Chinese spy convicted for theft of military technology

A Chinese national was sentenced to 40 months in prison for trying to steal military- and space-grade technology for the People's Republic of China.
Tao Li, 39, received his sentence from United States District Judge Diane J. Humetewa last Wednesday (Oct. 16)  in Phoenix, Arizona.  Earlier, Li had pleaded guilty to the charges. 

Li was arrested in September 2018 at Los Angeles International Airport, as Li attempted to travel from China to Arizona to meet with one of the undercover agents. 

“This case is one of many involving illegal attempts to take U.S. technology to China. Li attempted to procure highly sensitive U.S. military technology in violation of our export control laws. Such laws are in place to protect our national security, and the Department of Justice will continue to vigorously enforce them,” said Assistant Attorney General John C. Demers. “We don’t take these crimes lightly and we will continue to pursue them.”

Between December 2016 and January 2018, Li worked with other individuals in China to purchase radiation-hardened power amplifiers and supervisory circuits and illegally export them from the US to China. 

 The electronic components sought by Li are capable of withstanding significant levels of radiation and extreme heat, and as a result, are primarily used for military and space applications. 

Due to the technological capabilities of the electronic components sought by Li and the significant contribution that the components could make to a foreign country’s military and space programs, both parts required an export license from the US Department of Commerce, Bureau of Industry and Security, prior to being sent out of the the country. Notwithstanding the licensing requirement, the Department of Commerce has a policy forbidding the export these types of electronic components to the PRC.

Between December 2016 and January 2018, Li used multiple aliases to contact individuals in the US, including representatives of US-based private companies, to try to obtain the electronic components. 

Additionally, Li and his coconspirators agreed to pay a “risk fee” to illegally export the electronic components to China.  

Li's arrest and conviction is part of the US government crackdown on the theft of intellectual property and technology by China.

“This sentence is well deserved and further demonstrates the lengths of criminal activity by those who seek to engage in illegally obtaining sophisticated materials,” said Scott Brown, Special Agent in Charge for Homeland Security Investigations (HSI) Phoenix. “One of HSI’s top priorities is preventing U.S. military products and sensitive technology from falling into the hands of those who might seek to harm America or its interests."

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of Arizona, Phoenix, with assistance from Scott Claffee, Trial Attorney, Department of Justice National Security Division.

Husband and wife accused of stealing trade secrets from medical research facility

Nationwide Children's Hospital in Dublin, Ohio.

A couple, former employees of an Ohio research hospital, has been charged with stealing trade secrets concerning the research, identification and treatment of a range of pediatric medical conditions.

“Nationwide Children’s Hospital devoted years of work and its own money to researching exosomes in order to promote honorable medical advances,” U.S. Attorney Benjamin C. Glassman said. “The hospital’s Research Institute took reasonable measures to keep its trade secrets secret. I commend the cooperation of Nationwide Children’s throughout this investigation.”

According to the indictment, Yu Zhou, 49, and Li Chen, 46, currently of San Diego, California, conspired to, attempted to and did steal scientific trade secrets related to exosomes and exosome isolation from Nationwide Children’s Hospital’s Research Institute in Dublin, Ohio.

The defendants were arrested in July and the case was unsealed Wednessday (sept. 18) at the defendants’ arraignments in federal court in Columbus, Ohio before U.S. District Judge Sarah D. Morrison.

Zhou and Chen, who worked in separate medical research labs at the Research Institute for 10 years each (Zhou from 2007 until 2017 and Chen from 2008 until 2018). Exosomes play a key role in the research, identification and treatment of a range of medical conditions, including necrotizing enterocolitis (a condition found in premature babies), liver fibrosis and liver cancer.

The husband and wife allegedly founded a company in China in 2015 without the hospital’s knowledge. While Zhou and Chen continued to be employed by Nationwide Children’s, they marketed products and services related to exosome isolation through their Chinese company.

The indictment also alleges that in 2017, Zhou and Chen helped co-found an American biotechnology company. As of 2019, the company’s website advertises multiple products and services related to exosome isolation, including a kit that was developed from a trade secret created at a Nationwide Children’s research lab.

Zhou and Chen allegedly used the hospital’s Research Institute resources and equipment to conduct the exosome research necessary for their unauthorized, outside work.

In November 2017, Zhou and Chen allegedly received more than $876,000 and stock related to an asset purchase agreement involving the American biotechnology company. It is also alleged Zhou entered into a stock purchase agreement with that same company under which he would receive $450,000.

