Chinaâs President Hu Jintao promoted the emerging spirit of American-style entrepreneurialism during his visit to Washington D.C. this week for the highly-scripted U.S.-China Summit.
Jintao has not yet commented on the status of Chinese governmentâs home-grown brand of âshadow innovation,â which began nearly 30 years ago and is evolving today into an insidious and dangerous trend called âentrepreneurial espionage.â
In 1986, Deng Xiao Peng established âProgram 863,â a sort of academy of sciences and technologies charged with closing the scientific gap between China and the worldâs advanced economies in a very short period of time. The 863 program and its institutional derivatives not only sponsored actual research, they also promoted the acquisition of advanced technologies from other countries legally or illegally.
Today, counter-intelligence activities in the United States that have a nexus with China typically involve the illegal acquisition of U.S. technologies. Unlike Russian intelligence officers looking to exploit ego, greed, or other personal weaknesses, China has not normally paid agents for classified documents or engaged in clandestine activity like âdead drops.â
While some of the recent espionage cases brought against China have ties to Chinaâs intelligence services, the vast majority are linked to other state organizations, particularly the factories and research institutes of Chinaâs military-industrial complex. Multiple Chinese state entities are engaged in an active effort to acquire restricted U.S. technologies. Unlike other foreign governments, China has a history of encouraging and rewarding private individuals to obtain technology on its behalf.
Chinese intelligence practices rely on nonprofessional collectors motivated by profit, patriotism or other factors and acting either independently or on behalf of the Chinese government to gather science and technology intelligence.
Nonprofessional intelligence collectorsâincluding government and commercial researchers, students, academics, scientists, business people, delegations, and visitorsâalso provide China with a significant amount of sensitive U.S. technologies and trade secrets,â according to reports by the Office of the Director of National Intelligence. â[I]n many cases, the collection efforts of these private-sector players are driven entirely by the opportunity for commercial or professional gain and have no affiliation with [PRC intelligence].â
This practice has led to a vast amount of âentrepreneurialâ economic and industrial espionage conducted by Chinese students, trade delegations, businessmen and educational and research institutions, according to reports by the U.S.-China Economic And Security Review Commission.
The Chinese government encourages such efforts and has benefited from them. In 2009, the Commission quoted testimony provided by former FBI Special Agent I.C. Smith that:
the Ministry of State Security sometimes places pressure on Chinese citizens going abroad for educational or business purposes and may make pursuit of foreign technology a quid pro quo for permission to travel abroad. However, this phenomenon of âentrepreneurial espionageâ appears to be particularly common among businessmen who have direct commercial ties with Chinese companies and who seek to skirt U.S. export control and economic espionage laws in order to export controlled technologies to the PRC. In such instances, profit appears to be a primary motive, although the desire to âhelp Chinaâ can intersect in many cases with the expectation of personal financial gain.
âEspionage entrepreneursâ are not focused solely on obtaining state-of-the-art, high-tech data and equipment. In many cases there is no obvious direct state involvement in the theft or illegal export of controlled technology. These entrepreneurial efforts frequently take the form of âmom-and-popâ companiesâmany of them nothing more than a titular business registered at a residential addressâthat legally purchase older military technology from U.S. manufacturers or through a secondary market of defense industrial equipment auctions, or even from the Internet, and then look for customer institutions back in China.
âThere are pieces of technology . . . that the Chinese are trying to acquire that are 20, 25 years old, [and] that are mainstays of existing U.S. defense systems but come nowhere close to being considered state-of-the-art, and yet a means-ends test would correctly identify those as critical gaps in the Chinese system,â said Dr. James Mulvenon, a specialist on the Chinese military at the Defense Group, Inc., stated during testimony before the Commission in 2009.
* Espionage aimed at investment plan, not technology-Ghosn
* Renault chief says has ample proof in spying case
* Lawyer calls on Renault to provide evidence of wrongdoing
By Daniel Flynn
PARIS, Jan 23 – The chief executive of French carmaker Renault RENA.PA said on Sunday that a case of suspected industrial espionage at the company would not affect the rollout of three electric car models this year.
