The Chinese have been pretty adept when it comes to espionage. Their level of spying puts the old KGB to shame.
How China Steals U.S. Military Secrets
By Simon Cooper
July 10, 2009 12:00 AM
How China Steals U.S. Military Secrets - Popular Mechanics
On a hot Florida day late in 2005, Ko-Suen "Bill" Moo was preparing for the endgame of a covert operation he'd been orchestrating for nearly two years. He had arrived in Fort Lauderdale at 5 am on Nov. 7, as the city was recovering from the onslaught of Hurricane Wilma two weeks earlier. Moo checked into a $350-a-night room at the plush Harbor Beach Marriott Resort & Spa, and now, a day after arriving in town, the Korean-born businessman was ready to sign what promised to be a lucrative contract. In a few days, he'd head back to Hollywood International Airport to see off a plane, chartered for $140,000 to carry a special package. Moo would catch a commercial flight and meet up with his cargo in Shenyang, a city in northeastern China. The cargo was costing him nearly $4 million, but it was worth it. He would clear $1 million in profit once he made the delivery to his clients, senior officials in the Chinese People's Liberation Army.
Moo's package was an F110-GE-129 afterburning turbofan engine, built by General Electric to power America's latest F-16 fighter jet to speeds greater than Mach 2 (1500 mph). Over lunch in the Marriott's restaurant, 58-year-old Moo told the arms dealers who had arranged the purchase that he would soon be looking for additional engines--or even an entire F-16. But what the Chinese army wanted most of all was an AGM-129A, the U.S. Air Force's air-launched strategic nuclear-capable cruise missile. The stealth weapon, which flies at 800 miles per hour, can deliver a 150-kiloton W80 warhead to a target 1800 miles away.
Like everything else Moo was shopping for, the missile is guarded by at least three laws forbidding its sale or the transfer of its design details to foreign countries without government permission. Moo knew this quite well. In addition to working as a covert agent for China, he had a day job in the U.S. aerospace industry. For more than 10 years Moo had been an international sales consultant for Lockheed Martin and other U.S. defense companies in Taiwan. He was arguably the Taiwanese air force's most critical arms broker.
Scouring the Globe
According to U.S. counterintelligence agents, Bill Moo was one player in a sprawling, decentralized network. "They are scouring the globe on behalf of the Chinese government, vacuuming up every shred of technology information or hardware they can get their hands on," says former FBI officer Ed Appel. A press officer at the Chinese embassy in Washington, D.C., calls that accusation "groundless," saying that "the Chinese government does not have activities in espionage in the United States." However, Appel and others say that extensive Chinese spying is indicated by a sampling of cases that have recently come to light in the United States.
South Korean arms dealer Kwonhwan Park was sentenced in August 2005 for exporting Black Hawk helicopter engines and night vision equipment to China. Ting-Ih Hsu, a naturalized U.S. citizen, and Hai Lin Nee, a Chinese citizen, illegally exported 25 low-noise amplifier chips that have applications in the Hellfire air-to-ground missiles carried by Apache and Cobra helicopters. New Jersey firms Manten Electronics and Universal Technologies sold China millions of dollars' worth of restricted computer chips. Eugene You-Tsai Hsu, a retiree living in Blue Springs, Mo., tried to buy a critical encryption device tightly controlled by the National Security Agency. Additional accused Chinese operatives have been sent to prison in cases involving Generation III night vision equipment and computer chips used in advanced radar and navigation systems. None of the spies acted in concert, according to U.S. counterintelligence sources. Like Moo, they were freelancers, operating at what Appel calls a "deniable distance" from their Beijing bosses. However, they did share much of their quarry--items on shopping lists that included some of America's most sophisticated weaponry.
Sights on Taiwan
On Feb. 28, 1991, the United States and its allies called a halt to combat operations in the Persian Gulf War, just four days after U.S. tanks started to roll across the desert, and a few weeks after launching an air campaign. "The Chinese watched with dismay the ease of the U.S. victory over Iraq," says Toshi Yoshihara, visiting professor at the Air War College in Montgomery, Ala. In response, he says, modernizing the country's vast but primitive arsenal became a top priority for Chinese officials.
According to U.S. deputy undersecretary of defense Richard Lawless, China's sense of urgency stems partly from concern over the future of Taiwan. In testimony before the Senate Foreign Relations Committee, Lawless said that China wants "a variety of credible military options to deter moves by Taiwan toward permanent separation or, if required, to compel by force the integration of Taiwan" with the mainland. Since the United States has pledged to defend Taiwan, that means China is seeking the ability to go toe-to-toe against America's best weaponry. Some U.S. officials argue that China's ambitions go beyond Taiwan to encompass the global stage. Rather than trying to address all its military shortcomings at once, Yoshihara says, the Chinese government focused on obtaining "leap ahead" technologies already in use by the United States. Former Chinese leader Jiang Zemin called these technologies "shashoujian," translated variously as "assassin's mace" or "silver bullet." They ranged from advanced communications equipment to long-range missile systems.
