelligence energies The top five, unnamed, “collecting intelligence. Eventually, Japanese law looking particularly into the activities countries” were responsible for 57.4 enforcement saw to it that the Japanese of China and Russia. percent of all technology collection man was fired from his job and that the But for an investigation by the Japa- activity. Russian quietly returned to Moscow. nese magazine Shukan Bunshun, the State-sponsored spying activity The lines have blurred between indus- suicide of a Japanese consul in Shanghai nearly doubled from the year before, trial and economic espionage conducted in 2004 might have been attributed to to 30.6 percent of the technology col- by foreign governments and intelli- loneliness or thwarted career ambitions. lection attempts. gence agencies, and spying instigated Instead, the investigation revealed that Little wonder that some experts have at the behest of private companies or the Japanese official was in a relation- characterized the trend as the greatest individuals. ship with a hostess in a karaoke bar. foreign intelligence challenge since A number of foreign governments Chinese intelligence officers reportedly the Cold War. Or as one former Rus- have created quasi-official organiza- threatened to make the relationship sian intelligence officer commented to tions, such as the Russian trade office, public unless the man divulged the a reporter on the ubiquity of data theft to tap into and help direct the technology secrets of Tokyo’s diplomatic encryp- and industrial espionage, “Everyone is theft being conducted by the private tion system. stealing from everyone else.” sector. The Japanese consul hanged himself Foreign theft of sensitive technologies Meanwhile, foreign intelligence ser- instead. has “eroded the US military advantage vices continue to aggressively conduct The case reveals why many experts be- by making dangerous technology avail- able to our adversaries,” Michelle Van Cleave, the former national counterin- telligence executive, testified in 2005 before Congress.

Prime Targets Sensitive US technologies that un- derpin the economy and contribute to military superiority, she said, remain prime targets of foreign intelligence services, companies, and private in- dividuals. Such spying and theft “has undercut the competitiveness of US industry by allowing foreign firms to acquire, at little or no cost, technol-

