August 2008

The new spies

...From New York and London to Moscow and Beijing, any decent-sized corporation can now hire former agents from the CIA, FBI, MI5, MI6 and the KGB. The ex-spooks are selling their old skills and contacts to multinationals, hedge funds and oligarchs, digging up dirt on competitors, uncovering the secrets of boardroom rivals and exposing investment targets. They are also keeping tabs on journalists, protesters and even potential employees…In 2007, the parent company of the US private military firm Blackwater, which hit the headlines for gunning down Iraqi civilians in Baghdad last September, entered this market through Total Intelligence Solutions (TIS), a new CIA-type private operation, to provide intelligence services to commercial clients. Blackwater's vice-chairman, J Cofer Black, who runs TIS, spent three decades in the CIA and the state department, becoming director of the Counterterrorist Centre and co-ordinator for counter terrorism, a job with ambassadorial rank. He describes the new company as bringing "the intelligence-gathering methodology and analytical skills traditionally honed by CIA operatives directly to the boardroom. With a service like this, CEOs and their security personnel will be able to respond to threats quickly and confidently - whether it's determining which city is safest to open a new plant in or working to keep employees out of harm's way after a terrorist attack." Black also says TIS will operate a "24/7 intelligence fusion and warning centre" that will monitor civil unrest, terrorism, economic stability, environmental and health concerns, and information technology security around the world……(New Statesman, 7 Aug 08)

E-Mail Hacking Case Could Redefine Online Privacy

A federal appeals court in California is reviewing a lower court's definition of "interception" in the digital age, in a case that some legal experts say could weaken consumer privacy protections online. The case, Bunnell v. Motion Picture Association of America, involves a hacker who in 2005 broke into a file-sharing company's server and obtained copies of company e-mails as they were being transmitted. He then e-mailed 34 pages of the documents to an MPAA executive, who paid the hacker $15,000 for the job, according to court documents.  The issue boils down to the judicial definition of an intercept in the electronic age, in which packets of data move from server to server, alighting for milliseconds before speeding onward……(Washington Post, 6 Aug 08)

July 2008

Dad-of-two accused of Gulf spying

A Staines dad-of-two has been kept in solitary confinement in Qatar for the past month after being accused of spying.  Ian Heywood, a former British Airways executive, is fighting to return to Britain after being held for nearly a month in the Middle East on suspicion of industrial espionage.  Mr Heywood, 47, who worked for Qatar Airways but was headhunted by BMI, was seized by police at Doha airport in the Gulf state on May 1.  He was released on bail on May 25 after being held at an unknown location…..(This is Local London, 31 Jul 08)

The perils of e-mail: Ponder, then click

…In 2002, the Pew Internet and American Life project reported that 10 percent of so-called "work e-mailers" had accidentally sent an embarrassing e-mail to the wrong person at work. By the time The Marlin Co. released its annual Attitudes in the American Workplace study in 2007, that percentage had doubled… Of course, merely embarrassing yourself isn't the worst possible scenario. Take the case of Caryn Camp and Stephen Martin, two of the first casualties of the Economic Espionage Act of 1996. Back in 1998, Camp worked for IDEXX Laboratories Inc., a leading manufacturer of veterinary diagnostics products. On the market for a new job, she e-mailed her resume to Martin, owner of several companies that competed with IDEXX. Camp planned to leave IDEXX to work for Martin, and soon the e-mails escalated into an exchange of proprietary information in anticipation of that move. That is, until Camp composed an e-mail whose contents she predicted would make Martin "feel like a kid on Christmas Day" - and mistakenly sent it to IDEXX's head of global marketing. After IDEXX notified the U.S. attorney, Camp and Martin were tried and convicted of conspiring to steal IDEXX trade secrets……(Olympian, 30 Jul 08)

British airline exec held in Qatar on spy charges

The future of Ian Heywood, prominent airline executive and recently appointed Director of airline BMI, remains unclear as he attempts to return to Britain after solitary detention in Qatar. The former British Airways executive has been detained in the Middle East on suspicion of industrial espionage, with his family only recently discovering his whereabouts. For three weeks he was held in an unknown location, without any information delivered home.

Heywood was arrested in Doha, where he was establishing his notice period as VP of Global Sales and Distribution for Qatar Airways, following his acceptance of directorship at BMI…..(eTravel Blackboard, 30 Jul 08)

U.S. Lawyer Goes on Trial In Belarus For Spying

A U.S. lawyer went on trial behind closed doors in Belarus on Thursday charged with carrying forged documents, drug offences and industrial espionage -- offences that could carry up to seven years in prison. Emmanuel Zeltser, a New York-based specialist in Russian law and organized crime, was arrested in March at the height of a diplomatic row between ex-Soviet Belarus and the United States. He was initially charged with using forged documents, and the other accusations were added subsequently… Zeltser was born in Russia but emigrated to the United States. He is a director of the American Russian Law Institute, which promotes legal reform in Russia.

He traveled to Belarus to represent the interests of Josef Kay, a relative of the late Georgian businessman Badri Patarkatsishvili…..(Reuters, 30 Jul 08)

Oracle alleges SAP of embraced corporate espionage

RISING RANCOR: Oracle Corp. expanded its allegations of corporate espionage against rival SAP AG Monday in the latest volley of documents filed in a 16-month-old lawsuit. THE ACCUSATION: Based on SAP's internal documents obtained during the suit's evidence-gathering phase, Oracle alleges that SAP's top executives knowingly bought and then embraced an illegal operation set up to steal Oracle's products and customers….(AP, 28 Jul 08)

Airline executive free on bail in Qatar

A former British Airways executive who was held in the Middle East nation of Qatar for alleged industrial espionage is free on bail. Ian Heywood, 47, was kept in solitary confinement for 25 days after being arrested…Heywood, who worked for British Airways for 26 years, joined Qatar Airways in May last year as vice president of global sales and distribution. He was then recruited by rival British airline. "This all started with a commercial dispute that probably has something to do with him leaving Qatar Airways," said Tory Philip Hammond. "The next thing, he was being accused of taking secret information from Qatar Airways with him…..(UPI, 27 Jul 08)

