By: Dr. Sam Vaknin
Also published by United Press International (UPI)
The Web site of GURPS (Generic Universal Role Playing
System) lists 18 "state of the art equipments (sic) used for
advanced spying". These include binoculars to read lips,
voice activated bugs, electronic imaging devices,
computer taps, electromagnetic induction detectors,
acoustic stethoscopes, fiber optic scopes, detectors of
acoustic emissions (e.g., of printers), laser mikes that can
decipher and amplify voice-activated vibrations of
windows, and other James Bond gear.
Such contraptions are an integral part of industrial
espionage. The American Society for Industrial Security
(ASIC) estimated a few years ago that the damage caused
by economic or commercial espionage to American
industry between 1993-5 alone was c. $63 billion.
The average net loss per incident reported was $19 million
in high technology, $29 million in services, and $36
million in manufacturing. ASIC than upped its estimate to
$300 billion in 1997 alone - compared to $100 billion
assessed by the 1995 report of the White House Office of
Science and Technology.
This figures are mere extrapolations based on anecdotal
tales of failed espionage. Many incidents go unreported.
In his address to the 1998 World Economic Forum, Frank
Ciluffo, Deputy Director of the CSIS Global Organized
Crime Project, made clear why:
"The perpetrators keep quiet for obvious reasons. The
victims do so out of fear. It may jeopardize shareholder
and consumer confidence. Employees may lose their jobs.
It may invite copycats by inadvertently revealing
vulnerabilities. And competitors may take advantage of
the negative publicity. In fact, they keep quiet for all the
same reasons corporations do not report computer
intrusions".
Interactive Television Technologies complained - in a
press release dated August 16, 1996 - that someone broke
into its Amherst, NY, offices and stole "three computers
containing the plans, schematics, diagrams and
specifications for the BUTLER, plus a number of
computer disks with access codes." BUTLER is a
proprietary technology which helps connect television to
computer networks, such as the Internet. It took four years
to develop.
In a single case, described in the Jan/Feb 1996 issue of
"Foreign Affairs", Ronald Hoffman, a software scientist,
sold secret applications developed for the Strategic
Defense Initiative to Japanese corporations, such as
Nissan Motor Company, Mitsubishi Electric, Mitsubishi
Heavy Industries, and Ishikawajima-Harima Heavy
Industries. He was caught in 1992, having received
$750,000 from his "clients", who used the software in
their civilian aerospace projects.
Canal Plus Technologies, a subsidiary of French media
giant Vivendi, filed a lawsuit last March against NDS, a
division of News Corp. Canal accused NDS of hacking
into its pay TV smart cards and distributing the cracked
codes freely on a piracy Web site. It sued NDS for $1.1
billion in lost revenues. This provided a rare glimpse into
information age, hacker-based, corporate espionage
tactics.
Executives of publicly traded design software developer
Avant! went to jail for purchasing batches of computer
code from former employees of Cadence in 1997.
Reuters Analytics, an American subsidiary of Reuters
Holdings, was accused in 1998 of theft of proprietary
information from Bloomberg by stealing source codes
from its computers.
In December 2001, Say Lye Ow, a Malaysian subject and
a former employee of Intel, was sentenced to 24 months in
prison for illicitly copying computer files containing
advanced designs of Intel's Merced (Itanium)
microprocessor. It was the crowning achievement of a
collaboration between the FBI's High-Tech squad and the
US Attorney's Office CHIP - Computer Hacking and
Intellectual Property - unit.
U.S. Attorney David W. Shapiro said: "People and
companies who steal intellectual property are thieves just
as bank robbers are thieves. In this case, the Itanium
microprocessor is an extremely valuable product that took
Intel and HP years to develop. These cases should send
the message throughout Silicon Valley and the Northern
District that the U.S. Attorney's Office takes seriously the
theft of intellectual property and will prosecute these
cases to the full extent of the law".
Yet, such cases are vastly more common than publicly
acknowledged.
"People have struck up online friendships with employers
and then lured them into conspiracy to commit espionage.
People have put bounties on laptops of executives. People
have disguised themselves as janitors to gain physical
access," Richard Power, editorial director of the Computer
Security Institute told MSNBC.
