Transnational FBI Case Unveils Complex Saga Involving China’s Student Spies

The FBI’s investigation of a transnational espionage case in which a Chinese intelligence official was extradited to the United States from Belgium to stand trial has uncovered more details to the saga, including an email implicating a Chinese exchange student working on the Chinese regime’s behalf.

In recent years, the United States has launched a multi-pronged counterespionage campaign to tackle espionage cases by the Chinese Communist Party (CCP) regime. As the Trump administration highlights the large-scale Chinese theft of U.S. intellectual property in its negotiations with Beijing, the Justice Department has been stepping up its investigation and prosecution of individuals who have assisted the Chinese regime in its foreign intelligence operations.

“We cannot tolerate a nation stealing our firepower and the fruits of our brainpower,” said John Demers, the Assistant Attorney General of the National Security Division last year when dealing with a case involving CCP intelligence officials stealing U.S. trade secrets. The methods involved in these cases are diverse and often interrelated. A Sept. 26 report by the Chicago Tribune revealed links between individuals indicted in these two cases, made public by the Justice Department last year.

Aerospace Espionage

On Oct. 9, 2018, the United States secured the extradition of Yanjun Xu, a Chinese intelligence official, from Belgium, where he had been apprehended for attempting to obtain industrial secrets from American aerospace companies under a false identity. It is the first successful extradition of a Chinese official made by the U.S. justice system.

The Chinese characters for Xu’s name were not provided by court documents. He is identified as the deputy director of the Ministry of State Security’s Jiangsu provincial department. Xu was charged with stealing trade secrets on Oct. 10 that year.

The prosecutor alleged that Xu used names such as “Qu Hui” and “Zhang Hui” to carry out his espionage work and posed as a representative of the Jiangsu Association for Science and Technology (JAST).

According to the indictment, since 2013, Xu had targeted top American airlines and industry experts for “highly sensitive” technical information and invited employees of American companies to China under the pretext of “exchanging ideas” or giving lectures at universities.

The Inside Report on Xu’s Arrest

In early 2017, Xu’s associates contacted an ethnic Chinese aerospace engineer from General Electric (GE) via LinkedIn, also known as “A.” The engineer was deeply involved in the design and analysis of GE’s new commercial jet engine, a technology which is the prime target of the Communist Party’s agents.

Later, the engineer was asked to make an experience exchange report in Nanjing, China, which is the provincial capital of Jiangsu. Before going to China, he loaded five GE aerospace documents onto the hard drive of his personal laptop. The Chinese side promised him $3,500 for the lecture and covered the costs of his airfare and accommodation.

A few months later, the aerospace engineer told the FBI his speech at the Nanjing University of Aeronautics and Astronautics encountered some initial technical problems. Staff at the university, which is controlled by the Chinese Ministry of Industry and Information Technology, told him that the projector wouldn’t work, so he allowed them to insert a USB drive into his personal laptop, which contained the confidential GE documentation.

Further investigation by the FBI found ongoing “criminal activity” on the engineer’s social media accounts, including that involving CCP spies.

The FBI identified Xu as the “real user” of an iCloud account containing a record Xu’s covert activities and the technology he wanted to collect.

On Jan. 23 and Feb. 3, 2018, Yanjun Xu asked “A” via email to collect GE’s technical documents on engine production and design, including “containment analysis” of fan blades.

General Electric J-47-27 jet engine at the National Museum of the United States Air Force in Dayton, Ohio. (U.S. Air Force photo)

In March 2018, Xu emailed the engineer and suggested that he download GE aviation records and “more data… Including any relevant design,” following which the two agreed to meet in Belgium.

The U.S. Office of the Attorney General began preparing prosecution documents to indict Xu and provide them to Belgian authorities.

Xu arrived in Brussels on April 1, 2018, but instead of the GE engineer, he was greeted by Belgian police and FBI agents, and put in handcuffed.

“U.S. aerospace companies invest decades of time and billions of dollars in research,” Benjamin Glassman, the U.S. attorney for the Southern District of Ohio, said at the time of Ji’s indictment. “In contrast … a Chinese intelligence officer tried to acquire that same, hard-earned innovation through theft.”

The investigation into Xu also opened the door to other cases of Chinese economic theft, as reported by the Chicago Tribune. U.S. investigators took note of 27-year-old Ji Chaoqun, a Chinese man who had begun attending Chicago’s Illinois Institute of Technology in August 2013, where he studied electrical engineering on a F1 visa.

U.S. investigators took note of a Chinese man who had corresponded with Xu, leading to the case of Ji Chaoqun. (Composite image)

Another Meaning for ‘Midterm’

The investigators were alerted to Ji because of his correspondences with Yanjun Xu uncovered in the investigation of the latter. From December 2013 to July 2015, Ji and “intelligence officer A” exchanged about 36 text messages, FBI agent Andrew K. McKay said in a declassified court document.

“Intelligence officer A” refers to Yanjun Xu.