British airline boss is locked in solitary for 25 days after arrest for 'spying' in Middle East

A former British Airways executive was kept in solitary confinement for 25 days after being arrested in the Middle East for alleged industrial espionage. Ian Heywood, 47, was heading off for a weekend break in Bahrain with a group of colleagues when he was seized by police as he was about to board a flight at Doha airport in the Gulf state of Qatar. He was taken to an unknown location – thought to have been a police station – where he was detained in a cell for nearly a month. Last night the Foreign Office in London admitted that Qatari officials had verbally confirmed his arrest to them after eight days…..(Daily Mail, 27 Jul 08)

Boss of BP Russia venture leaves

BP has said the chief executive of its Russian joint venture TNK-BP has temporarily left Russia because of "sustained harassment". Robert Dudley will run the company from outside the country and BP said that TNK-BP would operate as normal. This year TNK-BP has faced lawsuits, visa rows and industrial spying claims, as well as arguments over investment and the future role of Mr. Dudley. The Russian shareholders said the claims of harassment were "insulting". They reiterated their call for a new chief executive. (BBC, 24 July 08)

Second case of 'secrets-for-profit' alleged at Motorola

A former top executive of Schaumburg-based Motorola is being sued by the communications giant, which is accusing him of disclosing trade secrets to aid his current employer Apple Inc. Michael Fenger was a vice president for its mobile-device business in Europe, the Middle East and Africa, a position he left about 6 months ago. According to a lawsuit filed against him in Cook County Circuit Court, Fenger is now Apple's vice president for global iPhone sales. The Fenger case comes on the heels of spy allegations against a former Motorola software engineer, 37-year old Hanjuan Jin…In the current case, Fenger was "privy to the pricing, margins, customer initiatives, allocation of resources, product development, multiyear-product, business and talent planning, and strategies being used by Motorola," according to the complaint filed in Chicago late Thursday. Fenger's employment by Apple allegedly violates his written agreement not to work for a competitor for at least two years after leaving Motorola. Motorola is asking the court to prevent Fenger from working for Apple for two years…The other case, that of Hanjuan Jin, is a criminal court matter and has yet to go to trial. Jin is a Chinese-born American citizen and graduate of the Illinois Institute of Technology. She had been working at Motorola headquarters in Schaumburg since 1998. According to a federal indictment handed up in April, Jin agreed to work for a Chinese tech company that allegedly recruited her to steal Motorola secrets. Federal agents arrested her at O'Hare airport about to board a plane for Beijing and carrying an estimated $600 million in company secrets…..(ABC, 21 Jul 08)

Belarusian court to try U.S. lawyer Zeltser on July 30

The trial in Belarus of Emanuel Zeltser, a U.S. citizen charged with industrial espionage and drug smuggling, will start on July 30, the suspect's lawyer said Monday. "The start of the trial is set for July 30. The process is expected to be held behind closed doors," Dmitry Goryachko said. Soviet-born lawyer and financial expert Emanuel Zeltser was detained by the Belarusian security services along with his secretary on arrival in Belarus on March 12, and accused of using forged documents. In late May, Zeltser was officially charged with drug smuggling and possession, and later with industrial spying. (RIA Novosti, 21 July 08)

Beijing's red spider's web

The fall of the Soviet Union and the end of the Cold War had a profound impact not only on how security and intelligence professionals viewed the world of espionage but also on the motivations of the players and the targets of their espionage activities. Global rivalries centered on technology development and intellectual capital replaced the old divides of East versus West and communism versus capitalism as the primary driver of the new espionage war; in this globalized competitive economy the battlefield has widened to include private companies and corporate spies. During the height of the Cold War, no other nation could match the desire and ability of the Soviet Union's KGB to steal American corporate and military secrets, particularly technology secrets. That has since changed, however. In today's information age, the People's Republic of China (PRC) has replaced and even improved on the KGB methods of industrial espionage to the point that the PRC now presents one of the most capable threats to US technology leadership and by extension its national security……(Asia Times, 21 Jul 08)

Italian prosecutors accuse top firms in spy case: reports

Italian prosecutors have accused two of the country's top firms, Telecom Italia and its former leading shareholder Pirelli, of lack of oversight in connection with a huge spying scandal, the companies confirmed Saturday. Some 34 suspects have been targeted by Milan prosecutors following inquiries launched two years ago into an extensive wire-tapping system, according to the ANSA news agency. They include a former head of security at the two firms, Giuliano Tavaroli, but not former Telecom Italia boss Marco Tronchetti Porvera, as the prosecutor did not believe there was evidence that he knew about the spying……(AFP, 20 Jul 08)

California Firm Sentenced While Search for Its Fugitive Vice President Continues in Arms Export Case   

Air Shunt Instruments Inc., a California aircraft components company, has been sentenced to pay a criminal fine of $250,000 for false statements related to an export of military technology, while agents intensify their search for the company’s Vice President for International Sales, who is a fugitive and has been indicted for numerous illegal exports of military items to the United Arab Emirates and Thailand… On July 15, a federal judge in the Central District of California accepted a felony guilty plea and sentenced Air Shunt, based in Chatsworth, Calif., to a criminal fine of $250,000 and a special assessment of $400 for making false statements on Shipper's Export Declaration in claiming that a military item being shipped overseas did not require an export license, when in fact the item required such a license…The Statement of Facts filed with the court states that John Nakkashian, a Vice President at Air Shunt, was responsible for international sales and for obtaining all required licenses for such sales at the company. The court documents further allege that Nakkashian knew it was illegal for defense articles covered by the USML to be exported without first obtaining an export license from the Department of State. During the investigation of Air Shunt, Nakkashian fled the United States and is believed to be overseas today……(DOJ, 17 Jul 08)

Calif. exec charged with illegal military sales

A former sales executive for an aircraft parts company is on the run after being charged with illegally sending military items to the United Arab Emirates and Thailand, prosecutors said Thursday.

