These Chinese spies are getting out of hand

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MILITARY & DEFENSEMore: China Kentucky Military
Kentucky Couple Accused Of Selling Military Electronics To China

  • 16 MINUTES AGO
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helga tawil souri on www.flickr.com



A couple in Union, Kentucky has been arrested by the FBI for allegedly selling prohibited military-grade electronics to China.


Louis and Rosemary Brothers, who own Valley Forge Composite Technologies, came under investigation after the State Department received information they had used the company to provide International Traffic in Arms Regulations items to China, according to the Associated Press.

“The FBI is dedicated to detect, deter and defeat the threat posed by state sponsored groups, individuals and organizations attempting to illicitly acquire technology,” the agency said in a statement released after the arrests.

The couple was booked and then released on bond, and the company website appeared to be taken down, according to WLWT 5 Cincinnati. It was unclear what the specific items in question were.

Valley Forge Composite Technologies is a publicly traded company whose trading was suspended in April by the Security and Exchange Commission due to a lack of current and accurate information about the company, the SEC stated in a release.



Read more: http://www.businessinsider.com/kentucky-military-electronics-china-2014-8#ixzz3AbCCsOO6
 

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A New Kind of Spy
How China obtains American technological secrets.
BY YUDHIJIT BHATTACHARJEE

Greg Chung was eager to help China. “He has a big heart,” his wife said.CREDITCOURTESY FBI
Greg Chung was at home on February 1, 2003, when the space shuttle Columbia fell from the sky. His son Jeffrey called to tell him the news: the ship had broken apart while returning to Earth, and all seven astronauts on board had died. “That’s not a good joke to make,” Chung said. An American citizen who was born in China, Chung lived with his wife, Ling, on a cul-de-sac in Orange, California. Until his retirement, a few months earlier, he had worked on NASA’s space-shuttle program. Among other things, he had helped to design the Columbia’s crew cabin. When he realized that Jeffrey was telling the truth, he hung up the phone and wept.

In 1972, NASA outsourced the design and development of its space shuttles to the Rockwell Corporation, which was later acquired by Boeing. For three decades, Chung was a structural engineer in the stress-analysis group. The work was repetitive, but he was well suited to it. He rarely left his office, even for coffee; instead, he sat at his desk, running computer models that predicted how the fuselage would hold up under various intensities of heat and pressure.


After the Columbia accident, NASA asked Boeing to improve the design of the next shuttle. Chung had been one of the best analysts in his group, and his former supervisor called to hire him back as a subcontractor. Though he was seventy, he was glad to postpone retirement. He returned to his former habits, coming home late for dinner and then working until midnight. He was driven not by the prospect of a promotion or a raise but by the pleasure of the work. “He’d tell me how much money he had saved for Boeing,” Ling told me later. “I always teased him: ‘your Boeing, your Boeing.’ ”

In April, 2006, two F.B.I. agents visited Chung at home. He had designed the house in Orange, and it included a deck that he and Ling had built themselves. In the large front yard, Chung had planted lemon trees and a tomato patch, which he sprinkled with water recycled from the shower. Their two sons—Jeffrey and his older brother, Shane—lived nearby with their families.

Chung, a tall man with a lean, impassive face, invited the agents inside. They asked him about Chi Mak, an acquaintance of Chung’s, who had been arrested several months earlier. Mak had moved to California from Hong Kong in the seventies, and had worked as an engineer at Power Paragon, a company that builds power-distribution systems for the Navy. For years, China had been trying to modernize its naval fleet, and the F.B.I. suspected that Mak had been trained by Chinese intelligence services and sent to the United States as a spy.

For more than a year leading up to Mak’s arrest, F.B.I. agents had tapped his phone and followed him on his errands. Once, while Mak and his wife were on vacation in Alaska, agents entered their house in the middle of the night. They were careful to leave no trace—even the cobwebs in the living room remained intact after the search—as they photographed hundreds of Mak’s documents, including his address book, in which they found the names of several Chinese-American engineers. One of the names was Greg D. Chung.

Chung, whose given name was Dongfan, had gone by Greg since arriving in the United States, forty years earlier. He told the F.B.I. agents that he and Ling went out to dinner with the Maks once or twice a year, but that, because Chi Mak was an electrical engineer, not a structural engineer, the two men never discussed work. The agents thanked Chung and left. They had learned a few useful pieces of information, but nothing that implicated him in any wrongdoing.

