Tour guide who spied for China sentenced to 4 years in prison

The FBI secretly videotaped Bay Area resident Xuehua Peng during one of his dead drops.

A tour guide based in the San Francisco Bay Area received a 4-year sentence for acting as an agent for People’s Republic of China’s Ministry of State Security (MSS).

In addition to his sentence, Xuehua Peng aka Edward Peng was ordered to pay a $30,000 fine for his role in a scheme to conduct pickups known as “dead drops” and transport Secure Digital (SD) cards from a source in the United States to the MSS operatives in China, announced the Department of Justice.

The sentence and fine was announced Monday by Judge Haywood S. Gilliam, of the U.S. District Court.

“This case exposed one of the ways that Chinese intelligence officers work to collect classified information from the United States without having to step foot in this country" said Assistant Attorney General for National Security John C. Demers. 

"Peng acted as an agent of the Chinese Ministry of State Security in the United States, conducting numerous dead drops here on their behalf and delivering classified information to them in China. He pled guilty and is now being held accountable for his criminal actions and his betrayal of his oath of citizenship.”

According to his Nov. 25, 2019, guilty plea, Peng, a 56-year-old US naturalized citizen living in Hayward, Calif., acted at the direction and under the control of MSS officials in China in retrieving classified information passed to him and leaving money behind for the source. Peng admitted that in March 2015, an official from the People’s Republic of China (PRC) introduced himself to Peng while Peng was on a business trip to China. The official asked Peng to use his citizenship in the United States to assist the official with matters of interest to the PRC. 

Peng eventually came to learn that the official was employed as an intelligence or security services officer of the PRC, specifically of the Ministry of State Security (MSS), and nevertheless agreed to perform activities in the US on behalf of the PRC. Peng’s plea acknowledged that he knew he was acting on behalf of the government of the PRC.

Specifically, Peng admitted that in March of 2015, he received instructions regarding how to use dead drops to exchange money for items to deliver to the PRC. Peng admitted that the official directed him to locate and reserve hotel rooms where he was to leave money and then depart for several hours. The official instructed Peng to return later and retrieve small electronic storage devices that the source would leave for him. Peng was to fly to the PRC later and deliver the retrieved devices to the PRC official. 

Peng said he never met nor interacted with the individual who left the devices for him and was instructed not to access the information stored on the SD cards.

According to court documents, Peng participated in five dead drops involving drop-offs of cash and/or pick-ups of SD cards, after a practice run in June 2015. 

After he participated in two dead drops in the San Francisco Bay Area between October 2015 and April 2016, Peng began making dead drops in Columbus, Georgia. After three dead drops in Georgia, Peng informed the PRC official that he wanted to resume dead drops in the San Francisco Bay Area. Peng did not complete a seventh dead drop before his arrest by federal authorities in September 2019.

Undercover video released by the Federal Bureau of Investigation following his arrest last September showed Peng taping cash and secure digital computer cards to the underside of a chest of drawers in a hotel room for his source to retrieve.

Peng also admitted that the PRC official paid him at least $30,000 for the acts he performed as a courier for the MSS.

Peng reportedly had a degree in mechanical engineering and was trained in traditional Chinese medicine but worked most recently as a guide for Chinese tourists visiting California.

Peng entered the country in 2001 on a temporary business visa. He became a lawful permanent resident in 2006 following his marriage and was naturalized in September 2012.

Peng's lawyers said in court documents that their client was “a simple man who was recruited by sophisticated foreign agents” who had no criminal record, lived with his wife and two young daughters, and “deeply regrets his actions” in the case.