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Analysis: The industrious spies - III

By SAM VAKNIN, UPI Senior Business Correspondent   |   May 15, 2002 at 12:31 PM   |   Comments

SKOPJE, Macedonia, May 15 (UPI) -- The cases of individuals and companies committing industrial espionage are rampant, but the problem is not limited to single unhappy employees and firms trying to find out their competitors' trade secrets.

But even countries get involved, which brings us to Echelon. Exposed on March 2000 by the European Parliament with great fanfare, this telecommunications interception network, run by the United States, United Kingdom, New Zealand, Australia and Canada has become the focus of bitter mutual recriminations and far flung conspiracy theories.

These have abated following the terrorist attacks of Sept. 11 when the need for an Echelon-like system with even laxer legal control was made abundantly clear. France, Russia and 28 other nations operate indigenous mini-Echelons, their hypocritical protestations to the contrary notwithstanding.

But, with well more than $600 billion a year invested in easily pilfered research and development, the United States is by far the prime target and main victim of such activities rather than their chief perpetrator. The harsh -- and much industry lobbied -- "Economic Espionage (and Protection of Proprietary Economic Information) Act of 1996" defines the criminal offender thus: "Whoever, intending or knowing that the offense will benefit any foreign government, foreign instrumentality, or foreign agent, knowingly" and "whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will , injure any owner of that trade secret:

-- (1) steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains a trade secret

-- (2) without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys a trade secret

-- (3) receives, buys, or possesses a trade secret, knowing the same to have been stolen or appropriated, obtained, or converted without authorization

-- (4) attempts to commit any offense described in any of paragraphs (1) through (3); or

-- (5) conspires with one or more other persons to commit any offense described in any of paragraphs (1) through (4), and one or more of such persons do any act to effect the object of conspiracy."

Other countries either have similar statutes or are considering introducing them. Taiwan's National Security Council has been debating a local version of an economic espionage law.

There have been dozens of prosecutions under the EEA. Companies -- such as "Four Pillars" which stole trade secrets from Avery Dennison -- paid fines of millions of dollars. Employees -- such as PPG Inc.'s Patrick Worthing -- and their accomplices were jailed.

Foreign citizens, like the Taiwanese Kai-Lo Hsu and Prof. Charles Ho from National Chiao Tung university, were detained. Mark Halligan of Welsh and Katz in Chicago lists on his Web site more than 30 important economic espionage cases tried under the EEA by July 2001.

The EEA authorizes the FBI to act against foreign intelligence gathering agencies toiling on U.S. soil with the aim of garnering proprietary economic information. During the Congressional hearings that preceded the law, the FBI estimated that no less that 23 governments -- including the Israelis, French, Japanese, Germans, British, Swiss, Swedes and Russians, were busy doing exactly that. Louis Freeh, the former director of the FBI, put it succinctly, "Economic espionage is the greatest threat to our national security since the Cold War."

The French Ministry of Foreign Affairs runs a program which commutes military service to work at high-tech U.S. firms. Program-enrolled French computer engineers were arrested attempting to steal proprietary source codes from their American employers. In an interview with German ZDF Television quoted by "Daily Yomiuri" and Netsafe, the former director of the French foreign counterintelligence service, the DGSE, confessed: "All secret services of the big democracies undertake economic espionage ... Their role is to peer into hidden corners and in that context business plays an important part ... In France the state is not just responsible for the laws, it is also an entrepreneur. There are state-owned and semi-public companies. And that is why it is correct that for decades the French state regulated the market with its right hand in some ways and used its intelligence service with its left hand to furnish its commercial companies ... It is among the tasks of the secret services to shed light on and analyze the white, gray and black aspects of the granting of such major contracts, particularly in far-off countries."

The FBI works with U.S. corporations and obtains investigative leads from them through its 26-year-old Development of Espionage, Counterintelligence, and Counter Terrorism Awareness Program renamed ANSIR (Awareness of National Security Issues and Response). Every local FBI office has a White Collar Crime squad in charge of thwarting industrial espionage.