John Nakkashian, former vice president for international sales at Air Shunt Instruments Inc., has been indicted on four counts of violating the Arms Export Control Act, according to the U.S. attorney's office. Officials said he vanished during the investigation in 2007 and was charged in May.

Prosecutors allege Nakkashian in 2003 and 2004 exported components for the F-5 fighter jet to Dubai and a gyroscope used on military helicopters to Bangkok without first obtaining the required export licenses from the U.S. State Department……(AP, 18 Jul 08)

French Journalist Charged In Renault Spying Case

A French journalist was charged Thursday for publishing photographs in a magazine of a new Renault SA (13190.FR) car model after the automaker filed suit for industrial espionage, a judicial source said.
Bruno Thomas, 45, who works for the magazine Auto Plus, is accused of breach of trust, revealing manufacturing secrets and other charges in the case that dates back to last year. Auto Plus ran a story and unpublished photos of a car model that was to be launched by Renault in three years, prompting the French carmaker to take legal action in July 2007. Thomas was held for questioning Tuesday as police searched the magazine's offices in Paris, seizing computer hard discs and photos…..(AFP, 17 Jul 08)

Police Raid French Auto Magazine in Renault Industrial Espionage Investigation

The French auto enthusiast magazine Auto Plus was raided by police Tuesday, and a journalist on the staff is in custody and being questioned on charges of industrial espionage. The case involves the magazine's publication on several occasions of secret photos and information about future Renault models. For example, in May, the weekly publication ran a major story with photos about the Mégane III, which had been slated for a 2008 Paris Auto Show unveiling.  Bruno Thomas, who is in charge of new-model reporting for the weekly publication, was taken in for questioning by the police, who were accompanied by a judge handling Renault's complaint. The publication's Web site said on Wednesday, "We have not heard from our journalist and have not been given a summary of what he could be charged with."…..(Edmunds, 17 Jul 08)

Magazine raided in Renault espionage case

French police on Tuesday questioned a journalist from specialized magazine Auto Plus and confiscated computers and photographs as part of an investigation into an industrial espionage complaint filed by Renault. The French carmaker filed an industrial espionage complaint in July 2007 after Auto Plus published photos of an as-yet unreleased model. A Renault spokesman would not confirm which confidential photos triggered last year's complaint……(Automotive News, 16 Jul 08)

You've Got Mail -- and Security Breaches

Some intellectual property, such as corporate financial reports, is intended to be in certain e-mails. But other intellectual property, including complete e-mail threads, draft documents, and other private information, is not meant to leave a company's premises… There are several steps companies can take to ensure the integrity of their e-mails, though e-mail experts contend that no method or combination of methods is entirely foolproof. One of the biggest concerns for enterprises is e-mail that falls into the wrong hands, according to Nigel Johnson, VP for product management for Zix Corp., which provides an e-mail gateway service. Not only are there corporate espionage concerns, Johnson says, there are also issues of privacy -- as in the anchor's e-mails mentioned earlier -- and regulatory compliance in terms of distribution and retention…..(CIO Today, 16 Jul 08)

French Journalist Questioned In Renault Spying Case

French police Tuesday questioned a journalist and searched the offices of an automobile magazine after Renault SA (13190.FR) lodged a complaint for industrial espionage, a source close to the case said. The magazine Auto Plus has published over the past months several photographs of car models being developed by automaker Renault. Dozens of police officers seized computers, hard discs and photographs during a search at the magazine's offices in Paris, said chief editor Laurent Chiapello.….(AFP, 15 Jul 08)

Sweden: Man remanded in Saab spying case

A Swedish court has remanded a 48-year-old man suspected of industrial espionage against Swedish space and defense company Saab AB. Prosecutor Tomas Lindstrand is not immediately available for comment, but Swedish news agency TT says the suspect is being detained on suspicion of industrial espionage, unauthorized trade with secret information, and attempted extortion…The man is accused of having gained illegal access to documents regarding the operations of Saab's radar systems unit, Saab Microwave Systems……(AP, 12 Jul 08)

Man arrested for spying on Swedish defense group Saab AB

Police have arrested a 48-year-old man on suspicion of industrial espionage against Swedish space and defense company Saab AB, the company said Friday. Prosecutor Tomas Lindstrand also has sought an order from the Goteborg District Court to hold the suspect pending investigation and possible indictment. According to documents filed by Lindstrand with the court, the man is accused of industrial espionage, unauthorized trade with secret information, and attempted extortion over a period of more than eight months… A statement from Saab said the suspect was arrested in Goteborg on Thursday for illegally having "gained access to documents regarding the operations" of its radar systems unit, Saab Microwave Systems……(AP, 11 Jul 08)

TNK-BP faces fresh inquiry by Russian taxman

The investigations are part of a wave of regulatory pressure that has swept over TNK-BP since the dispute with the four Russian billionaires, who control 50 per cent of the company, began. The joint venture's Moscow headquarters were raided by the Federal Security Service in March after an employee was charged with industrial espionage. TNK-BP has also been the target of three labour inspections and a tax investigation. (Times Online, 9 July 08)

Ex-HP exec won't contest trade-secret theft charges

A former Hewlett-Packard executive has agreed not to contest federal charges that he stole trade secrets from his previous employer, IBM, and attempted to pass the information to colleagues at HP. Atul Malhotra was a vice president for printing services at IBM when he obtained confidential pricing information in March 2006, according to charges filed Friday in San Jose's U.S. District Court. Prosecutors said Malhotra went to work for HP's printing division that May, and in July 2006, he sent e-mails to other HP executives with the confidential IBM information, marked "for your eyes only."…..(Mercury News, 2 Jul 08)

Feds obtain spyware records in Tony Trout investigation

The maker of Remote Spy software has turned over a CD to federal investigators in connection with their investigation of county Councilman Tony Trout’s alleged use of spyware on the county administrator’s computer, according to federal court documents obtained by GreenvilleOnline.com. An FBI agent sought a search warrant because he said there was "probable cause to believe" that the software maker had evidence of the crime of intentionally accessing a protected computer without authorization and obtaining information from a computer using "interstate or international communication," according to the agent’s affidavit…..(Greenville Online, 1 Jul 08)