Zhou resigned from the Research Institute at Nationwide Children’s, effective Nov. 10, 2017. On Jan. 31, 2018, Chen resigned from her position at the research institute.

Before his official last day of employment with the research institute, Zhou allegedly participated in a press release announcing the American company’s plans to market and distribute “proprietary exosome isolation systems” from its headquarters in Central Ohio.

Conspiring to, attempting to and committing theft of trade secrets is punishable by up to 10 years in prison. Conspiring to, attempting to and committing wire fraud carries a potential maximum sentence of up to 20 years in prison.

The couple's arrest is just the latest in the US clampdown on an alleged Chinese government conspiracy of spying, theft of intellectual property and trade secrets supposedly employing Chinese and Chinese American scientists, researchers and students.

The administration clampdown has resulted in a few convictions but it has also ruined careers of innocent people. Members of the Chinese American community also believe it is fomenting anti-Chinese suspicions among research and educational institutions that is sweeping up Chinese Americans in its wake.

EDITOR'S NOTE. The report was UPDATED Sept. 20 to include context.

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Research center force out 3 Asian scientists

ASAM NEWS

Three Asian scientists have been kicked out from the MD Anderson Cancer Center in Houston over concerns of ties to China, reports the Houston Chronicle.

The center took action after being warned by the National Institutes of Health. The three are accused of having conflicts of interest and unreported foreign income. Their ouster is part of growing concerns from private industry and U.S. security officials that the Chinese Americans are trying to steal U.S. scientific research. The names of the scientists have not been released.

A 2017 FBI report found that intellectual-property theft by China costs the U.S. as much as $600 billion annually. FBI Director Christopher Wray has called China “the broadest, most significant” threat to the nation and that its espionage is active in all 50 states.

The actions taken by the cancer center has led to concerns from the Chinese American community of racial profiling.

“Scientific research depends on the free flow of ideas,” Frank H. Wu, president of the Committee of 100, a group of influential Chinese Americans. said to the Chronicle. “Our national interest is best advanced by welcoming people, not by racial stereotyping based on where a person comes from.”

According to the Tech Times, the three scientists are reportedly Chinese. Two resigned before they could be dismissed and the third is challenging the firing. Of two other scientists also investigated, one has been cleared while the other still faces scrutiny.

Sources told the Chronicle involved more than the scientists who left. In the last several months about 20 employees have left for various reasons. The former employees said that they left because of the toxic work environment caused by racial profiling.

View From the Edge contributed to this report.

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Chinese man charged with with theft of trade secrets

Hongiin Tan

HONGIIN TAN, 35, a Chinese national and U.S. legal permanent resident, was arrested and charged with stealing trade secrets from his employer worth over $1 billion.

Tan allegedly stole trade secrets related to a product from his employer, a U.S.-based petroleum company, to use for the benefit of a Chinese company where he was offered employment, said Assistant Attorney General John C. Demers. 

FBI agents allege that Tan was offered a job at a company in China where he planned to use these files to benefit his new employer.

“The theft of intellectual property harms American companies and American workers. As our recent cases show, all too often these thefts involve the Chinese government or Chinese companies. The Department recently launched an initiative to protect our economy from such illegal practices emanating from China, and we continue to make this a top priority,” said Davis.

A LinkedIn page with Tan's name says he’s part of a research team at Phillips 66.

“We can confirm that we are cooperating with the FBI on an ongoing investigation involving a former employee at our Bartlesville location,” the company told Bloomberg News in an emailed statement. “We are unable to share any further details at this time.”

“The value of the trade secrets in this case is estimated to be more than $1 billion dollars. Theft of critical research, development, and other intellectual property harms the economic prosperity and security of the United States," said U.S. Attorney Trent Shores. 

Tan made an initial appearance Dec. 20 before U.S. Magistrate Judge Jodi F. Jayne. A preliminary and detention hearing has been set for Dec. 26.

According to the criminal complaint, Tan allegedly stole trade secrets from a U.S.-based petroleum company regarding the manufacture of a “research and development downstream energy market product.” 

The company’s methods of developing the product are of great value, both economically and to competitors. Until recently, Tan worked for the petroleum company and allegedly downloaded hundreds of files, including files related to the manufacture of the product. 

 Tan has been residing in the United States for the past 12 years.
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