The State Department runs a similar outfit called the Overseas Security Advisory Council. More than 1,600 U.S. companies and organizations are permanently affiliated with OSAC. Its advisory council is made up of 21 private-sector and four public-sector organizations that, according to OSAC, "represent specific industries or agencies that operate abroad. Private sector members serve for two to three years. More than fifty U.S. companies and organizations have already served on the council. Member organizations designate representatives to work on the council.

These representatives provide the direction and guidance to develop programs that most benefit the U.S. private sector overseas. Representatives meet quarterly and staff committees tasked with specific projects. Current committees include Transnational Crime, Country Council Support, Protection of Information and Technology and Security Awareness and Education."

But the FBI is only one of many agencies that deal with the problem in the U.S. The federal government alerts its contractors to CI threats and subjects them to "awareness programs" under the DOD's Defense Information Counter Espionage program. The Defense Investigative Service maintains a host of useful databases such as the Foreign Ownership, Control, or Influence register. It is active otherwise as well, conducting personal security interviews by industrial security representatives and keeping tabs on the foreign contacts of security cleared facilities. And the list goes on.

The collection methods range from the traditional -- agent recruitment and break ins -- to the technologically fantastic. Mergers, acquisitions, joint ventures, research and development partnerships, licensing and franchise agreements, friendship societies, international exchange programs, import-export companies -- often cover up for old fashioned reconnaissance. Foreign governments disseminate disinformation to scare off competitors -- or lure then into well-set traps.

Foreign students, foreign employees, foreign tourist guides, tourists, immigrants, translators, affable employees of non-governmental organizations, eager consultants, lobbyists, spin doctors and mock journalists are all part of national concerted efforts to prevail in the global commercial jungle. Recruitment of traitors and patriots is at its peak in international trade fairs, air shows, sabbaticals, scientific congresses, and conferences.

In May 2001, Takashi Okamoto and Hiroaki Serizwa were indicted of stealing DNA and cell line reagents from Lerner Research Institute and the Cleveland Clinic Foundation. This was done on behalf of the Institute of Physical and Chemical Research in Japan -- an outfit 94 percent funded by the Japanese government. The indictment called the institute "an instrumentality of the government of Japan".

The Chinese Ministry of Posts and Telecommunications was involved on May 2001 in an egregious case of theft of intellectual property. Two development scientists of Chinese origin transferred the PathStar Access Server technology to a Chinese corporation owned by the ministry. The joint venture it formed with the thieves promptly came out with its own product probably based on the stolen secrets.

Industrial espionage is not new. In his book, "War by Other Means: Economic Espionage in America," John Fialka, vividly describes how Frances Cabot Lowell absconded from Britain with the plans for the cutting edge Cartwright loom in 1813.

Still, the phenomenon has lately become more egregious and more controversial. As Cold War structures -- from NATO to the KGB and the CIA -- seek to redefine themselves and to assume new roles and new functions, economic espionage offers a tempting solution. Moreover, decades of increasing state involvement in modern economies have blurred the traditional demarcation between the private and the public sectors. Many firms are either state-owned (in Europe) or state-financed (in Asia) or sustained by state largesse and patronage (the United States). Many businessmen double as politicians and numerous politicians serve on corporate boards.

President Eisenhower's "military-industrial complex" though not as sinister as once imagined is, all the same, a reality. The deployment of state intelligence assets and resources to help the private sector gain a competitive edge is merely its manifestation. As foreign corporate ownership becomes widespread, as multinationals expand, as nation-states dissolve into regions and coalesce into supranational states -- the classic, exclusionary, and dichotomous view of the world ("we" vs. "they") will fade. But the notion of "proprietary information" is here to stay. And theft will never cease as long as there is profit to be had.


(This is Part 3 of a survey of industrial espionage. Part 1 appeared Monday, Part 2 Tuesday.)

Topics: Louis Freeh
© 2002 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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