June 2008

KGB accused US citizens Joseph Kay and Emanuel Zeltser of “economic espionage”

The KGB investigatory department instituted a criminal case against US citizen Joseph Kay over an article “economic espionage”… As Interfax learnt from the KGB Center of Information and Public Relations, Emanuel Zeltser is accused of coming crimes over part 2 of article 380 (using fake documents, giving rights, by a group of people by previous concert), part 2 of article 228 (narcotic substances smuggling), part 1 of article 328 (trafficking of narcotics, psychotropic substances and precursors), and part 1 of article 254 (commercial espionage) of the Criminal Code of Belarus.  Moreover, as the agency has learnt, detained with Zeltser Russia’s citizen Vladlena Bruskova was charged with committing of crimes over part 2 of article 380 (using fake documents, giving rights, by a group of people by previous concert) and part 1 of article 254 (commercial espionage) of the Criminal Code of Belarus.  The KGB investigatory department also instigated a criminal case against US citizen Joseph Kay on the facts provided by part 1 of article 254 (commercial espionage) of the Criminal Code of Belarus, the KGB press service informs…..(Charter 97, 27 Jun 08)

Foreign Spies Infiltrating US Businesses

The foreign intelligence threat within the United States is far more complex than it has ever been historically. The threat is increasingly asymmetrical insofar as it comes not only from traditional foreign intelligence services but also from nontraditional, non-state actors who operate from decentralized organizations.  Intelligence collection is no longer limited to classified national defense information but now includes targeting of the elements of national power, including our national economic interests. Moreover, foreign intelligence tradecraft is increasingly sophisticated and takes full advantage of advances in communications security and the general openness of US society…..(American Chronicle, 25 Jun 09)

Woman accused of spying for China at Motorola

A Chinese spy was caught "red-handed," according to federal authorities, as she was about to board a plane at O'Hare bound for Beijing. Hanjuan Jin says she worked as a computer engineer for Schaumburg-based Motorola, a global leader in communications technology. Federal agents say Jin was also working as a spy for a Chinese company, and she has been charged in a corporate espionage case that reflects a growing national security problem.....On its Web site, Motorola touts the company's internal security but declined an invitation from the I-Team to explain how an employee just off medical leave could nearly board a plane to Beijing with $600 million in corporate secrets. That is Motorola's own estimate quoted by the FBI........(ABC/WLS-TV News Chicago, 25 Jun 08)  VIDEO

Corporate Espionage Detailed in Documents

They scavenged through trash and tailed people for hours. They used undercover operatives to infiltrate private meetings. The targets were not agents of foreign powers but advocacy groups that had been critical of corporations. In the 1990s, a Maryland-based private detective agency composed of former CIA agents and law enforcement officers spied on such activist groups as Greenpeace, the firm's records show…Beckett Brown International, which was founded in 1995, disbanded in 2000, and the activists might never have learned they were spied on. But a disgruntled BBI investor began digging through company records two years ago and has been contacting the former targets. He also gave The Washington Post access to the records, which provide an unusually.....(Washington Post, 21 Jun 08)

Warrant seeks spyware records, prosecutor says; firm cooperating, official says

Federal investigators are looking for records from the Florida-based maker of Remote Spy software related to County Councilman Tony Trout’s accounts allegedly used to access the county administrator’s computer, First Assistant U.S. Attorney Kevin McDonald said Thursday.  McDonald said an affidavit by an FBI agent supporting a federal search warrant states that a Remote Spy logo appeared on documents already obtained in the federal investigation. The affidavit chronicles the investigation to date, including Trout’s alleged statements to the media, he said…..(Greenville Online, 19 Jun 08)

Economic Espionage, Military Source Code, Sentencing

Xiaodong Sheldon Meng, 44, a software engineer born in China and currently a resident of Cupertino, Calif., was sentenced today to a term of 24 months by the Honorable Jeremy Fogel, U.S. District Court Judge in San Jose and was also ordered to serve a three-year term of supervised release following his prison term; pay a fine of $10,000, and forfeit computer equipment seized in the case…On August 1, 2007, Meng pleaded guilty to two national security violations: one count of violating the Economic Espionage Act and one count of violating the Arms Export Control Act and the International Traffic in Arms Regulations. Meng’s conviction was the first involving military source code under the Arms Export Control Act and marked the second case in which there was a conviction under the Economic Espionage Act for misappropriating a trade secret with the intent to benefit a foreign government. According to court records, Meng committed economic espionage by misappropriating a trade secret, known as "Mantis 1.5.5," from his former employer, Quantum3D Inc., with the intent to benefit a foreign government, specifically the People’s Republic of China (PRC) Navy Research Center in Beijing… Defendant Meng was ordered to surrender for this prison term on August 18, 2008. He has been out of custody after a $500,000 bond, secured by cash and real property, was posted at the beginning of the case.…….(Technology News Daily, 19 Jun 08)

Russian Spies Go For The Money

A manager at Eurocopter recently received a suspended sentence after admitting he spied for Russian intelligence (SVR) between 2004-6. He received $20,000 from the Russians, and supplied them with unclassified documents. He received such lenient treatment because he cooperated with police, and that led to several other arrests, and severe damage to Russian spying operations in Germany…..(Strategy Page, 19 Jun 08)

