Amazing world

WASHINGTON - 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.

The sentence, the first handed down for a violation of the Economic Espionage Act of 1996 (18 USC Section 1831), was announced by Patrick Rowan, Acting Assistant Attorney General for National Security; Joseph P. Russoniello, U.S. Attorney for the Northern District of California; Arthur Cummings, Executive Assistant Director for the FBI’s National Security Branch; and Julie L. Myers, Department of Homeland Security Assistant Secretary for U.S. Immigration and Customs Enforcement (ICE).

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. He did so by using the Mantis 1.5.5 trade secret as part of a demonstration project in attempting to sell products of his new employer, Orad, Hi-Tec Systems Ltd., which was a direct competitor of Quantum3D. The trade secret at issue, known as "Mantis," is a Quantum3D product used to simulate real world motion for military training and other purposes.

In addition, Meng violated the Arms Export Control Act by knowingly and willfully exporting to the PRC a defense article on the United States Munitions List (defense article viXsen) without authorization from the United States. The product viXsen is a Quantum3D visual simulation software program used for training military fighter pilots who use night visual sensor equipment, including thermal imaging.

According to court documents, the investigation established that Meng had, in fact, misappropriated two defense articles (specifically nVSensor, in addition to viXsen described above), at least six source code products which were also trade secrets, and more than one hundred materials and utilities belonging to his former employer, Quantum3D. Many of these misappropriated Quantum3D products were intended primarily for military purposes. For example, nVSensor is a Quantum3D product used to provide night vision simulation and is exclusively used in military applications for precision training and simulation applications.

The investigation also established that defendant Meng was assisting in developing two separate military proposals for two separate Air Forces in Southeast Asia involving visual simulation equipment and source code. Copies of two F-16 Full Mission Simulator proposals involving two different countries were found on Meng’s laptop.

"Today’s case demonstrates the importance of safeguarding sensitive U.S. military technology as well as trade secrets. It should also serve as a warning to others who would compromise our national security for profit," said Patrick Rowan, Acting Assistant Attorney General for National Security.

Mr. Rowan commended the teamwork of several agencies that worked on the case for nearly four years, including the U.S. Attorney’s Office Computer Hacking and Intellectual Property (CHIP) Unit in the Northern District of California; the National Security Division and Criminal Division at the U.S. Department of Justice; the FBI, and ICE, as well Customs & Border Protection. The Department of State and the Department of Defense also provided assistance on the case. The U.S. Attorney’s Offices in the Northern District of Alabama, District of Minnesota, and Middle District of Florida also joined the plea agreement as some conduct in the case occurred in those jurisdictions.

Joseph P. Russoniello, U.S. Attorney for the Northern District of California, stated, "In this case, a Silicon Valley trade secret was used in a demonstration project in Beijing with the intent to benefit the PRC Naval Research Center. Source code for military visual simulation programs to train military fighter pilots and restricted defense articles were also willfully exported outside the United States. We will continue to enforce the criminal laws against those who violate export restrictions and misappropriate our trade secrets. Many of the systems we protect are designed to safeguard our men and women in harm’s way and compromising them significantly adds to the perils that they face in defending us. It is imperative that we vigilantly protect the intellectual property developed in the Silicon Valley and elsewhere in the country so as to maintain as our nation’s military defense advantages, and to deter acts of aggression against vital American interests."

"ICE is committed to shutting down those who are willing to put America’s national security on sale for a profit," said Julie L. Myers, Department of Homeland Security Assistant Secretary for ICE. "The export of U.S. military products and sensitive technology is controlled for good reason – in the wrong hands, these items could be used to harm America or its allies. Enforcing U.S. export laws is one of ICE’s top priorities, and we will continue to work with our partners in law enforcement and industry to ensure that those who put our country at risk are brought to justice."

FBI Executive Assistant Director for the National Security Branch, Arthur Cummings stated, "Protecting our nation’s most sensitive trade secrets and critical technology is at the core of the FBI mission. The FBI is committed to safeguard our country’s economic well-being and national security."

Quantum3D, Inc., based in San Jose, California, has cooperated fully in the government’s investigation. Quantum3D produces hardware and software components for simulation systems for commercial and military customers. Some of the products include high-end visual simulation systems, and interactive, open-architecture visual computing solutions, image generators, and embedded graphics subsystems.

