Foreign tech spies difficult to catch

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Published Sunday, Feb. 11, 2001, in the San Jose Mercury News

Foreign tech spies difficult to catch

IN EFFECT ALMOST FIVE YEARS, U.S. LAW HAS NABBED NOBODY BY SEAN WEBBY Mercury News

The spies of Silicon Valley lurk on the end of bugged phone lines, pose as temps and full-time workers, download secret documents, open fake companies, steal laptops, raid networks.

The high-tech world of foreign espionage, the way the FBI describes it, makes the Peninsula sound like Cold War Berlin. But instead of military secrets, they are stealing trade secrets -- billions of dollars worth a year. So, with the security of the high-tech industry in mind, Congress passed a law against foreign economic espionage fanged with lengthy prison terms and millions in fines.

Almost five years later, there hasn't been a single charge.

It's not for lack of trying, those who investigate and prosecute the law say.

Federal prosecutors have filed charges in about two dozen cases -- three in Silicon Valley -- against people accused of stealing information from high-tech firms. They just haven't charged anyone with sending secrets across U.S. borders. Some of those cases began as foreign espionage probes but investigators were unable to definitively trace the crimes back to a foreign government.

``The Cold War is over, but that doesn't mean the spying has stopped,'' said FBI Agent Thomas Purcell, who is based in Palo Alto. ``And Silicon Valley is ground zero.''

Complex assignment

A specialized high-tech unit of the U.S. Attorney's office in San Jose handles espionage cases. So do nine FBI agents based at a small suite of offices across from the House of Foam in downtown Palo Alto. Their job is to try to uncover and deter the complex cloak and keyboard world of high-tech espionage from Highway 84 to Monterey.

Other units -- in San Jose and Hayward, for instance -- have agents who handle economic espionage cases. But the Palo Alto office is the only FBI bureau in the country solely dedicated to investigating and tracking trade-secret thievery. It goes on all the time, agents say. Proprietary information flows illegally across borders -- usually electronically. The CIA recently reported to Congress that the intelligence services of more than half a dozen nations, including some close U.S. allies, are actively trying to steal U.S. proprietary economic information, company trade secrets and critical technologies. Such theft cost U.S. firms more than $1 trillion last year, according to a study commissioned by the American Society of Industrial Security.

``Information is wealth,'' said Mary B. Marsh, a veteran FBI agent and former accountant who works in the Palo Alto office.

The specialized unit faces a daunting assignment.

The Espionage Act is full of investigative and legal challenges for even the simplest case, experts say. It's tough to prove criminal intent and convince publicity-shy Silicon Valley firms to report theft cases. Plus, learning to negotiate the law is complex.

That learning curve may quicken very soon.

Donald Przybyla, the unit's supervising agent, said his squad is working two large foreign espionage cases, in which groups working for large high-technology companies in Silicon Valley are suspected of stealing trade secrets with the intent to pass them on to a foreign government. He declined to release more than to say ``these are two of the most exciting cases I've seen in years.''

Case of the Danish engineer

The office has had some local success. In its latest case, filed in late November, Peter Morch -- a Danish engineer at Cisco Systems Inc. -- was accused of downloading trade secrets on CDs before he left his job for a competitor. That case is pending.

Morch's case was a relatively simple one to make, according to court documents: There were witnesses and incriminating statements, and agents found the CDs in his San Francisco apartment. If convicted, Morch could face 10 years in prison.

Earlier this year, Mikahel K. Chang of San Jose pleaded guilty to stealing trade secrets. Chang admitted to the theft of customer and sales order information in databases from his former employer, Semi Supply Inc. of Livermore. He is scheduled to be sentenced in July and faces up to 10 years in federal prison.

And in March of last year, the U.S. Attorney's office's first espionage act case was brought against Say Lye Ow, a Malaysian national accused of stealing Intel secrets before he left the company in 1998. That case is still pending.

The FBI has used stings and other methods to uncover other domestic cases. With foreign cases, the complexities and stakes are much higher.

The Morch case, and every other case the Palo Alto office has handled so far, began as an investigation into foreign espionage, according to Przybyla.

But the proof wasn't there. The suspects were instead charged under a provision that claims the person knowingly stole the secret for someone else's benefit while knowing it would injure the company.

The problem of intent

Proving intent is a stiff challenge, experts say.

The FBI and the U.S. Attorney's office must try to prove a number of elements in the most basic espionage case, including that the suspect stole a trade secret without authorization from the owner, knew it was a trade secret, tried to convert it into economic gain and intended to or knew it would injure its owner.

Hard enough, investigators and prosecutors say. But add trying to prove that someone intended to benefit a foreign government by stealing a secret, and the level of proof becomes incredibly difficult to find. What rises to that level of proof? Usually it takes some sort of self-incriminating communication or a confession, according to Assistant U.S. Attorney Ross Nadel, head of the high-tech unit and the head prosecutor for every one of the area's espionage cases. It is not necessarily enough, for instance, for someone to give information to a foreign government official who uses it to benefit his own business.

One of the least-mentioned problems, but perhaps the most potent, is that the U.S. government may not want certain foreign espionage cases to go to court because they are too sensitive.

Nadel said that he felt uncomfortable discussing any problems with the federal law but that the dearth of cases did not imply that the law was ineffective.

``I prosecuted what I think is the only anti-apartheid act case in the country. That doesn't mean it was an ineffective law,''' said Nadel, who brought charges against a Hollister seed company, alleging it imported onion seeds from South Africa in the late 1980s despite a law banning agricultural imports from the pro-apartheid South African government.

Nadel also suggested that the fight against high-tech espionage was in its infancy.

Contact Sean Webby at swebby@sjmercury.com or (650) 688-7577. Fax (650) 688-7555.

http://www0.mercurycenter.com/premium/local/docs/espionage11.htm

-- Martin Thompson (mthom1927@aol.com), February 11, 2001


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