Canadian Citizen Gets Two Years in Night-Vision Espionage Case

This summer, we could see several people of Chinese descent prosecuted in the U.S. for economic espionage. Yesterday, district judge Jeremy Fogel became the first judge to sentence a defendant convicted under economic espionage laws since Congress passed them in the 90’s. Xiaodong Sheldon Meng received 24-months, the maximum under a plea deal in which he reportedly admitted to possessing night vision software for pilots, and using the software to benefit the Chinese Navy. According to The Recorder and the AP, here’s what happened: Meng, 44, a Canadian citizen, left software company Quantum3D in 2004 to work for Orad, an Israeli competitor. However, Meng allegedly kept some of Quantum3D’s trade secrets on his computer, including a software program called Mantis which he then used in a demonstration to Chinese naval officials. Meng reportedly altered Quantum3D’s brand to make it seem like the software secrets regarding the space shuttle, a military transport plane and a rocket belonged to Orad…According to the AP, two other Silicon Valley engineers — a U.S. citizen from China, and a permanent resident of the U.S. from China — have pleaded guilty to economic espionage for stealing microchip blueprints from their employers and attempting to smuggle them to China. Their sentencing is set June 23. In a separate case, two other Silicon Valley engineers of Chinese descent were indicted in September on charges they stole chip designs and tried to launch a microprocessor startup with a Chinese VC firm. Their trial hasn’t been set…….(Wall Street Journal, 19 Jun 08)

Engineer jailed for theft of U.S. secrets

…Mr. Meng, who held Canadian citizenship and had two degrees from McGill University, had just arrived in the United States from China to attend an event that only a computer geek could love: the Interservice Industry Training, Simulation and Education Conference. Unknown to Mr. Meng, he was also delivering himself into the hands of the FBI, who had spent months on a high-tech investigation that led from California to China. And now the FBI had the smoking gun: On Mr. Meng's laptop and hard drive were thousands of files that officers said proved he had stolen advanced military technology from his former U.S. employer and taken them to China, the world's newest superpower…..(Globe & Mail, 19 Jun 08)

Judge Takes Hard Line in First Economic Espionage Sentence

…Xiaodong Sheldon Meng, 44, was hit with a 24-month sentence, the maximum under a plea deal in which he admitted possessing night vision software for pilots, material that belonged to Quantum3D, a San Jose, Calif., company. He then used that software to benefit the Chinese government. Meng also admitted breaking American arms export-control laws. With the hearing Wednesday in San Jose, Fogel became the first judge in the country to sentence a defendant convicted under economic espionage statutes since Congress passed them in the 1990s…..(Law, 19 Jun 08)

Salesman gets 2 years for industrial spying

Xiaodong Sheldon Meng, 44, now a Canadian citizen, is the first person to be sentenced under a 1996 economic espionage law designed to prevent trade secrets from being handed over to foreign powers. The prison term was the maximum that prosecutors said they would seek after Meng pleaded guilty in August in U.S. District Court in San Jose to one count of violating the Economic Espionage Act and one count of violating the Arms Export Control Act. Thirty-four other counts he had faced were dropped……(SF Chronicle, 19 Jun 08)

China’s Secret War

Cyber warfare officially arrived on Capitol Hill last week. Two Republican congressmen, Rep. Frank Wolf of Virginia and Rep. Christopher Smith of New Jersey, went public last Wednesday with the news that in 2006 and 2007 their office computer networks had been breached by Chinese hackers… China’s largest cyber-raid in the United States occurred in 2004. The assault was so massive that American security authorities gave it a code name, “Titan Rain.”… to the biggest Chinese espionage program directed against the United States and the West. It is known as the “thousand grains of sand” strategy. In this approach, the agents are all amateurs. They consist of Chinese who are either going overseas, such as students, or those who already live abroad… By some estimates, the “thousand grains of sand” program involves 100,000 people – a testament both to the importance that China attaches to the program as well as to its extent. And it has been going on for a long time. “For nearly two decades, Beijing has mobilized the Chinese-American community to penetrate US military corporations that are working on defense contracts,”…….(FrontPage, 19 Jun 08)

Engineer is first sentenced for economic espionage

…Meng left the courthouse without commenting to reporters. Released on a $500,000 bond, he has until August 18 to begin serving his sentence. Prosecutors described him as a low flight risk. Two other Silicon Valley engineers — Fei Ye, a U.S. citizen from China, and Ming Zhong, a permanent resident of the U.S. from China — have pleaded guilty of economic espionage for stealing microchip blueprints from their employers and attempting to smuggle them to China. Their sentencing is set June 23. In a separate case, Silicon Valley engineers Lan Lee and Yuefei Ge were indicted in September on charge they stole chip designs and tried to launch a microprocessor startup with a Chinese venture capital firm. Their trial hasn‘t been set. In Southern California, Chinese-American engineer Dongfan "Greg" Chung, who worked at Boeing Co. and space shuttle-builder Rockwell International, has pleaded not guilty of charges he stole secrets regarding the space shuttle, a military transport plane and a rocket on behalf of China……(AP, 18 Jun 08)

US links India with arms conspiracy 

In a shocking case of international espionage involving arms, the US has linked India with an arms conspiracy claiming that the Indian government agencies have  conspired with Sudarshan Parthasarathy, CEO of Cirrus Electronics, to obtain secret weapons technology for its missile program. However, the Indian embassy in Washington, has denied this by saying that Cirrus Electronics, Singapore had responded to the requirement of Indian organizations through a transparent, public and open tendering process. The CEO of Cirrus Electronics, Parthasarathy Sudarshan is said to have hatched this conspiracy. Cirrus Electronics has offices in Simpsonville, South Carolina, Singapore, and Bangalore, India. Forty-seven year old Sudarshan was sentenced to 35 months in jail and slapped a USD 60,000 fine by a US court for shipping restricted military technology to Indian government entities engaged in missiles and fighter jet production and space program…..(Times Now, 17 Jun 08)

DOJ Press Release: Businessman Parthasarathy Sudarshan Sentenced for Supplying Indian Government with Controlled Technology  

German Convicted of Spying for Russia

A former engineer with the German Eurocopter company has been convicted by a Munich court of committing industrial espionage for Russia. He was sentenced to an 11-month suspended prison sentence. The court ruled that there was sufficient evidence to show that 44-year-old Werner G. had provided information on civilian Eurocopter helicopters to Russian special services in the course of two years. The defendant was not involved in military espionage, however. The punishment for military spying is much more severe. According to the accusations against him, Werner G. gave secret documents to representatives of the Russian Foreign Intelligence Service between 2004 and 2006 in exchange for €13,000. His defense argued that Werner G. provided comparatively insignificant information on technical details of the German civilian helicopters…….(Kommersant, 17 Jun 08)