Ji Chaoqun was arrested in Chicago on Sept. 25, 2018, and charged with acting as an illegal agent on behalf of a senior MSS intelligence official in Jiangsu Province. The prosecutor alleged that Ji had received covert instructions from Chinese intelligence agents, and that he had hidden his contacts with these agents when undergoing a U.S. military background check.

In Ji’s electronic accounts, federal authorities were drawn to an email addressed to “intelligence officer A” about “midterm exam questions.” In the email, Ji indicated that he had attached eight sets of “exam questions” over a period of three years.

However, the email attachments Ji sent to Xu had nothing to do with midterm exams, but instead contained background information on eight American scientists and engineers also residing in the United States.

According to a federal criminal complaint, Ji collected information on these eight individuals at the direction of a high-ranking Chinese intelligence official, so that they could be recruited as spies. These eight people were originally from Taiwan or mainland China. All of them were employed in or had worked in the field of science and technology, and seven had worked for U.S. defense contractors.

All were seen as targets of the CCP’s new-generation espionage activities, the federal complaint stated. These spy operations are part of the Party’s strategy to win overcome the United States without active warfare.

According to the FBI, the CCP’s spy agencies typically focus their recruitment efforts on ethnic Chinese for cultural and linguistic reasons. Given his position as an international student, Ji Chaoqun was in an ideal position to reach these individuals.

Court records show that the Chinese agents focused on stealing secrets from major U.S. aerospace companies, and contacted Ji seven months after he began his studies.

Ji graduated in 2015 and, a year later, joined the U.S. Army Reserve via a program called Military Accessions Vital to the National Interest (MAVNI), which had been started in response to an acute shortage of manpower.

Ji made three trips to Beijing and met intelligence officials at a hotel. “Based upon my training and experience,” the FBI agency McKay wrote in court records, “conducting meetings in hotel rooms is an indication of intelligence officer tradecraft because meetings in hotel rooms provide a discreet, private place for the intelligence officer to recruit or debrief his/her intelligence asset.”

John Lausch, the United States attorney for the Northern District of Illinois, spoke to the Chicago Tribune about the significance of Ji’s case. He noted that Ji had come to the United States on a visa intended for his studies, only to be used by Communist Party agents as an intelligence asset.

The LEAP-1A engine, developed by CFM, a joint venture between France’s Safran and General Electric, is pictured during its handover ceremony on April 15, 2016 in Colomiers, outside Toulouse. (REMY GABALDA/AFP/Getty Images)

Steven Dollear, an assistant U.S. attorney, said that while Ji was not charged with collecting military secrets, he would have had access to such information at that time. Joining the U.S. military increased the scope of Ji’s access to information, especially since he had also received training by Chinese intelligence officials, making him a greater threat to U.S. national security.

Ji has pled not guilty to all charges.

Fake Employment and Immigration Fraud

Ji’s criminal case also touched on a large-scale immigration fraud scheme involving a federal program that allows international students to work in the United States in fields related to their studies upon graduation.

After receiving his master’s degree in electrical engineering in 2015, Ji remained in the United States through a temporary work program called the Optional Practical Training (OPT) program. The OPT program allows recently graduated international students to stay and work in the U.S. for one year in order to put their knowledge into marketable practice. It is widely seen as a step towards converting their residence status to the H-1B work visa. Since 2016, graduates in science, technology, engineering and mathematics (STEM) fields have been allowed to extend their internships by two years.

Ji claimed to have landed a job as a software engineer at a company called Findream LLC. The company, which describes itself as an emerging technology company based in Mountain View, California, is one of two companies run by Chinese businesswoman Weiyun Huang, also known as Kelly Huang. Her other company is called Sinocontech.

However, “Findream LLC.” and “Sinocontech” do not actually exist. Federal authorities say the companies were used to provide false employment credentials for Chinese students studying abroad, so that they could stay in the United States after they graduate.

Huang, now aged 30, is charged with conspiracy and fraud to provide false employment records, financial statements, and tax documents, according to a federal indictment that was made public on July 26. Huang earned $2 million from 2,600 students who received false employment certificates through her fake companies.

Federal authorities say Ji is one of Huang’s clients, as Ji had admitted to FBI agents that he had paid “Findream” $900 and never did any work for that firm.

According to attorney Robert Rouse, law enforcement is tracking the 2,600 individuals involved in the fraud scheme to determine appropriate future steps.

Tip of the Iceberg

While Ji’s case is the latest in a series of communist Chinese espionage cases in Chicago, the Party’s espionage operations have targeted some of the city’s top companies for over a decade, from financial companies like the Chicago Mercantile Exchange, to manufacturers like subsidiaries of Caterpillar Inc.

Beyond the aerospace industry, as given in the case above, U.S. officials have warned that the CCP regime is intent in acquiring advanced transport technology on subways, passenger rail, and freight trains.

On July 11, the Justice Department issued a news release alleging that Xudong Yao, 57, a Chinese software engineer at a locomotive manufacturer in suburban Chicago, was suspected of having stolen trade secrets from the company and taken them to China. He was charged with nine counts of stealing trade secrets.