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.

The prosecution is being handled by Assistant U.S. Attorney Mark L. Krotoski, presently on assignment at the Computer Crime and Intellectual Property Section, with the assistance of Paralegal Lauri Gomez. Thomas P. Reilly, a Trial Attorney in the National Security Division’s Counterespionage Section, also assisted on the case. The case was investigated by a team of agents from the FBI and ICE.

Reference:http://www.justice.gov/opa/pr/2008/June/08-nsd-545.html

The Government has openly accused China of carrying out state-sponsored espionage against vital parts of Britain’s economy, including the computer systems of big banks and financial services firms.

In an unprecedented alert, the Director-General of MI5 sent a confidential letter to 300 chief executives and security chiefs at banks, accountants and legal firms this week warning them that they were under attack from “Chinese state organisations”. It is believed to be the first time that the Government has directly accused China of involvement in web-based espionage. Such a blunt and explicit warning from Jonathan Evans could have serious diplomatic consequences and cast a shadow over Gordon Brown’s first official visit to China as Prime Minister early in the new year.

A summary of the MI5 warning, a copy of which has been seen by The Times, was posted on a secure government website. It says that Mr Evans wrote to business leaders “warning them of the electronic espionage attack”.

The summary, on the website of the Centre for the Protection of the National Infrastructure, says: “The contents of the letter highlight the following: the Director-General’s concerns about the possible damage to UK business resulting from electronic attack sponsored by Chinese state organisations, and the fact that the attacks are designed to defeat best-practice IT security systems.”

It adds: “The letter acknowledges the strong economic and commercial reasons to do business with China, but the need to ensure management of the risks involved.”

Access to the site is limited to groups that form part of the country’s critical infrastructure, which include telecoms firms, banks and water and electricity companies. The document gives warning that British companies doing business in China are being targeted by the Chinese Army, which is using the internet to steal confidential commercial information. The Home Office refused to comment last night on what it called leaked private correspondence. A spokesman for the Chinese Embassy in London said he was unaware of the allegations and that the embassy had not received any complaints from the British authorities.

Martin Jordan, a principal adviser at the accountants KPMG, who has seen the contents of the letter, said: “If the Chinese know that a British firm is trying to buy a company or other assets such as land in China then they are using every means at their disposal to discover details such as exactly how much money the British company is prepared to spend for that asset.”

Firms known to have been compromised recently by Chinese attacks are one of Europe’s largest engineering companies and a large oil company, The Times has learnt. Another source familiar with the MI5 warning said, however, that known attacks had not been limited to large firms based in the City of London. Law firms and other businesses in the regions that deal even with only small parts of Chinese-linked deals are being probed as potential weak spots, he said.

A security expert who has also seen the letter said that among the techniques used by Chinese groups were “custom Trojans”, software designed to hack into the network of a particular firm and feed back confidential data. The MI5 letter includes a list of known “signatures” that can be used to identify Chinese Trojans and a list of internet addresses known to have been used to launch attacks.

A big study gave warning this week that Government and military computer systems in Britain are coming under sustained attack from China and other countries. It followed a report presented to the US Congress last month describing Chinese espionage in the US as so extensive that it represented “the single greatest risk to the security of American technologies”.

Ian Brown, of Oxford University, one of the report’s authors, said that attacks traced back to China have been found attempting to crack Whitehall passwords. The report identified China as the country most active in internet-enabled spying operations and attacks but says that 120 other countries are using the same techniques.

The Centre for the Protection of National Infrastructure, one of several British bodies charged with protecting the country’s computer systems, has described the threat posed by cyber attacks as enormous.

Defence departments across the globe are already rewriting manuals for a future of digital warfare. The US has recorded 37,000 attempted breaches of government and private systems this year and a new unit at the US Air Force, staffed by 40,000 people, has been set up to prepare for cyber-war.

The Virtual Criminology Report found that attacks had progressed from initial curiosity probes to well-funded and well-organised operations for political, military, economic and technical espionage.[1]

Reference:

[1]http://business.timesonline.co.uk/tol/business/industry_sectors/technology/article2980250.ece