3 indicted for stealing list of high rollers

A high-level casino marketing executive and two former colleagues were indicted on charges they stole a list of more than 20,000 top gamblers from the Tropicana Hotel and Casino, said Attorney General Anne Milgram and Criminal Justice Director Gregory Paw. John Conklin, 47, of Galloway, vice president of relationship marketing at the Borgata Hotel and Casino, Justin Litterelle, 26, of Las Vegas and James DiMarco, 59, of Ocean City, were charged with second-degree counts of theft by unlawful taking, computer theft, and conspiracy. In addition, Conklin and Litterelle were charged with second-degree receiving stolen property, and DiMarco was charged with second-degree attempted receiving stolen property. Conklin also was charged with witness tampering, a third-degree offense. The list of top-level casino patrons - including addresses, phone numbers and ratings - was proprietary information of the Tropicana that had an assessed value of more than $108 million….(Star-Ledger, 16 Jun 08)

German engineer sold helicopter secrets to Russia

A Munich court sentenced a German engineer to 11 months probation on Monday for passing industrial secrets from helicopter maker Eurocopter to the Russian secret service. The court said there was sufficient evidence to show that the 44-year-old engineer, who admitted passing on information, had provided the Russian foreign intelligence agency with details about the helicopters for more than two years. However, the judge ruled that the accused, named only as Werner G., had not crossed the line into military espionage which would have led to a tougher sentence. The case has highlighted growing worries about Russian industrial espionage activity which Germans worry could hurt business in Europe's biggest economy…..(Reuter, 16 Jun 08)

Algeria subject to economic espionage

All participants in the international conference on Institution Governance and Economic Intelligence held in UFC University in Algiers agreed on the fact that economic intelligence issue is not clear in Algeria.  The director of Human Skills Development Institute, expert Mohamed Bahloul said the strategic concept of homeland security is no more restricted to the military circle, as economy has become, nowadays, a paramount factor in terms of security effort. Bahloul further mentioned that economic espionage has become a reality, while stressing that information and economic security are the cornerstone of national defense system….(El Khabar, 15 Jun 08)

Dam Data Leakage at Source

…Losing data damages a company's reputation, puts them in breach of the Data Protection Act and may by very costly, including the possibility of being fined. If sensitive information, such as financial details, is lost, it may leave customers or staff exposed to identify theft. Currently, the protection of data is mainly inadequate. Because of the rapidly changing structure of computer networks, companies should review the way they protect the security of data. The highest risk areas for losing data are through email, through remote access and through laptop use…….(Compliance and Privacy, 12 Jun 08)

Eurocopter Engineer Confessed to Spying for Russia

Ex-engineer of the German company Eurocopter has confessed to industrial spying for Russia. The 44-year-old German citizen acknowledged the facts of selling technical information about civil Eurocopter helicopters to Russian special services. Next week the court will render a verdict. According to the prosecutors, in 2004-2006 the Eurocopter's ex-worker several times forwarded secret documentation to a representative of the Foreign Intelligence Service of the RF on the territory of Germany, Austria and Croatia and received 13.000 EUR for his “help”.  The defence claims that the engineer gave Russia only considerably unimportant information about technical details of the German civil helicopters….(Russia IC, 12 Jun 08)

Finnish state and armaments industry targeted by online espionage

Viruses sent in e-mails from Chinese server. The Finnish state and companies operating in the weapons industry have been targeted by online espionage.  The snooping has involved concentrated attacks, in which one or more employees have been sent an e-mail message containing a computer virus, which has allowed the attacker to use the Internet connection to download information that the employee has access to from the infected computer. The virus has also given the cyber-spies access to networks protected by passwords…..(Helsingin Sanomat,  11 Jun 08)

Targets of Spying Get Smart

Tiny electronic-surveillance gadgets that James Bond could only dream of are increasingly turning up in boardrooms, bedrooms and bathrooms.  Crooks are parking vans outside people's homes to steal bank-account passwords and credit-card numbers, using programs that tap into Wi-Fi connections. Paparazzi hide cameras and microphones in private jets, hoping to record embarrassing celebrity video. Corporate spies plant keystroke-recording software in executives' laptops and listen in on phone conversations as they travel…The growing availability and affordability of digital surveillance equipment -- even primitive stuff such as baby monitors -- has caused mounting worries about spying, Mr. Murray says. Devices "that used to be super-duper a few years ago are ordinary now," he says. "There was a time when you had to know somebody or pay a lot of money to get the equipment. Now you can get a wireless camera for under $100 -- tiny ones, too."  Indeed, for less than $350 at spy shops and over the Internet, snoops can purchase a GPS-tracking device that is smaller than a pack of matches and includes a microphone. But because many telephones and computers are tied into network servers these days, some of the greatest threats come from malicious software and hacker attacks that reroute phone calls and steal computer passwords….(Wall Street Journal, 11 Jun 08)

The Spy Who Loves Us: Pay no mind to the Mossad agent on the line

After Israeli spy Jonathan Pollard was sentenced to life in prison in 1986, the U.S. negotiated an understanding with Israel—a “gentlemen’s agreement” —stipulating that neither nation would thenceforth conduct espionage operations in the other’s territory without consent. But the agreement was a sham from the beginning… Two Israeli companies in particular—Amdocs and Comverse Infosys, both of which are headquartered in Israel—do significant business in the United States. Amdocs, which has contracts with the 25 largest telephone companies in the U.S. that together handle 90 percent of all calls made, logs all calls that go out and come in on the system. It does not record the conversations themselves, but the records provide patterns, referred to as “traffic analysis,” that can provide intelligence leads. In 1999, the National Security Agency warned that records of calls made in the United States were winding up in Israel. Amdocs also has an apparent relationship with some of the art students who were arrested in 2001. Several were provided with bond money by an Amdocs executive. Comverse Infosys provides wiretapping equipment to law enforcement throughout the United States and also has large contracts with the Israeli government, which reimburses up to 50 percent of the company’s research and development costs. Because equipment used to tap phones for law enforcement is integrated into the networks that phone companies operate, it cannot be detected. Phone calls are intercepted, recorded, stored, and transmitted to investigators by Comverse, which claims that it has to be “hands on” with its equipment to maintain the system. Many experts believe that it is relatively easy to create a so-called “back door” that permits the recording to be sent to a second party, unknown to the authorized law-enforcement recipient. And Comverse equipment has never been inspected by FBI or NSA experts to determine whether the information it collects can be leaked, reportedly because senior government managers block such inquiries……(American Conservative, 11 Jun 08)

