News / USA

China’s Alleged Cybertheft Could Cost US Billions

FILE: U.S. officials announced charges against five Chinese military officers at a Washington, D.C., news conference May 19, 2014. Attorney General Eric Holder, second from left, is joined by, from left, David Hickton, John Carlin and Robert Anderson.FILE: U.S. officials announced charges against five Chinese military officers at a Washington, D.C., news conference May 19, 2014. Attorney General Eric Holder, second from left, is joined by, from left, David Hickton, John Carlin and Robert Anderson.
x
FILE: U.S. officials announced charges against five Chinese military officers at a Washington, D.C., news conference May 19, 2014. Attorney General Eric Holder, second from left, is joined by, from left, David Hickton, John Carlin and Robert Anderson.
FILE: U.S. officials announced charges against five Chinese military officers at a Washington, D.C., news conference May 19, 2014. Attorney General Eric Holder, second from left, is joined by, from left, David Hickton, John Carlin and Robert Anderson.
A U.S. manufacturer was in the midst of a trade dispute with Asian competitors it said was flooding the market with cut-rate solar panels when it learned of a glaring new vulnerability: Its online communications were being hacked.
 
SolarWorld executives “were notified by the FBI that there was a penetration, and it was ongoing,” company spokesman Ben Santarris said, describing the “exfiltrations” of thousands of sensitive emails and documents.
 
Santarris’ dispassionate language contrasts with the anger and frustration that U.S. officials expressed this week. In a landmark case, they charged five Chinese military officers with stealing information from a handful of prominent technology companies, including SolarWorld, U.S. Steel Corp. and Westinghouse Electric Co.
 
While the exact toll of the alleged espionage and theft would be almost impossible to calculate, experts say, the potential costs to America’s economy could be staggering in terms of lost sales, profits and jobs. 
 
The theft of a single company’s proprietary information about products or processes “could be worth millions, it could be billions,” said Halina Dziewit, who specializes in emerging technology as an intellectual property attorney for the Washington-based law firm Patton Boggs LLP.
 
“You’re losing your competitive advantage. You’re not getting the maximum return on your investment,” creating disincentives for more research and development, she said.
 
Overall, foreign theft of U.S. intellectual property costs “$300 billion a year and up, and that’s conservative,” said Slade Gorton, a former U.S. senator and member of the Commission on the Theft of American Intellectual Property.
 
Report warned about China
 
Last May, the commission issued a report that cited the impact of intellectual property theft by foreigners, singling out China as the most egregious offender. 
 
The indictment announced Monday was brought by a grand jury in the Western District of Pennsylvania.
 
FILE: A poster of five Chinese military officers accused of stealing U.S. companies’ trade secrets is displayed at the Justice Department in Washington, D.C., on May 19, 2014.FILE: A poster of five Chinese military officers accused of stealing U.S. companies’ trade secrets is displayed at the Justice Department in Washington, D.C., on May 19, 2014.
x
FILE: A poster of five Chinese military officers accused of stealing U.S. companies’ trade secrets is displayed at the Justice Department in Washington, D.C., on May 19, 2014.
FILE: A poster of five Chinese military officers accused of stealing U.S. companies’ trade secrets is displayed at the Justice Department in Washington, D.C., on May 19, 2014.
Five of the alleged six hacking victims are located in Pittsburgh: Westinghouse Electric Co., Alcoa World Alumina, Allegheny Technologies, U.S. Steel Corp. and the United Steelworkers Union. SolarWorld, a wholly owned subsidiary of SolarWorldAG in Germany, is based in Hillsboro, Ore. 
 
China denied the accusations, lodging a protest late Monday with U.S. Ambassador Max Baucus. China’s Defense Ministry warned the indictments could harm the two countries’ ongoing discussions concerning cybersecurity and the military.
 
A spokesman for China’s foreign ministry, Hong Lei, denied his country ever had engaged in cybertheft of trade secrets. And China's Defense Ministry accused the United States of having "ulterior motives" and of demonstrating "hypocrisy and double standards."
 
FBI Director James Comey, in an interview this week with ABC News, said the United States conducted surveillance for national security purposes but never shared information with businesses, which would give them an unfair competitive edge.
 
For years, the United States had accused China of stealing trade secrets but hadn’t adequately substantiated its claims, said David Hickton, U.S. attorney for the Western District of Pennsylvania.
 
“This indictment changes that,” Hickton told VOA in an interview.  “… We have given China the evidence.”
 
Indictment details problems
 
The indictment charges the Chinese with computer hacking, economic espionage and other offenses. It alleges that, from 2006 to 2012, they broke into computer systems, stealing trade secrets or other sensitive information that might benefit Chinese companies or “that would provide a competitor, or an adversary in litigation, with insight into the [organization’s] strategy and vulnerabilities,” according to a Department of Justice news release Monday.
 
For instance, the indictment contends the hackers stole key information about U.S. Steel’s cutting-edge stainless-steel pipes, installing malware on computers and snagging “hostnames and descriptions” of computers, “including those that controlled physical access to company facilities.” Westinghouse, while building four power plants in China, allegedly suffered the theft of “confidential and proprietary technical and design specifications” for pipes.  
 
