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Former IBM Developer Sentenced for Espionage, Theft of Trade Secrets

FILE - The IBM logo is seen at the SIBOS banking and financial conference in Toronto, Ontario, Canada, Oct. 19, 2017.
FILE - The IBM logo is seen at the SIBOS banking and financial conference in Toronto, Ontario, Canada, Oct. 19, 2017.

A former software engineer for IBM in China has been sentenced to five years in prison for stealing the source code for highly valuable software developed by the tech company, the U.S. Justice Department announced Friday.

Xu Jiaqiang, 31, was sentenced Thursday by a federal judge in White Plains, New York, months after he pleaded guilty to three counts of economic espionage and three counts of theft, possession and distribution of trade secrets.

Prosecutors said Xu stole the source code for computer performance-enhancing software while working for IBM from 2010 and 2014, with the intent to benefit China's National Health and Family Planning Commission.

Acting Assistant Attorney General Dana J. Boente of the Justice Department's national security division said the agency “will not hesitate to pursue and prosecute those who steal from American businesses.”

Xu, a Chinese national, “is being held accountable for engaging in economic espionage against an American company,” Boente said in a statement.

U.S. Attorney Geoffrey S. Berman for the Southern District of New York said, “Xu's prison sentence should be a red flag for anyone attempting to illegally peddle American expertise and intellectual property to foreign bidders.”

IBM was not identified in court documents. But a LinkedIn profile of Xu identifies him as a system developer for IBM in China from 2010 to 2014 with a master's degree from the University of Delaware.

A Justice Department spokesman declined to say whether the company in question was IBM. IBM didn't immediately respond to a request for comment.

Xu appeared on the FBI's radar screen in 2014 after the bureau received a tip that Xu, who had by then left the company, claimed to have the source code to one of company's most closely guarded software packages and was using it in “business ventures” unrelated to its clients.

The software is described as a cluster file system sold to governments and large companies and used to enhance computer performance.

Undercover FBI agents posing as an investor and project manager for a large data storage company approached Xu, who tried to sell them the software and admitted that he’d built it with stolen source code, according to prosecutors.

IBM employees later confirmed to the FBI that the software had been built by someone with access to the company’s proprietary source code.

Xu was arrested in December 2015 after meeting with an undercover agent at a White Plains hotel.