Industrial Espionage at Eurocopter

As Ferrari racing fans are very aware these days, industrial espionage that goes far beyond the bounds of ethical competitive intelligence is alive and kicking. This is even more true in the aerospace industry, whose national security implications often feature national intelligence organizations undertaking industrial espionage – in some cases, even against allied countries. China is most frequently mentioned in this context, with good reason, but Russia and France have also built reputations in this area.

A recent case in Europe shines a brief light on some of these goings on – and on some classic techniques used in the field. Deutsche Welle reports that former Eurocopter executive “Werner G.” allegedly met with a Russian SVR intelligence agent several times between 2004 and 2006 in Germany, Austria and Croatia, handing over unclassified technical manuals, files and CD-ROMs in exchange for EUR 13,000 euros (about $20,500). In a modern twist, classic techniques like dead drops and visual signals were bypassed in favor of anonymous webmail accounts to arrange meetings…..(Defense Industry Daily, 10 Jun 08)

Arms-Control Group Tied to Kremlin Paid Wife of Weldon Aide

A former congressional aide admitted in court proceedings that his wife received unreported payments from an arms-control group with ties to top security officials in the Russian government, according to several people involved in an inquiry of a former congressman. The aide worked as chief of staff for former Rep. Curt Weldon, a Pennsylvania Republican. Rep. Weldon had sought a federal grant for the Russian organization, known as International Exchange Group, according to the people familiar with the inquiry. Rep. Weldon's former aide, Russell Caso, pleaded guilty in December to failing to disclose payments made to his wife, but the origin of the funds wasn't identified. Rep. Weldon is embroiled in a federal corruption probe that contributed to his loss in the 2006 election. The Weldon inquiry is significant in part because it is an element of a broader U.S. Justice Department probe into what officials suspect are efforts by Russian-backed firms to gain influence or gather information in Washington. Prosecutors also are looking into Mr. Weldon's involvement with a Russian-owned natural-gas company with alleged ties to organized crime. Attorney General Michael Mukasey in April said the government has reconvened its long-dormant federal Organized Crime Council to combat what he called a new "hybrid criminal problem" involving alliances between foreign intelligence agencies and criminal groups. In a speech before the Center for Strategic and International Studies in Washington on April 23, Mr. Mukasey said law-enforcement officials have "grave concern" about "so-called 'iron triangles' of corrupt business leaders, corrupt government officials and organized criminals."… The firm paid Mr. Caso's wife $19,000 for editing work, much of which wasn't performed, Mr. Caso admitted in his court statement, and he failed to disclose the payments as required by law. Mr. Caso is cooperating with the investigation, court filings state. Attorneys for Mr. Caso and Mr. Weldon declined to comment on International Exchange. International Exchange was founded by Vladimir Petrosyan, who claimed to have ties to the Kremlin, according to Louisiana lawyer Claude Kelly, who also was involved with the firm. Mr. Kelly said in an interview that Mr. Petrosyan introduced him to top Russian officials including Alexei Alexandrov, a member of the Russian Parliament. Mr. Petrosyan, who left the U.S. in 2006, couldn't be located for comment. In his 20 years in Congress, Rep. Weldon, who speaks Russian and made many trips to Russia, often sought to strengthen relations between the U.S. and Eastern Bloc nations. One person who dealt with Mr. Petrosyan said he used a business card with the House of Representatives seal that identified him as an adviser to Mr. Weldon.….(Wall Street Journal, 10 Jun 08)

German on trial for selling secrets to Russia

A German helicopter engineer has gone on trial in Munich charged with spying for Russia. Franz G.Werner, who worked for EADS's Eurocopter unit, is accused of selling industrial secrets to a Russian secret agent. According to German prosecutors, the mechanical engineer was paid 13,000 euros for documents, handbooks and other technical information. Werner admits giving data to the man but denies espionage. He said the helicopters were intended for export to Russia anyway and that he didn’t know he was divulging secret information…..(Russia Today, 10 Jun 08)

Eurocopter Engineer Admits Espionage

The trial of a former Eurocopter employee accused of spying for Russia began in Germany on Monday. According to investigators, the 44-year-old engineer, identified in the case as Werner Franz G., gave the Russian Foreign Intelligence Service secret documentation on the helicopters produced by Eurocopter. The suspect does not deny giving the Russian service the documents, but he denies that it constituted espionage, insisting that he gave out information only about civilian helicopters, the export of which to Russia is not prohibited. …..(Kommersant, 10 Jun 08)

German Eurocopter worker admits spying for Russia

A German engineer admitted at his espionage trial on Monday that he had passed information from the helicopter maker Eurocopter to the Russian secret service. Prosecutors say the 44-year-old Werner G. took documents from Eurocopter, a division of the European aerospace group EADS, and passed them to a Russian intelligence agent whom he met several times between 2004 and 2006 in Germany, Austria and Croatia… He said such technical documents were highly valuable because they could allow another manufacturer to save development costs and offer its own product at cheaper prices. Prosecutors say the defendant passed on manuals, files and CD-ROMs with technical details of various Eurocopter helicopters, and received some 13,000 euros ($20,500) in return…….(Reuters, 9 Jun 08)

Softscape Charges Espionage Attempt in Court Suit

With the Clinton-Obama fight over, Softscape and SuccessFactors (profile; site) have stepped up to fill the void with the two HR software companies in court for the second time this year. This time the allegations include claims of corporate espionage, unfair competition and interference with contract. The latest volley was fired today by Softscape, which claims in court papers filed in Massachusetts, where it is headquartered, that SuccessFactors hired its employees in order to learn company secrets, then used that information in the design of the latest release of its Performance and Talent Management Suite, ULTRA……(ERE, 5 Jun 08)

