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

Obama: Alaskans Feel Signs of Climate Change

They're seeing bigger storm surges as sea ice melts, more wildfires, erosion of glaciers, shorelines More

1855 Slave Brochure Starkly Details Sale of Black Americans

Document lists entire families that were up for sale in New Orleans, offering graphic insight into the slavery trade More

Katrina Brought Enduring Changes to New Orleans

The city’s recovery is the result of the people and culture the city is famous for, as well as newcomers and start-up industries 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.
Colombians Flee Venezuela as Border Crisis Escalatesi
X
August 27, 2015 2:08 AM
Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Is China's Economic Data Accurate?

Some investors say China's wild stock market gyrations have been made worse by worries about the reliability of that nation's economic data. And some critics say the reports can mislead investors by painting an unrealistically-strong picture of the economy. A key China scholar says Beijing is not fudging ((manipulating)) the numbers, but that the economy is evolving quickly from smoke-stack industries to services, and the ways of tracking new economic activity are falling behind the change. V
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Shipping Containers Provide Experimental Housing

Housing prices around the San Francisco Bay area are out of reach for many people, so some young entrepreneurs, artists and tech industry workers are creating their own houses using converted shipping containers. But as VOA's Mike O’Sullivan reports from Oakland, the effort requires ingenuity and dealing with restrictive local laws.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video Technique May Eliminate Drill-and-Fill Dental Care

Many people dread visiting dentists because they're afraid of drills. Now, however, a technology developed by a British firm promises to eliminate the need for mechanical cleaning of dental cavities by speeding a natural process of tooth repair. VOA’s George Putic reports.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.
Video

Video French Experiment in Integrating Roma Under Threat

Plans to destroy France’s oldest slum have sparked an outcry on the part of its Roma residents. As Lisa Bryant reports from the Paris suburb of La Courneuve, rights groups argue the community is a fledgling experiment on integrating Roma who are often outcasts in many parts of Europe.
Video

Video Kenyans Turn to Agriculture for Business

Each year Kenyan universities continue to churn out graduates for the job market despite the already existing high rate of unemployment among youth in the country. Some of these young men and women have realized that agriculture can be as rewarding as any other business or job, and they are resorting to agribusiness in large numbers as a way of tackling unemployment. Rael Ombuor reports for VOA.
Video

Video First Women Graduate Elite Army Ranger School

Two women are making history for the U.S. Army by proving they are among the toughest of the tough. VOA's Carla Babb reports from Fort Benning, Georgia as 94 men and those two women rise as graduates of the difficult Ranger school.

VOA Blogs