“There is a direct loss to the company when cyber-espionage is done,” Hickton said, “… especially when it’s done by a state actor for a state company.”
 
He also emphasized the “downstream losses” to ordinary Americans, particularly those employed by the named companies. They “lose their jobs because the companies they work for can’t compete,” he told VOA.
 
Exact accounting ‘unknowable’
 
The hackers allegedly stole SolarWorld information about “cash flow, manufacturing metrics, product line information, costs and privileged attorney-client communications” about ongoing trade litigation, the indictment says.
 
SolarWorld’s spokesman, Santarris,  told VOA he couldn’t estimate the company’s related financial losses because of “too many unknowables.” Through cyber spying, he said, “unfair advantages could have been secured in a variety of directions: knowing about our cost structure, our financial position, our technological road map, our innovative ideas, our strategy for trying to curb anti-competitive trade.” 
 
Santarris said SolarWorld had been in litigation with China over what the company believed was the “dumping” of low-cost solar panels in the United States, creating unfair competition. The U.S. Commerce Department concurred in mid-2012 – right around the time the FBI notified SolarWorld executives of ongoing hacking.  “All of the personnel who were targeted for this infiltration had connections to the trade cases,” Santarris added.
 
SolarWorld cooperated with the FBI investigation, Santarris said.
 
Helping investigators collect evidence means a company can risk further exposure, said Melodi Mosley Gates, a privacy expert and an associate with Patton Boggs. She praised what she sees as increased collaboration between private companies and the government, “a critical part of improving cybersecurity.” 
 
Gorton, of the intellectual property theft commission, said he was encouraged by the government’s indictment, which aligns with the commission’s call for more aggressive investigation and prosecution of trade-secret theft, especially involving cybersecurity, by the Justice Department and FBI.
 
“This kind of cybertheft will only end when the cost of doing it exceeds the benefits the Chinese get from it,” Gorton said. “That means dealing with our own domestic market [to] much more quickly seize goods that benefit from intellectual property theft, and perhaps going beyond that.”
 
VOA’s Mandarin Service reporters Wei Hu and Yuwen Cheng contributed to this story.

You May Like

Nigeria Incumbent in Tight Spot as Poll Nears

Muhammadu Buhari is running a strong challenge to Goodluck Jonathan, amid a faltering economy and Boko Haram security worries More

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo tells VOA that despite her fame, life is still a struggle as she waits for government's promise of support to arrive More

Video Cambodian Land Grabs Threaten Traditional Communities

At least seven different indigenous groups in Ratanakiri depend mainly on forest products for their survival, say they face loss of their land, traditional way of life More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Liberia's Almost Last Ebola Patient Grateful but Still Grievingi
X
Benno Muchler
March 26, 2015 3:41 PM
Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.
Video

Video US, South Korea Conduct Joint Military Exercises

The Eighth U.S. Army Division and the Eighth Republic of Korea Mechanized Infantry Division put on a well orchestrated show of force for the media this week during their joint military training exercises in South Korea. VOA’s Seoul correspondent Brian Padden was there and reports the soldiers were well disciplined both in conducting a complex live fire exercise and in staying on message with the press.
Video

Video Space Program Status Disappoints 'Last Man on the Moon'

One of the films that drew big crowds last week at the annual South by Southwest festival in Austin, Texas, tells the story of the last human being to stand on the moon, U.S. astronaut Eugene Cernan. It has been 42 years since Cernan returned from the moon and he laments that no one else has gone there since. VOA’s Greg Flakus reports.
Video

Video Young Filmmakers Shine Spotlight on Giving Back

A group of student filmmakers from across the United States joined President Barack Obama at the White House this month for the second annual White House Student Film Festival. Fifteen short films were officially selected from more than 1,500 entries by students aged 6 through 18. The filmmakers and their families then joined the president and a group of celebrities for a screening of their films. VOA’s Julie Taboh reports.
Video

Video VOA Exclusive: Interview with Afghan President Ashraf Ghani

Afghan President Ashraf Ghani, during his first visit as president to Washington, gave a one-on-one interview with VOA Afghan Service reporter Said Suleiman Ashna, about his request for a change in U.S. troop levels, the threat from the Islamic State, and repairing relations with the United States and Pakistan. The interview was held at Blair House, late Sunday, in Pashto.
Video

Video California Science Center Tells Story of Dead Sea Scrolls

The ancient manuscripts were uncovered in the mid-20th century, and they are still yielding clues about life and religious beliefs in ancient Israel. As VOA's Mike O'Sullivan reports, an exhibit in Los Angeles shows how modern science is bringing the history of these ancient documents to life.
Video

Video Angelina Jolie Takes Another Bold Step

Hollywood actress and filmmaker Angelina Jolie has revealed she had her ovaries and fallopian tubes removed to lower her odds of getting cancer. Doctors say the huge publicity over her decision will help raise awareness about the importance of cancer screening. VOA’s George Putic has more

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More