Marshall Phelps, IBM Vice President for Commercial and
Industry Relations admitted to the Senate Judiciary
Committee as early as April 1992:
"Among the most blatant actions are outright theft of
corporate proprietary assets. Such theft has occurred from
many quarters: competitors, governments seeking to
bolster national industrial champions, even employees.
Unfortunately, IBM has been the victim of such acts".
Raytheon, a once thriving defense contractor, released
"SilentRunner", a $25,000-65,000 software package
designed to counter the "insider threat". Its brochure,
quoted by "Wired", says:
"We know that 84 percent of your network threats can be
expected to come from inside your organization.... This
least intrusive of all detection systems will guard the
integrity of your network against abuses from
unauthorized employees, former employees, hackers or
terrorists and competitors".
This reminds many of the FBI's Carnivore massive
network sniffer software. It also revives the old dilemma
between privacy and security. An Omni Consulting
survey of 3200 companies worldwide pegged damage
caused by insecure networks at $12 billion.
There is no end to the twists and turns of espionage cases
and to the creativity shown by the perpetrators.
On June 2001 an indictment was handed down against
Nicholas Daddona. He stands accused of a unique
variation on the old theme of industrial espionage: he was
employed by two firms - transferring trade secrets from
one (Fabricated Metal Products) to the other (Eyelet).
Jungsheng Wang was indicted last year for copying the
architecture of the Sequoia ultrasound machine developed
by Acuson Corporation. He sold it to Bell Imaging, a
Californian company which, together with a Chinese firm,
owns a mainland China corporation, also charged in the
case. The web of collaboration between foreign - or
foreign born - scientists with access to trade and
technology secrets, domestic corporations and foreign
firms, often a cover for government interests - is clearly
exposed here.
Kenneth Cullen and Bruce Zak were indicted on April
2001 for trying to purchase a printed or text version of the
source code of a computer application for the processing
of health care benefit claim forms developed by ZirMed.
The legal status of printed source code is unclear. It is
undoubtedly intellectual property - but of which kind? Is it
software or printed matter?
Peter Morch, a senior R&D team leader for CISCO was
accused on March 2001 for simply burning onto compact
discs all the intellectual property he could lay his hands on
with the intent of using it in his new workplace, Calix
Networks, a competitor of CISCO.
Perhaps the most bizarre case involves Fausto Estrada. He
was employed by a catering company that served the
private lunches to Mastercard's board of directors. He
offered to sell Visa proprietary information that he
claimed to have stolen from Mastercard. In a letter signed
"Cagliostro", Fausto demanded $1 million. He was caught
red-handed in an FBI sting operation on February 2001.
Multinationals are rarely persecuted even when known to
have colluded with offenders. Steven Louis Davis pleaded
guilty on January 1998 to stealing trade secrets and
designs from Gillette and selling them to its competitors,
such as Bic Corporation, American Safety Razor, and
Warner Lambert. Yet, it seems that only he paid the price
for his misdeeds - 27 months in prison. Bic claims to have
immediately informed Gillette of the theft and to have
collaborated with Gillette's Legal Department and the
FBI.
Nor are industrial espionage or the theft of intellectual
property limited to industry. Mayra Justine Trujillo-Cohen
was sentenced on October 1998 to 48 months in prison for
stealing proprietary software from Deloitte-Touche, where
she worked as a consultant, and passing it for its own.
Caroll Lee Campbell, the circulation manager of Gwinette
Daily Post (GDP), offered to sell proprietary business and
financial information of his employer to lawyers
representing a rival paper locked in bitter dispute with
GDP.
Nor does industrial espionage necessarily involve
clandestine, cloak and dagger, operations. The Internet
and information technology are playing an increasing role.
In a bizarre case, Caryn Camp developed in 1999 an
Internet-relationship with a self-proclaimed entrepreneur,
Stephen Martin. She stole he employer's trade secrets for
Martin in the hope of attaining a senior position in
Martin's outfit - or, at least, of being richly rewarded.
Camp was exposed when she mis-addressed an e-mail
expressing her fears - to a co-worker.
Steven Hallstead and Brian Pringle simply advertised their
wares - designs of five advanced Intel chips - on the Web.