May 2008

FTC settles with investigators in HP spy scheme

The Federal Trade Commission said Wednesday it agreed to $600,000 in settlements and judgments against several private investigators involved in the Hewlett-Packard Co. boardroom spying case. The FTC last year filed a complaint against those investigators for allegedly obtaining consumers' private phone records without their knowledge and consent and selling them to third parties. Palo Alto, Calif.-based HP hired the investigators in 2005 to secretly examine the private telephone logs of journalists, board members and HP employees to identify the source of leaks to the media……(AP, 29 May 08)

Germany's Corporate Spying Scandal

Bristling with code names like "Clipper" and "Rheingold," Germany's latest corporate scandal seems like the stuff of a Cold War espionage novel. But as merely the latest in a series of corporate shenanigans, it may actually reflect the newly sordid style of business at Germany Inc. The story begins in 2005, when Deutsche Telekom, the former German phone monopoly, was rapidly losing ground to new competitors. Management was under fire and sensitive information was showing up in a steady stream of embarrassing newspaper headlines. Telekom's management was determined to find out who was talking to the press and stop the leaks……(Time Magazine, 27 May 08)

Fairfax Tech Firms Settle Software Suit

A Fairfax County technology company has agreed to pay a rival $4.5 million to settle a lawsuit accusing it of stealing computer software. Razorsight also agreed to stop using the intellectual property from Teoco, a Fairfax County company that had developed software to process and audit billing among telecommunications carriers.

Teoco filed suit last September, claiming that Razorsight had stolen source code for software that loads and processes telecom invoices. Razorsight founder Sundeep Sanghavi worked for Teoco before launching the company….(Washington Post, 21 May 08)

Government offices target of cyber criminals

The federal police have opened an investigation into suspected espionage following an attack by hackers of the computer system of two government departments. A spokeswoman said the foreign ministry and State Secretariat for Economic Affairs (Seco) were the target of professional hackers at the end of last year. A cyber crime expert said the case was unique since employees in particular departments of the federal administration were singled out for the attack….(Swiss Info, 21 May 08)

SAS likely to appeal Norwegian Air court ruling

Scandinavian airline SAS is likely to appeal against a Norway court verdict ordering it to pay rival Norwegian Air Shuttle 132 million crowns ($26.33 million) in compensation, SAS said on Tuesday…Norwegian had sued SAS for industrial espionage, accusing it of illegally accessing and using its booking data. The court also ruled that SAS should pay Norwegian Air's legal costs of about 6.8 million crowns in the industrial espionage case, Norwegian said in a separate statement….(Reuters, 20 May 08)

California man sentenced for stealing military technology

An El Dorado Hills man has been sentenced to two years in federal prison for selling trade secrets to foreign governments. Allen W. Cotten, 53, was sentenced in U.S. District Court after pleading guilty earlier this year.

Prosecutors say Cotten stole plans and parts for two types of video amplifiers from his employer, Genesis Microwave Inc. The thefts took place over a two-year period, starting in February 2004. The amplifiers are used in microwave technologies that have several military applications….(AP, 19 May 08)

Selling stolen trade secrets nets prison for Central Valley man

…Mr. Cotton admitted that when he worked at Genesis Microwave Inc. in El Dorado Hills, he stole plans, designs, specifications and mechanical parts and hardware for the manufacture and testing of components used in microwave technologies…Mr. Cotton sold or tried to sell the secret plans to foreign governments and foreign military contractors, prosecutors says. Names of the foreign entities have not been made public…..(Central Valley Business Times, 19 May 08)

El Dorado Hills Man Sentenced for Selling Stolen Trade Secrets
to Foreign Governments  (FBI)

Man Pleads Guilty to Stealing Trade Secrets from Local Company to Sell to Foreign Governments   (DOJ)

Chemist jailed for formula theft
A chemist employed by a Houston industrial coatings-maker who pleaded guilty to stealing the formula for a secret fire-proof finish was sentenced to a year in prison. Qinggui Zeng, 46, a US resident also known as Jensen Zeng, was arrested in Houston days before he planned to return to China and begin making the product. US Federal Bureau of Investigation agents searched Zeng's home and said they found printouts of the stolen formula hidden under attic insulation… He pleaded guilty last week at a Houston federal court. At the hearing, Zeng confessed to hacking into his employer's computer, stealing the formula, and soliciting investors to fund a Chinese venture through which he would make and sell the proprietary coating as his own creation, according to a statement issued by US Attorney Don DeGabrielle in Houston…..(Bloomberg, 19 May 08)

News Corp company cleared in hacking case

A subsidiary of News Corp has been cleared of charges in a corporate espionage lawsuit brought by satellite TV company DISH Network that claimed damages of almost $1 billion. A US federal court jury awarded just $US1500 ($1572) in damages from NDS for a single test incident with a satellite TV smartcard. DISH had alleged that NDS employed a hacker who systematically broke into its network, stole software code and posted information on the internet to let users unscramble DISH's signals and receive satellite television for free…..(News Technology, 19 May 08)

Analysis: Russia spies on German firms

The German government has accused foreign intelligence services -- blaming mainly Russian agents -- of having spied on German companies. "In the course of the global competition over market share and market dominance, industrial espionage is becoming increasingly important," a new government report on terrorism, political extremism and intelligence found. This industrial espionage hurts the German economy in the process and endangers jobs, the report said. …(UPI, 16 May 08)

Chinese, Russian industrial spies active in Germany - official

Chinese, Russian and Iranian spies have tried to steal industrial secrets from as many as one in two German firms, Financial Times Deutschland reported, citing Hartwig Moeller, head of North Rhine-Westphalia's intelligence agency. 'Every second German company has been affected, studies show,' with the loss of information valued at between 15 billion euros and 50 billion euros a year, said Moeller.'Togeth