May 24, 2001

Beijing illegally bought circuits

By Bill Gertz
THE WASHINGTON TIMES

Federal authorities have uncovered a major Chinese technology transfer program that illegally purchased thousands of U.S. radiation-protected computer chips for use in Chinese missiles and satellites. The military-related technology-buying program was revealed in court papers released in Orlando, Fla., earlier this month after a raid on a Chinese company involved in selling "radiation-hardened" integrated circuits to Chinese government missile and satellite manufacturers, including several that were sanctioned in the past by the U.S. government for their missile sales.

The company, Means Come Enterprises Inc., is under investigation for "illegally exporting radiation-hardened integrated circuits to [the People´s Republic of China] without the required [Commerce Department] export licenses," according to documents obtained by The Washington Times.

Three illegal diversions of the missile microchips by Means Come are described in a 27-page affidavit produced by the Commerce Department´s Office of Export Enforcement before a search of the company´s Orlando offices.

Commerce Department, U.S. Customs Service and Postal Service agents raided the Orlando offices of Means Come on May 3, seizing computers and documents related to the microchip transfers.

Officials of the company, which has offices in Orlando, Beijing, Hong Kong and Montreal, could not be reached for comment. Jim Hoyos, a Commerce Department export control investigator involved in the case, also declined to comment. "It´s an ongoing investigation," he said.

The illegal diversion of U.S.-made radiation-hardened computer chips to China was first reported in The Washington Times on Jan. 26.

The raid on the Orlando company took place the same day FBI agents arrested two Chinese nationals and a third man for stealing Lucent Technologies software codes and selling them to China.

According to Commerce export agent Roy A. Gilfix, who wrote the affidavit in support of a federal search warrant, Means Come sold China 2,316 embargoed integrated circuits in shipments in February, May and November 1998.The chips were made by Harris Semiconductor, a Melbourne, Fla., subsidiary of the Harris Corp.

According to the affidavit, the radiation-hardened chips are used in missiles and require export licenses before being sold abroad.

Means Come Enterprises made its first export license application in March 1997, saying it wanted to buy 7,200 radiation-protected chips for the Chinese Academy of Space Technology (CAST) for use in a satellite project, the affidavit states.

The license was turned down in June 1997 because the sale posed "an unacceptable risk" that the Chinese government-run academy would use the circuits "in missile proliferation activities," the affidavit said.

CAST and several other Chinese firms were sanctioned by the U.S. government in 1993 for selling M-11 missiles to Pakistan in violation of U.S. arms proliferation laws.

A month after the export license was rejected, Kao Ahwan, a Chinese national, and her husband, Kao Shuli, opened the Orlando office of Means Come and bought the 7,200 Harris computer chips from Atel Electronics Corp. in New York. Means Come paid $679,000 for the chips, which were sold by Atel for use only in the United States.

However, Means Come exported the circuits without a license in three shipments in 1998, the affidavit states. "Means Come Enterprises´ customer, the Great Wall Industry Import and Export, is a state-owned corporation in China´s defense aerospace industry," the document said. "It develops strategic and tactical ballistic missiles, space launch vehicles, surface-to-air missiles, cruise missiles, military reconnaissance and communication mission and civilian satellites."

Great Wall Industry also was sanctioned in the past for its sales of missiles to Pakistan, Iran and Iraq.

In October 1998, Means Come officials in Florida were questioned about the circuit exports and other weapons-related technology sales. One company executive, Francis Chan, was questioned by Commerce export control agents and told them the company recently sought to purchase "U.S.-origin nuclear electronics for export to the PRC."

The parts were to be transferred to the China National Aero-Technology Import & Export Corp., known as CATIC, the affidavit said, but the sale never took place after Mr. Chan learned it required a U.S. export license.

CATIC was indicted in 1999 for illegally diverting U.S. aircraft manufacturing machine tools to a military plant. On May 11, it agreed to pay $1.3 million in fines for using McDonnell Douglas aircraft machine tools meant for commercial purposes to make Silkworm anti-ship missiles.

The company also brought officials from China´s state-run China Aerospace Corp. to the United States for inspections of technical equipment at its Orlando offices. The affidavit states that China Aerospace "specializes in various space products, such as satellites, missiles, launch vehicles and ground support systems."

Gary Milhollin, weapons proliferation specialist and director of the Wisconsin Project on Nuclear Arms Control, said the chips have military applications and could be used by the Chinese military to "improve their ability to target U.S. cities with long-range missiles."

Mr. Milhollin said the Bush administration should reverse the Clinton administration policy of "looking the other way and refusing to put Chinese companies like the Chinese Academy of Space Technology, CATIC, and China Aerospace Corp. on a special government watch list."

-- Anonymous, May 24, 2001