They were, of course, caught and sentenced to more than
5 years in prison. David Kern copied the contents of a
laptop inadvertently left behind by a serviceman of a
competing firm. Kern trapped himself. He was forced to
plead the Fifth Amendment during his deposition in a civil
lawsuit he filed against his former employer. This, of
course, provoked the curiosity of the FBI.
Stolen trade secrets can spell the difference between
extinction and profitability. Jack Shearer admitted to
building an $8 million business on trade secrets pilfered
from Caterpillar and Solar Turbines.
United States Attorney Paul E. Coggins stated: "This is
the first EEA case in which the defendants pled guilty to
taking trade secret information and actually converting the
stolen information into manufactured products that were
placed in the stream of commerce. The sentences handed
down today (June 15, 2000) are among the longest
sentences ever imposed in an Economic Espionage case".
Economic intelligence gathering - usually based on open
sources - is both legitimate and indispensable. Even
reverse engineering - disassembling a competitor's
products to learn its secrets - is a grey legal area. Spying is
different. It involves the purchase or theft of proprietary
information illicitly. It is mostly committed by firms. But
governments also share with domestic corporations and
multinationals the fruits of their intelligence networks.
Former - and current - intelligence operators (i.e., spooks),
political and military information brokers, and assorted
shady intermediaries - all switched from dwindling Cold
War business to the lucrative market of "competitive
intelligence".
US News and World Report described on May 6, 1996,
how a certain Mr. Kota - an alleged purveyor of secret
military technology to the KGB in the 1980's - conspired
with a scientist, a decade later, to smuggle
biotechnologically modified hamster ovaries to India.
This transition fosters international tensions even among
allies. "Countries don't have friends - they have interests!"
- screamed a DOE poster in the mid-nineties. France has
vigorously protested US spying on French economic and
technological developments - until it was revealed to be
doing the same. French relentless and unscrupulous
pursuit of purloined intellectual property in the USA is
described in Peter Schweizer's "Friendly Spies: How
America's Allies Are Using Economic Espionage to Steal
Our Secrets."
"Le Mond" reported back in 1996 about intensified
American efforts to purchase from French bureaucrats and
legislators information regarding France's WTO,
telecommunications, and audio-visual policies. Several
CIA operators were expelled.
Similarly, according to Robert Dreyfuss in the January
1995 issue of "Mother Jones", Non Official Cover (NOC)
CIA operators - usually posing as businessmen - are
stationed in Japan. These agents conduct economic and
technological espionage throughout Asia, including in
South Korea and China.
Even the New York Times chimed in, accusing American
intelligence agents of assisting US trade negotiators by
eavesdropping on Japanese officials during the car
imports row in 1995. And President Clinton admitted
openly that intelligence gathered by the CIA regarding the
illegal practices of French competitors allowed American
aerospace firms to win multi-billion dollar contracts in
Brazil and Saudi Arabia.
The respected German weekly, Der Spiegel, castigated the
USA, in 1990, for arm-twisting the Indonesian
government into splitting a $200 million satellite contract
between the Japanese NEC and US manufacturers. The
American, alleged the magazines, intercepted messages
pertaining to the deal, using the infrastructure of the
National Security Agency (NSA). Brian Gladwell, a
former NATO computer expert, calls it "state-sponsored
information piracy".
Robert Dreyfuss, writing in "Mother Jones", accused the
CIA of actively gathering industrial intelligence (i.e.,
stealing trade secrets) and passing them on to America's
Big Three carmakers. He quoted Clinton administration
officials as saying: "(the CIA) is a good source of
information about the current state of technology in a
foreign country ... We've always managed to get
intelligence to the business community. There is contact
between business people and the intelligence community,
and information flows both ways, informally".
A February 1995 National Security Strategy statement
cited by MSNBC declared:
"Collection and analysis can help level the economic
playing field by identifying threats to U.S. companies
from foreign intelligence services and unfair trading
practices".
The Commerce Department's Advocacy Center solicits
commercial information thus:
"Contracts pursued by foreign firms that receive
assistance from their home governments to pressure a
customer into a buying decision; unfair treatment by
government decision-makers, preventing you from a
chance to compete; tenders tied up in bureaucratic red
tape, resulting in lost opportunities and unfair advantage
to a competitor. If these or any similar export issues are
affecting your company, it's time to call the Advocacy
Center".