72 AIR FORCE Magazine / March 2007 lieve industrial espionage and technical industrial espionage] in cases where successful spying made efforts to keep data theft have become a quasi-official something that would normally take it at arm’s length “futile.” part of Beijing’s foreign and industrial 10 years to develop takes them two or Likewise, there is ample evidence policy, dating back to the 1980s and three,” said David W. Szady, then chief that Washington’s old adversary Mos- the “863 Program” launched by former of FBI counterintelligence operations, cow remains hyperactive in the fields leader Deng Xiaoping. Designed to put in 2005 to the Calgary Herald. of industrial espionage and sensitive China on a fast track to technological DSS provided a telling case study data theft. equality with the developed nations, of how this technology theft can work, In one case, British defense contractor the 863 Program focused on achieving citing an example involving a Near BAE Systems learned in 2002 that one breakthroughs and shortcuts across a Eastern nation. An employee of a Near of its employees was passing stealth wide spectrum of military and industrial East defense firm, working on a joint cruise missile secrets to the Russians. technologies. program with a US defense contrac- Former BAE engineer Ian Parr is now Once critical technologies—or entire tor, connected his computer to the US serving 10 years for spying. weapons systems—were acquired, Chi- contractor’s classified test network, nese engineers and scientists adapted ostensibly to “control the test of an Dipping Into the Diaspora them quickly to existing weapons and expendable torpedo decoy.” A favored tactic of Russian intelli- systems through . The network was also being used gence, according to a number of reports, The 863 Program helps explain why to test a “US designed, classified, and is to entice or coerce members of the China today has more than 700 multi- export-controlled second generation huge Russian diaspora around the world national R&D centers versus less than torpedo defense suite.” When the test to act as agents. 50 just nine years ago, as Newsweek cycle was complete, the foreign em- “In the Soviet period, the Kremlin reported. The program also indicates ployee left with his computer. Within treated Russian refugees as traitors and why the United States and many allies months, his firm “announced its second enemies, but now it is turning them into are investigating and prosecuting dozens generation torpedo defense suite, with a fifth column,” according to Konstantin of cases of sensitive technology and similar characteristics and capabilities” Preobrazhensky, a former lieutenant banned items being smuggled to China, as the classified US system. colonel in Russian intelligence, quoted in from night vision systems to seismic Even in the shadowy world of espio- Scotland’s Sunday Herald. Intelligence imaging equipment. nage, signs of China’s massive collection officers “attract Russians overseas by Without citing specific nations, the effort surface with regularity. In 2006, appealing to their patriotism.” Defense Security Service notes that the a Taiwan citizen pleaded guilty to spy- The Defense Security Service says “apparent across-the-board surge in ac- ing for China, after he was caught in information technologies top the list tivity” from the East Asia-Pacific region the US trying to illegally acquire and of desired capabilities, as they are the “will continue ... as gaps in technologi- export cruise missiles and spare parts foundation of virtually all modern civil- cal capability become apparent in their for fighter aircraft. ian and military processes. Examples weapons development processes. Lasers In 2005, a Chinese case officer who include pursuit of Ka-band satellite and optics technology and aeronautics had worked for more than 10 years in communications systems, electronic appear to be priority technology targets European universities and companies warfare simulation systems, and tacti- for this region.” defected to ’s state security cal radios. services, revealing a network of hun- Next on the “most wanted” list are Too “Remarkable” dreds of Chinese industrial spies spread lasers and optics. The equipment sought In a report, the House of Represen- across Europe. in 2005 included night vision systems tatives listed 16 “remarkable” Chinese Among the companies targeted by and laser range-finders. technological breakthroughs that suggest this network was the French com- Aeronautics, the key to the United industrial espionage, from supercomput- munications firm Alcatel, as reported States’ vaunted airpower advantage, ers and advanced communications sys- by the Calgary Herald. Alcatel is is the third-most pursued category of tems to satellites and nanotechnology. a prime contractor for the Galileo technology. Collection events included The 863 Program also helps explain satellite communications system that attempts to obtain military aircraft en- how China was able to rapidly field leap- Europeans hope will one day rival the gines, tactical unmanned aerial vehicles, ahead weapons systems that seemed to Global Positioning System. and missile-launch warning systems. clone the Tomahawk cruise missile and A Western intelligence officer quoted Other technologies pursued by foreign the Aegis seaborne radar system. in the article said that China was eventu- entities included target tracking systems, “I think you see [signs of Chinese ally brought into the project because its anti-tank guided missiles, and radar cross-section modeling software—in short, a laundry list of the most advanced US military technologies. China was eventually brought “These technologies are frequently cutting edge and provide the collector the advantage of saving time and costs into the project because its associated with indigenous development of new technologies,” DSS reported. The methods that foreign intelligence successful spying made efforts to services and foreign industrial competi- tors devise to acquire sensitive technolo- keep it at arm’s length “futile.” gies are as numerous and ingenious as AIR FORCE Magazine / March 2007 73 the targeted technologies themselves. In the age of globalization, US of- A foreign company found out that ficials worry first that foreign countries or their industrial subsidiaries seeking sensitive technologies will simply buy its technological secrets were being US companies. The acquisition of fiber-optic network provider Global Crossing by a Singapore stolen by a snooping switchboard company, and the sale of IBM’s personal computer division to Lenovo, China’s operator in an overseas hotel. largest computer maker, are two sales that raised eyebrows in Congress. China’s acquisition of IBM’s personal computers division could transfer ad- vanced technology and corporate assets technology range from the mundane system to espionage. As noted by the to the Chinese government, said a 2005 to the sinister. The most popular NCIE’s report to Congress in 2005, letter to the Treasury Department signed method, for instance, is for spies to almost 30 percent of the science and by, among others, Rep. Duncan Hunter contact companies by e-mail, fax, or engineering faculty employed by US (R-Calif.), then House Armed Services phone call, simply requesting sensi- universities and colleges are foreign Committee chairman. tive information under the guise of a born. More than 40 percent of the The transaction could also “result in “sale” or “research.” The hope is to Ph.D.s awarded in science, engineer- certain US government contracts with find a company or individual naive ing, and mathematics went to foreign or involving [personal computers] being about export controls. citizens in 2004. fulfilled or participated in by the Chinese Other attempts are far more nefarious. “The sheer size of the population and government.” An organized campaign by professional the access that some have to key R&D hackers linked to China called “Titan projects make it inevitable that this group Easy Exploitations Rain” attempted to steal data from nu- will serve as an important funnel abroad Authorities also worry that joint merous defense companies and agencies for technologies.” ventures and overseas subcontractor through cyber-assault. Take the Chinese student who attended relationships between US industries According to DSS, “The potential Iowa State and the one at Penn State, and foreign partners are easily exploited gain from even one successful computer both of whom were cited in a Defense by industrial spies. US firms frequently intrusion makes [hacking] an attractive, Department report in 2003. According transfer secret data to foreign subcon- relatively low-risk option,” and “the risk to the report and a follow-on investiga- tractors, only to find out later that the to sensitive information on US computer tion by the Washington Times, the two work and information were then out- systems will increase.” students transferred top-secret data on sourced to third-party subcontractors In another case cited by DSS, a US a special metal to a company with close of suspect reputation. contractor received an e-mail from a ties to a foreign military. The metal is The National Counterintelligence doctoral student requesting informa- used in naval and aerospace sensors Executive’s annual report to Congress tion on an “ultraviolet missile warning and weapons. noted that in late 2004 a US software system.” As the Pentagon report noted, the manufacturer reported that portions of its The student claimed he was working nature of the convoluted transaction source code and the confidential design on a research project assigned by his was typical of the shady world of in- documents of one of its key products professor, and indeed such requests dustrial and economic espionage. had been stolen from a recently opened from university students to industry Although “one of the Chinese stu- research and development center in are a fairly commonplace part of the dents admitted sending this informa- Mumbai, India. Despite successfully free exchange of information among tion to [China’s People’s Liberation detecting the theft, the company had researchers. Army], ... usually the connections little legal recourse to stop further dis- In this case, however, executives between academic, commercial, and semination of the information. noticed that the e-mail came from a military organizations are not so clear Businessmen traveling abroad are commercial Internet provider instead cut,” the report summarized. also seen as prime espionage targets, of the “.edu” that signifies educational Finally, some of the collection ef- and they are vulnerable to having their institutions. Their suspicions were also forts would be right at home in the laptops, mobile phones, and Blackberrys aroused by the fact that the request was finest spy novels and movies. DSS stolen or bugged. for information on a specific system notes that on one occasion, a film In one such instance, a Canadian aero- rather than on a field of general scien- processing company contacted the space company in negotiations for a sale tific research. FBI after it developed film showing to a foreign company found out that its “classified images of satellites and technological secrets were being stolen 30 Percent Factor their blueprints.” It was “determined by a snooping switchboard operator in That case illustrates the vulnerabil- that the pictures were taken from an an overseas hotel. The potential “buyer” ity of the vast educational and research adjacent office’s window.” ■ was scamming the Canadian company, trying to steal its technology from the James Kitfield is the defense correspondent for National Journal in Washington, intercepted phone calls and faxes. D.C. His most recent article for Air Force Magazine, “The American Theater,” ap- Attempts on classified or restricted peared in the December 2006 issue.

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