A Credible Threat
The result of China's 15-year effort has been "the largest military buildup the world has witnessed since the end of the Cold War," says Richard Fisher, a China specialist for the International Assessment and Strategy Center (IASC), a Virginia-based think tank. China is now termed a "credible threat to other modern militaries operating in the region" by the Department of Defense, despite languishing perhaps 25 years behind the States in a number of areas. By next year, Chinese nuclear missiles could have the capability to hit any target in the United States from launch sites on mainland China. By 2008, the country is expected to possess submarine-launched nuclear missiles, giving it global strike capabilities.
The nuclear arsenal is backed by an increasingly sophisticated navy and air force. Currently on Chinese military drawing boards are plans for combat aircraft, the Chengdu J-10 and Xian JH-7A fighter jets; a combat helicopter, the Z-10; advanced warships; and even space-based weapons designed to knock out communications satellites. U.S. observers fear that much of this will be made possible by espionage.
In June 2005, China began sea trials of its new Luyang II guided-missile destroyers. When the armaments were unveiled, jaws clenched in the Pentagon. The ships were equipped with a knockoff of the latest version of the U.S. Navy's Aegis battle management system, a critical command-and-control technology. The technology enables U.S.--and now Chinese--forces to simultaneously attack land targets, submarines and surface ships. It also runs fleet defense tactics to protect against hostile planes and missiles. Federal sources insist that the only way the relatively backward Chinese military could have developed such a system was by copying it.
Into the Arms Bazaar
Anthony Mangione is a quiet-spoken man in his mid-40s whose office in Fort Lauderdale's federal courthouse is decorated with old newspaper cuttings celebrating the D-Day landings, two fish tanks (one full, one empty) and a door covered with dozens of curling Post-it notes.
As the assistant special agent in charge of the Fort Lauderdale department of Immigration and Customs Enforcement (ICE), Mangione heads a team of undercover agents who have spent years infiltrating what he terms a global "arms bazaar." The agents are assigned to ICE's Arms and Strategic Technology Investigations (ASTI) unit, which has operations in 43 countries as well as in the United States. Last year, ASTI agents conducted more than 2500 investigations worldwide, many of them involving China.
The Moo case got under way after two arms dealers, who also work as paid informants, introduced some of Mangione's undercover agents to a French middleman, Maurice Serge Voros. During a phone call on Feb. 26, 2004, Voros asked the agents, who were posing as arms dealers, for help obtaining engines used in the U.S. Black Hawk combat helicopter. The engines, manufactured by General Electric, are on the U.S. Munitions List, a catalog of restricted arms and technology administered by the State Department's Bureau of Political-Military Affairs. It is illegal to export Munitions List items without a special government license.
Over the following year, ASTI learned that Voros represented Moo, and that Moo in turn was working for the People's Liberation Army. In a Dec. 4, 2004, e-mail, Moo wrote that China did not want its name on any of the contracts. "These cases take a long time," says Mangione. "It can be frustrating. But you have to let the game play." In March 2005, Voros told the undercover agents that Moo had now shifted priorities. His new top goal was to buy an F-16 engine--and, said Voros, Moo had been given "the green light" to make a deal.
Lethal Shopping Lists
Moo's destination last November was Shenyang Aircraft Corp., which lies a few miles from Taoxian International Airport. It's the site where, in cooperation with Russia, China developed its first homegrown fighter engine, the Lyulka AL-31 turbofan engine. But the Lyulka provides a Pontiac Firebird level of performance compared to the Formula One-worthy engine that Moo was set to deliver. U.S. officials believe that China planned to copy the F-16 engine for its own prototype fighter.
China has managed to "reverse-engineer some of [America's] most modern rifles, cannons and guns and produce them domestically," says Larry Wortzel, chairman of the U.S.-China Economic and Security Review Commission, which reports to Congress. However, Chinese expertise in engine manufacturing has lagged, according to Wortzel, who spent 25 years working in military intelligence. "This is one of their biggest espionage targets," he says.
"There are characters out there with laundry lists of stuff like this," says Mangione. Moo's list included nuclear missiles and jet engines, and also called for the "urgent procurement" of "2 to 4 sets" of a "Nuclear Submarine (nuclear reactor should be one unit, no noise) including ALL nuclear weapon systems." Acquiring an entire submarine might be a long shot, Mangione says, but "any specs, any photos, any anything they can get is more than they had before."