A few weeks later, F.B.I. agents conducted another search of Mak’s house. In a stack of old bank statements, they found a photocopied letter, written in Chinese on the stationery of a Beijing hotel, from Gu Wei Hao, an official in the Chinese aviation ministry. It was dated 1987, and it was addressed not to Chi Mak but to Lingjia and Dongfan Chung.

In his letter, one of several documents that the F.B.I. recently shared with me, Gu asked Chung to collect information that would help China develop its space program. The Chinese government had embarked on a plan to build an Earth-orbiting space station, and Gu was looking for any relevant technical knowledge. “For all the expenses that you incur in collecting or purchasing information, I will find a way to pay you cash in person, and you will be allowed to carry it outside the country,” Gu wrote. He invited Chung to Guangzhou, where they could discuss technical matters “in a small setting” that would be “very safe.” Because Chung was an American citizen, Gu advised him to apply for a tourist visa; on the application, he should claim to be “visiting relatives in China.” Gu concluded, “It is your honor and China’s fortune that you are able to realize your wish of dedicating yourself to the service of your country.”

Chung was now an espionage suspect. The F.B.I. opened a new investigation, under the direction of an agent named Kevin Moberly, an athletic man in his early forties with cropped hair and a neat goatee. One night in August, 2006, Moberly woke up at 2 A.M. and got dressed. He and another agent, Bill Baoerjin, drove to Orange and parked on Grovewood Lane, less than a hundred yards from Chung’s house. They sat in the car for twenty minutes, scanning the neighborhood and letting their eyes adjust to the darkness. Then, using flashlights covered with red filters to make the beams less conspicuous, they rifled through two trash cans outside Chung’s gate. They found a bundle of Chinese-language newspapers, which they took back to the office.

Slipped between the newspaper pages were several technical documents from Rockwell and Boeing. Moberly, who had been an intelligence officer in the Air Force before joining the F.B.I., recognized the abbreviations: “O.V.,” for Orbital Vehicle; “S.T.S.,” for shuttle transportation system. There was no evidence that Chung was attempting to make a dead drop. He seemed simply to be getting rid of sensitive documents, possibly as a reaction to the Mak case, which had been in the news for months.


BUY OR LICENSE »
Chung’s father, a civil engineer in the railroad ministry, was a Nationalist. In 1946, with Maoists fighting for control of mainland China, the Chungs were forced to move to Taiwan, where the Nationalist Party, or Kuomintang, was forming a government in exile. There were now two Chinas—the People’s Republic of China, ruled by the Communist Party, and the Republic of China, on Taiwan—both of which claimed to represent the interests of the Chinese people. Chiang Kai-shek, Taiwan’s military dictator, encouraged anti-Communist propaganda. Like all Taiwanese schoolchildren, Chung was taught to despise the Maoist regime, but culturally and ethnically he still felt Chinese.

BUY OR LICENSE »
It was Chung’s first experience of China as an adult, and he relished it both professionally and personally. Between factory visits, the aviation ministry arranged sightseeing excursions, and the Chungs visited landmarks they had wanted to see since childhood—the huge Buddha carved out of a mountain in Leshan, the terra-cotta soldiers and the Dayan Pagoda in Xi’an. As they drove through the countryside, they saw villagers harvesting lotuses from the mud. Ling told me that Chung, while meditating, had had a vision of himself from a past life, as a monk in a Chinese temple. During the trip, they speculated about where that temple might have been.

At the end of the summer, Chung brought home a tie clip from Xi’an Aircraft Industrial Corporation, a tiepin from the Chinese Academy of Engineering, and an eight-page list of questions—what intelligence agents call a tasking list—from the engineers at the Nanchang Aircraft Manufacturing Company. Chung spent several months researching the engineers’ requests, and, in December, he drove to the Chinese Consulate in San Francisco to deliver materials to Nanchang by diplomatic pouch. What Chung sent would have alarmed U.S. authorities, had they seen it: twenty-seven book-length texts, most of them engineering manuals from Rockwell about the design of the B-1 bomber.
 