Yao was born in China and became a naturalized U.S. citizen, according to the press release and an FBI wanted poster.

The indictment shows that Yao began working for the locomotive manufacturer in August 2014 and, within two weeks of his employment, allegedly downloaded more than 3,000 unique electronic files related to the company’s locomotive operating system. Over the next six months, Yao downloaded a number of electronic files containing other trade secrets, including technical documents and software code.

According to the indictment, Yao flew from China to Chicago’s O’Hare International Airport on Nov. 18, 2015. He was suspected of having taken the stolen information, including nine complete copies of the Chicago manufacturer’s control system source code and a system design manual explaining how the code works, before returning to China.

In 2015, naturalized U.S. citizen Chunlai Yang pleaded guilty to stealing trade secrets from the Chicago Mercantile Exchange (CME), where he worked as a senior software engineer. He was sentenced to four years’ probation.

Court records show that Yang was accused of downloading more than 10,000 source code files from CME’s internal system and planning to set up his own financial trading company, Tongmei Futures Exchange Software Technology in China, according to Chicago Tribune’s report. The company was tasked with increasing trading volume on an electronic exchange controlled by the Chinese regime.

In Yang’s ruling, federal prosecutor Barry Jonas told the judge that Yang sought to transfer CME’s proprietary software to multiple financial exchanges in China.

“We’re talking about a country here who has a reputation, who it’s commonly known, they’re into economic espionage, especially reaching into the United States,” Jonas said, according to court records. “Economic espionage, computer intrusion, these are cybercrimes. These are the crimes of the future that are just growing leaps and bounds in society, and they have a direct negative impact on the U.S. economy, both commercially, as well as national security.”

Not all spies in the Chicago area recruited by the CCP’s intelligence apparatus are mainland Chinese. In 2009, a chemist from Taiwan was charged with stealing the formulas for 160 paints and colors from his employer, Valspar. The suspect, a naturalized U.S. citizen, planned to take the formulas to China and turn them over to a rival company, where he would be given a position. However, the FBI arrested him before he boarded his flight to Shanghai. He pled guilty to his charges.

The year prior, a Chinese woman working as a software engineer at Motorola was charged with stealing the company’s secrets and transferring them to a Chinese telecommunications company that developed products for the Chinese People’s Liberation Army (PLA). Hanjuan Jin was arrested on Feb. 28, 2007, when customs officers at Chicago’s O’Hare International Airport spotted the Motorola documents along with more than $30,000 in cash as she attempted to leave for China.

U.S. prosecutors working on Jin’s case held it up as an example of how, in addition to specialized operatives, the Chinese regime makes use of many untrained individuals residing in the United States and their contacts in order to steal technology and other industrial secrets.

‘China Initiative’ to Counter a Longstanding Threat

According to Marc Raimondi, a spokesman for the Justice Department, the People’s Republic of China is the culprit behind the majority of cases involving theft of economic or trade secrets. It was “important to note that there is a nexus to the Chinese Government in 80% of our economic espionage cases and over 60% of our trade secret theft cases,” Raimondi wrote in an email to Chicago Tribune.

In addition to recruiting businessmen and students like Ji Chaoqun to gain access to American technology, the CCP has also used recruitment programs like the “Thousand Talents Program” to attract overseas high-tech workers to work in China, which has caught the attention of the FBI.

Robert Grant, the former director of the FBI’s Chicago office, said that the CCP indoctrinates the Chinese people to think it is “the duty and responsibility of citizens” to help develop the economy and military of the People’s Republic.

“Every person in China is incentivized to collect intelligence, from waiters to 19-year-old college students studying in the United States,” Grant said.

Ji Chaoqun’s case marks an area of growing concern for U.S. authorities: the CCP government’s complex and long-term operation to have spies and foreign agents steal innovative ideas and technology from foreign companies and defense contractors.

Partially in response to the PRC’s rampant intellectual property theft, the Trump administration imposed a series of tariffs on Chinese goods starting last spring. In fall 2018, a few weeks after Ji’s case came to light, the Trump administration launched a China Initiative to combat economic theft.

The Initiative seeks to identify and deal with priority trade secret cases; develop enforcement strategies to address problems of researchers in laboratories, defense industries, and universities who may be persuaded by the CCP to transfer technology illegally to the PRC. The China Initiative also aims to educate American colleges and universities about the potential threats.

John Demers, Assistant Attorney General of the National Security Division and head of the China Initiative, told the Chicago Tribune that theft and economic espionage by the Chinese regime have cost investors money and put Americans out of work.

“China is the number one intelligence threat to the U.S. right now,” Demers said. “On the economic side … it’s far and away the number one threat to the U.S. in terms of theft of intellectual property.”

This article first appeared in the October 2019 issue of Truth China, a magazine published by the Chinese-language edition of The Epoch Times.

2019-10-21T17:30:13-05:00

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