China's efforts amount to a worldwide "market intelligence program," says former FBI analyst Paul D. Moore. "The reality is that China does not practice intelligence the way God intended," he jokes. America's intelligence structure arose during the Cold War to contain the Soviet Union. "In our model, professional intelligence officers go out and do the job," Moore says. "In China's model, anyone and everyone is a potential intelligence asset."
The system is chaotic and inefficient but also highly effective. According to Moore and others, it relies on "guanxi," a system of social networking with deep cultural significance. "The process for finding the best restaurant in Seattle is exactly the same as finding out what nuclear technology America has," Moore says. "You ask your friends. Eventually, you're introduced to someone who can help."
Guanxi could explain why Chi Mak, a naturalized American citizen who spent years as a naval engineer for U.S. defense contractors, finds himself in jail, accused of secretly working for the Chinese government. "When someone reaches out to you," Moore says, "it can be very hard to say no."
According to a 42-page FBI affidavit, Mak was the lead engineer on a highly sensitive U.S. naval project: the Quiet Electric Drive. The FBI says it recorded Mak copying Navy secrets, and later found Chinese-language wish lists in his home that included propulsion and command-and-control technology.
According to his lawyer, Ronald Kaye, Mak acknowledges "engaging in a technology exchange" with China. But, Kaye says, none of the material was classified. "It's unfortunate that so quickly people came to perceive something criminal." A trial is set for this November.
The Endgame
After a series of meetings in London and Orlando, Fla., Bill Moo, Voros and the ASTI agents agreed on a price of $3.9 million for one F-16 engine. On Oct. 5, 2005, Moo transferred the money into a Swiss bank account he controlled. One month later, he flew from Taipei to San Francisco and then to Miami. By now, he was being shadowed by ASTI investigators.
On Nov. 8, Moo was driven to a quiet hangar in Homestead and shown his prize, an F-16 engine. He had already wired $140,000 from a bank account in Singapore to an account run by an ASTI front company to cover shipping costs to China. Moo asked to photograph the engine but was rebuffed. Nevertheless, he now authorized payment of the $3.9 million. According to an ICE official, Moo told the undercover agents that after he returned to China he would want to buy an entire aircraft. "Then [the] customer [will] have a confidence on you, okay? So they will be planning [to buy] the two-seat F-16." Moo also said he would want to purchase cruise missiles.
Mangione decided it was time to bring the operation to an end. "People like Moo don't have their lists out to one person," he says. "If he's dealing with us he's dealing with 10 other people. We couldn't take the risk that one of these other sellers might give him what he was after."
Agents moved in and arrested Moo in his hotel room on Nov. 9. After six months in jail--during which he tried to bribe both an assistant U.S. attorney and a federal judge to let him go--he pleaded guilty to multiple offenses; a sentencing hearing was set for this summer. Voros is still at large, the subject of an international arrest warrant.
Modern Smuggling
Technology espionage can be difficult to prevent. As Lockheed Martin's representative in Taiwan, Moo had successfully passed a "rigorous" vetting procedure dictated by U.S. government rules, according to company spokesman Jeff Adams. Yet, U.S. officials say he may have transferred restricted technology to China before the investigation began.
More typical cases are even harder to detect. ASTI agents often navigate the murky area of dual-use technologies, where pressure sensors could be used either for bombs or for washing machines, where computer chips with missile applications might actually be destined for in-car navigation systems. Furthermore, thousands of items prohibited for export can be bought over the Internet, shipped to a U.S. address, then simply mailed to China in a padded envelope. Such materials supply the building blocks needed for complex armaments.
In other cases, technology is smuggled out to an approved country using fake end-user certificates. For instance, Kwonhwan Park shipped his Black Hawk engines to Malaysia before sending them on to China. And, advanced technology such as the F-16 fighter has been sold to countries from Bahrain to Venezuela where controls may be less stringent than in the United States.
The situation outrages U.S. Rep. Frank Wolf (R-Va.), who successfully fought recent plans by the State Department to use Chinese-built computers for classified material. He says too little attention is paid to China's "aggressive spying program against the U.S." The legal deterrents to espionage are weak, says Wolf, who chairs a subcommittee overseeing security and technology. "In the Cold War people went to jail for a long time" for spying, he says, but today's "negligible penalties" are more appropriate to low-level embezzlement than military spying. Park was unusual in receiving a 32-month prison term and a deportation order; in contrast, Ting-Ih Hsu and Hai Lin Nee were each sentenced to three years of probation.
Meanwhile, says the IASC's Richard Fisher, a "battle is being waged. The Chinese have established a vast collection system that by the end of the decade will have helped them to become a global military power." While concern grows among policy-makers and wonks, Mangione and his team still labor in the shadows of the worldwide arms bazaar. They hope to prevent the day when U.S. troops could find themselves staring down the barrel of a high-tech weapon marked "Made in America."