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“This is the Holy Grail for an aircraft company, to figure out how to do what the U.S. is able to do,” Moberly told me. Chung was giving away knowledge that had taken Rockwell several decades and cost tens of millions of dollars to develop. “The whole atmosphere was friendship,” Ling told me. “In China, everybody would ask for help. ‘Oh, you are an engineer? You can help our country.’ ”

During the next year and a half, the Chungs acquired more real estate. In October, 1986, they bought a single-family home in Cypress, California. Five months later, they paid nearly six hundred thousand dollars, in cash, for the one-acre lot in Orange, with enough money left over to have a house built from scratch. Still, their taste in cars and clothing remained unassuming, and their colleagues and neighbors were unaware of their growing wealth.

Gu Wei Hao visited the couple, and they accompanied him on trips to Disneyland and to the beach. The Chinese government provided Gu with a paltry travel budget—four dollars a day for incidentals—so either the Chungs paid for the excursions themselves or Gu came up with the funds through other means.

The family moved into the new house in 1989. In the evenings, Chung used a telescope to study the night sky, identifying constellations from ancient Chinese astronomical maps. Ling, who had earned a graduate degree in fine arts from California State University, Long Beach, turned the garage into a painting studio. She taught painting at a nearby community college, specializing in neo-expressionism, an abstract style developed in the U.S. and Europe in the late nineteen-seventies. “She had a following of people who really enjoyed her style of teaching,” a colleague told me.

In 1998, two years after Boeing acquired Rockwell, the new management decided to relocate the office. Employees were given moving instructions: reference materials that they wished to keep were to be placed in dedicated boxes; burn bags were provided for the rest. During the next few weeks, Chung took home dozens of boxes of documents and stored them on the bookshelves in his cellar. His contacts in China had asked him to collect anything that might be of use; now he had enough to feed them for years.

In 2002, as Chung approached his retirement date, he printed documents from Boeing’s database at a frenzied pace. On each printout, he whited out warnings that prohibited sharing the documents outside the company; he also redacted the names of engineers who had worked on them, and indications of who had printed them out and when. He photocopied the printouts so that he could send documents to Chinese officials and keep the originals for his records. The volume of the material was so large, Moberly told me, that Chung “must have gone through hundreds of bottles of whitening fluid.”

In 2007, during a six-week federal trial in Santa Ana, California, prosecutors argued that Chi Mak was a spy employed by the Chinese government. They alleged that the information Mak gathered had helped China build its own version of Aegis, an American radar system used to protect combat ships. The jury convicted Mak of acting as an unregistered agent of a foreign government, and he was sentenced to more than twenty-four years in federal prison. It was the most significant conviction of a Chinese spy in the United States in decades.

One of Mak’s brothers and his wife had been caught at Los Angeles International Airport with a CD full of sensitive information, some of which was classified. In the Chung case, however, investigators reached an impasse. F.B.I. agents had spent months examining the three hundred thousand pages recovered from Chung’s house, and determined that none of the documents were classified. Chung could not be charged with conveying national secrets to a foreign power. And though prosecutors could show that he had shared trade secrets with Chinese officials in the eighties, the five-year statute of limitations for export-control violations had long since passed. “It was very clear that he was doing something wrong,” Moberly said. “I just had to figure out whether he was breaking the law.”

While flipping through a federal-statute book, Moberly came across a paragraph titled “Economic Espionage,” which had become a crime in 1996, when Congress passed the Economic Espionage Act. Moberly recalled a thirty-minute class that he’d taken on the topic during his counterintelligence training. The class had been so short because no one in the U.S. had ever been convicted of economic espionage.


The statute defined an economic spy as anyone who “takes, carries away or conceals” or otherwise “misappropriates” a trade secret with the intent of aiding a foreign government. For Chung to be charged under the statute, prosecutors would not have to show that he had transmitted information to China within the past five years; the fact that he had concealed trade secrets in his cellar might be enough.

The Chung case went to trial in June, 2009, before the same judge, Cormac J. Carney, who had sentenced Chi Mak. During his testimony, Ronald Guerin, a former F.B.I. counterintelligence expert, described how Chinese intelligence officers recruited informants. “What they try to do is work on the China aspect—‘You are not so much hurting the United States; you are helping China,’ ” he said. “You can just stroke the person and tell them they’re doing it for the good of the Motherland or the good of their country. You give them awards, give them letters, give them plaques, whatever. . . . Or you pay them a lot of money.” In Chung’s case, it was clear that the Chinese handlers had used flattery to great effect. The prosecution did not show any evidence that cash had changed hands.

