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

US Gives Malaysia Questionable Upgrade in Human Trafficking Ranks

Malaysia’s upgrade seen as removing barrier to country’s participation in the US-led 12-nation Trans-Pacific Partnership More

Turkey, US Try to Establish Buffer Despite Differences

Coalition airstrikes in proposed zone would aim to drive out Islamic extremists, allowing targeted area to come under sway of anti-Assad rebels More

Video US: Millions Exploited by Vast Fortunes of Human Trafficking

State Department's annual report calls exploitation 'modern slavery,' brutalizing girls, women into prostitution and forcing men, women and children into low-wage jobs across the globe 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.
US Calls Fight Against Human Trafficking a Must Wini
X
July 28, 2015 12:21 AM
The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video US Calls Fight Against Human Trafficking a Must Win

The United States is promising not to give up its fight against what Secretary of State John Kerry calls the “scourge” of modern slavery. Officials released the country’s annual human trafficking report Monday – a report that’s being met with some criticism. VOA’s National Security correspondent Jeff Seldin has more from the State Department.
Video

Video Iran Nuclear Pact Wins Few New US Congressional Backers

Later this week, President Barack Obama returns from a trip to Africa to confront a U.S. Congress roiled by the nuclear accord with Iran, an agreement that has received the blessing of the U.N. Security Council. Days of intensive lobbying and testimony by top administration officials have won few new congressional supporters of the pact. VOA’s Michael Bowman reports.
Video

Video Washington DC Underground Streetcar Station to Become Arts Venue

Abandoned more than 50 years ago, the underground streetcar station in Washington D.C.’s historic DuPont Circle district is about to be reborn. The plan calls for turning the spacious underground platforms - once meant to be a transportation hub, - into a unique space for art exhibitions, presentations, concerts and even a film set. Roman Mamonov has more from beneath the streets of the U.S. capital. Joy Wagner narrates his report.
Video

Video Obama Encourages Kenya to Fix Cultures of Corruption, Discrimination

President Barack Obama bid farewell to Kenya Sunday with a major speech at as stadium outside the capital Nairobi where he called on Kenyans to change the cultures of corruption and discrimination that can hold society back. VOA East Africa Correspondent Gabe Joselow has the story.
Video

Video Europe’s Twin Crises Collide in Greece as Migrant Numbers Soar

Greece has replaced Italy as the main gateway for migrants into Europe, with more than 100,000 arrivals in the first six months of 2015. Many want to move further into Europe and escape Greece’s economic crisis, but they face widespread dangers on the journey overland through the Balkans. VOA's Henry Ridgwell reports.
Video

Video Stink Intensifies as Lebanon’s Trash Crisis Continues

After the closure of a major rubbish dump a week ago, the streets of Beirut are filling up with trash. Having failed to draw up a plan B, politicians are struggling to deal with the problem. John Owens has more for VOA from Beirut.
Video

Video Paris Rolls Out Blueprint to Fight Climate Change

A U.N. climate conference in December aims to produce an ambitious agreement to fight heat-trapping greenhouse gases. But many local governments are not waiting, and have drafted their own climate action plans. That’s the case with Paris — which is getting special attention, since it’s hosting the climate summit. Lisa Bryant takes a look for VOA at the transformation of the French capital into an eco-city.
Video

Video Racially Diverse Spider-Man Takes Center Stage

Whether it’s in a comic book or on the big screen, fans have always known the man behind the Spider-Man mask as Peter Parker. But that is changing, at least in the comic book world. Marvel Comics announced that a character called Miles Morales will replace Peter Parker as Spider-Man in a new comic book series. He is half Latino, half African American, and he is quite popular among comic book fans. Correspondent Elizabeth Lee reports from Los Angeles.
Video

Video California Towns Welcome Special Olympics Athletes

Cities and towns in Southern California are greeting thousands of athletes who are arriving for Special Olympics, a competition for people with intellectual disabilities. The games will run from July 25th through August 2nd. VOA's Mike O'Sullivan reports from Pasadena, California, where athletes from Namibia, Singapore and Tanzania got a rousing welcome from local residents.
Video

Video Critics of Japan Defense Policy Focus on Okinawa

In Okinawa, many locals have long complained that Tokyo places an unfair burden on the tiny island by locating most of Japan's U.S. military bases there. As Japan's government moves toward strengthening and expanding the country's defense policies, opponents of those plans are joining local protesters in Okinawa, voicing concern about where the country is headed. VOA’s Brian Padden reports from Okinawa.
Video

Video IS Uses Chemical Weapons in Syrian Attack

Islamic State militants have added a new weapon in their arsenal of fear: chemical weapons. VOA Kurdish service reporter Zana Omer was on the scene within hours of a recent attack in Hasakah, Syria, and has details of the subsequent investigation, in this report narrated by Miguel Amaya.
Video

Video Historic Symbol Is Theme of Vibrant New Show

A new exhibit in Washington is paying tribute to the American flag with a wide and eclectic selection of artwork that uses the historic symbol as its central theme. VOA’s Julie Taboh was at the DC Chamber of Commerce for the show’s opening.
Video

Video Hoverbike Flying Toward Reality

Another long-standing dream of many technological inventors is quickly approaching reality: U.S.- and British-based firms are cooperating in the development of an individual flying platform they call a hoverbike. They say it may revolutionize the concept of flying, including in the U.S. military. VOA’s George Putic reports.
Video

Video As Japan Expands Defense Role, Protests Follow

The Japanese government is moving forward with a controversial security bill that would authorize the military to fight abroad for the first time since World War II. Leaders say it is critical to defend against rising threats from China and North Korea. VOA’s Brian Padden reports from Japan on the big changes ahead, and the opposition they are drawing.
Video

Video Replacing Poppies with Coffee in Myanmar

The remote mountains of Myanmar’s Shan state are home to the second-largest opium-producing region in the world. After a drop during the 2000s, production surged in the past eight years to feed an increasing demand for heroin in China. But farmers are now making less on the crop, and the U.N. is hoping many will make the switch to growing coffee. Daniel de Carteret reports for VOA from Taunggyi.

VOA Blogs