And then, of course, there is Echelon.
Exposed two years ago by the European Parliament in
great fanfare, this telecommunications interception
network, run by the US, UK, New Zealand, Australia, and
Canada has become the focus of bitter mutual
recriminations and far flung conspiracy theories.
These have abated following the brutal terrorist attacks of
September 11 when the need for 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 over $600 billion a year invested in easily
pilfered R&D, the US 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 (e.g., France) -
or are considering to introduce them. Taiwan's National
Security Council has been debating a local version of an
economic espionage law lat month. There have been
dozens of prosecutions under the law hitherto. Companies
- such as "Four Pillars" which stole trade secrets from
Avery Dennison - paid fines of millions of US dollars.
Employees - such as PPG'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 law by July last
year.
The Economic Espionage law authorizes the FBI to act
against foreign intelligence gathering agencies toiling on
US 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 Israeli, French, Japanese,
German, British, Swiss, Swedish, and Russian, 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 US
firms. Program-enrolled French computer engineers were
arrested attempting to steal proprietary source codes from
their American employers.
In an interview he granted to the German ZDF Television
quoted by "Daily Yomiuri" and Netsafe, the former
Director of the French foreign counterintelligence service,
the DGSE, freely 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, grey and black aspects of the
granting of such major contracts, particularly in far-off
countries".
The FBI investigated 400 economic espionage cases in
1995 - and 800 in 1996. It interfaces with American
corporations and obtains investigative leads from them
through its 26 years old Development of Espionage,
Counterintelligence, and Counter terrorism Awareness
(DECA) 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 (OSAC).
These are massive operations. In 1993-4 alone, the FBI
briefed well over a quarter of a million corporate officers
in more than 20,000 firms. By 1995, OSAC collaborated
on overseas security problems with over 1400 private
enterprises. "Country Councils", comprised of embassy
official and private American business, operate in dozens
of foreign cities. They facilitate the exchange of timely
"unclassified" and threat-related security information.
More than 1600 US companies and organization are
currently permanently affiliated wit OSAC. Its Advisory
Council is made up of twenty-one private sector and four
public sector member 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 USA. The President's Annual Report to
Congress on "Foreign Economic Collection and Industrial
Espionage" dated July 1995, describes the multiple
competitive intelligence (CI) roles of the Customs
Service, the Department of Defense, the Department of
Energy, and the CIA.
The federal government alerts its contractors to CI threats
and subjects them to "awareness programs" under the
DOD's Defense Information Counter Espionage (DICE)
program. The Defense Investigative Service (DIS)
maintains a host of useful databases such as the Foreign
Ownership, Control, or Influence (FOCI) 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.
According to the aforementioned report to Congress:
"The industries that have been the targets in most cases of
economic espionage and other collection activities include
biotechnology; aerospace; telecommunications, including
the technology to build the 'information superhighway';
computer software/ hardware; advanced transportation
and engine technology; advanced materials and coatings,
including 'stealth' technologies; energy research; defense
and armaments technology; manufacturing processes; and
semiconductors. Proprietary business information-that is,
bid, contract, customer, and strategy in these sectors is
aggressively targeted. Foreign collectors have also shown
great interest in government and corporate financial and
trade data".
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 NGO's, 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.
On 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 (RIKEN) in Japan - an
outfit 94 funded by the Japanese government. The
indictment called RIKEN "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.
The following ad appeared in the Asian Wall Street
Journal in 1991 - followed by a contact phone number in
western Europe:
"Do you have advanced/privileged information of any
type of project/contract that is going to be carried out in
your country? We hold commission/agency agreements
with many large European companies and could introduce
them to your project/contract. Any commission received
would be shared with yourselves".
Ben Venzke, publisher of Intelligence Watch Report,
describes how Mitsubishi filed c. 1500 FOIA (Freedom of
Information Act) requests in 1987 alone, in an effort to
enter the space industry. The US Patent office is another
great source of freely available proprietary information.
Industrial espionage is not new. In his book, "War by
Other Means: Economic Espionage in America", The
Wall Street Journal's 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 USA). Many businessmen double as
politicians and numerous politicians serve on corporate
boards.
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"
versus "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.