The defense conceded that Chung had done some “foolish things in the past,” but denied that he had planned to share the information. He was simply a pack rat. “He’s not a pack rat,” the lead prosecutor, Greg Staples, said in court. “He’s a pack elephant.”

Chung became the first American to be convicted of economic espionage at trial. He was sentenced to fifteen years and nine months in prison. Since then, federal prosecutors have brought four more economic-espionage cases, resulting in the convictions of five individuals.

Moberly later told me that, under questioning during the Chung trial, he had acknowledged the existence of classified evidence indicating that Chung had been paid. To protect the F.B.I.’s sources and methods, he could not reveal, even to a judge, what this evidence was. But the allegation was consistent with the letter that Gu Wei Hao had sent to Chung in 1987, in which Gu guarantees that Chung will be allowed to take cash out of the country. Also, even accounting for Chung’s frugality, it is not clear how his salary at Rockwell—less than sixty thousand dollars a year during the mid-eighties—would have allowed him to own an auto-repair shop, a triplex of rental apartments, and two houses, all at the same time. “I never believed he did what he did for money,” Moberly told me. Even so, payments from the Chinese government, perhaps on the order of tens of thousands of dollars, might have been an additional incentive.

Chung did not respond to my requests to visit him in prison, but Ling, who was never accused of a crime, reluctantly took my phone calls. One afternoon, I parked at the end of Grovewood Lane and walked to the iron gate in the Chungs’ driveway. There were cobwebs on the buzzer. The front yard was full of weeds, and an overturned wheelbarrow near the garage apparently hadn’t been used in years.

When I rang the bell, Ling Chung came out and waved from the front step. She was wearing a green nightgown and her hair was dishevelled. She invited me to sit on the white couch in the living room. Sunlight slanted in through the windows, lighting up patches of the carpet.

Ling got me a glass of water and sat across from me. With a forlorn smile, she recalled applying for U.S. citizenship with her husband. On one of the forms, they were asked whether they would be willing to bear arms for the United States. Chung had left the space blank. The interviewer asked Chung whether he would fight against China in the event of a war. Ling recalled Chung’s answer: “If this happens, I will grab a gun and shoot myself.”

We walked from the living room to her studio, which opens onto the front yard. Large abstract paintings lay on the floor or rested against the walls. Ling told me that she had been working on many of them for years. She pointed to one that looked like a violet cross superimposed on a purple night sky. “The title of that one is ‘45436-112,’ ” she said—her husband’s inmate number at a low-security federal prison in Butner, North Carolina. She visits him there every few months.

There were tears in her eyes. “The first day we met, we decided to get married,” she said. The tenderness lasted throughout their time together. Even in their sixties, a family friend told me, “they were like college sweethearts.” Ling said that when Chung worked at Boeing he sometimes napped in his office, and he would complain about being woken up by the illusion that she was singing. “He would say, ‘I always tell you, “Don’t sing around me—I cannot go to sleep,” ’ ” Ling told me. “In his mind, he thought I was singing behind him.”

I asked her whether Chung felt the same loyalty toward China that he felt toward her, and whether Chinese officials had taken advantage of that loyalty. She remained silent. I asked whether her husband was innocent. “I cannot answer that question,” she said.

She suggested that the prosecutors had looked at his actions too superficially to understand the motives behind them. “They just stayed on the surface,” she said. Later, she elaborated: Chung’s intention was to help China, not to hurt the U.S. “It’s not that complicated,” she said. “You make a friend, and they ask you, if you are an engineer or an artist, ‘Do you know this?’ And you tell them what you know. Simple as that.”

Before I left, she showed me a sheet of paper taped to the wall near the studio entrance. It had several neat rows of Chinese characters on it: a list of Buddhist precepts that Chung had copied for her by hand. I wondered whether the Buddha’s teachings had helped Chung resolve any conflicts he might have felt between his loyalties to the U.S. and to China. I asked Ling if she thought it was possible to hold two national identities at once. Her eyes brightened. “I’m Chinese, I’m American,” she said. “How beautiful is that! Why make it a confrontation?” ♦
 
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