In his first television interview since the case erupted, Carlos Ghosn said the suspected espionage appeared to have been aimed at uncovering Renault’s investment model for its electric vehicles rather than copying the technology.
Renault, which conducted its own internal investigation into the case for several months before alerting French authorities, has fired three senior executives in connection with the case.
A lawyer for one of the three men, who strongly deny any wrongdoing and say they will sue the company for damaging their reputations, had called on Ghosn to use Sunday’s interview to present some details of the case against them.
“We have certainties. If we did not have certainties, we would not be doing this,” Ghosn told TF1 television. He declined to provide specifics of what proof Renault held, saying simply: “They are multiple and that’s exactly why we started legal procedings.”
The scandal had threatened to harm improving relations between France and China after a government source said intelligence services were looking into a possible connection with China as part of initial checks before the official probe.
The French government has played down the possibility of a link to China, saying it is not accusing any one country of involvement, while China has denied any link to the case.
Asked whether there was indeed a Chinese connection to the case, Ghosn said it was now in the hands of judicial authorities and it was up to them to decide. “We are going to cooperate and be very discrete about this affair,” he said. “What is important is that we continue to advance in a cutting edge technology in which we have an advantage of two to three years over our rivals,” he said. “We have no evidence that it was technology itself which was the objective of this procedure.”
Renault is staking its future on growth in the electric car sector and Ghosn said that “under no circumstances” would the suspected spying case affect this.
MINISTER SAYS RENAULT TOO SLOW
Industry Minister Eric Besson had told French radio earlier on Sunday that Renault should have notified authorities much sooner, rather than pursuing its own investigation to its end.
Ghosn has said he was first notified about the case in August but the company did not formally present a legal complaint until mid January.
The Renault CEO said, however, that the company had its own internal procedures which needed to be respected. He earlier told the Journal du Dimanche newspaper that the carmaker had not broken any laws by conducting its own lengthy internal inquiry into the affair before making it public. [ID:nLDE70L0CS]
Pierre-Olivier Sur, one of the lawyers defending Renault’s former vice president of advanced engineering, Michel Balthazard, said sources close to the investigation had said payments to offshore bank accounts in Liechtenstein and Switzerland had been uncovered.
“These financial flows are traceable,” Sur told Reuters, arguing that Renault as the plaintiff was not obliged to keep its evidence secret under French law.
“Let someone indicate these traces and we’ll see it doesn’t stand up, because my client has never had any offshore accounts. So there’s a mistake.”
PARIS – FRENCH Industry Minister Eric Besson on Thursday warned the country was facing ‘economic war’ following an industrial espionage scandal at automaker Renault.
‘Unfortunately, the affair appears serious,’ Mr Besson said on RTL radio, after discussing the issue with Renault management.
‘The expression ‘economic war’, while sometimes outrageous, for once is appropriate,’ he said, calling for improvements in industrial security at companies who receive public money.
‘It appears to concern the electric car, but I do not want to go further,’ said Mr Besson.
Renault said on Wednesday it had suspended three managers for leaking secrets about electric cars, with the company staking its future on environmentally friendly vehicles and aiming to produce them for the general market. — AFP
Atheros and other semiconductor companies such as AMD, Marvell Technology, Broadcom and Intel have been embroiled in the insider trader probes the past two years.
Atherosâs name has come up twice, in fact. One of its executives tipped hedge fund manager Ali Far to the firmâs financial performance for the fiscal quarter ended in December 2008. In the spearate but related âexpert networkâ probe, Don Ching Trang Chu, an employee at Primary Global Research, allegedly provided inside information about Atheros directly to Richard Choo-Beng Lee, who was a cooperating witness in the Galleon case and co-founded Spherix Capital with Far.
So was there any suspicious Atheros trading before last weekâs deal?
The short answer: No.
Atherosâs shares opened the day at $37.14 and were trading at $37.18 at 3 p.m. when the New York Times broke the news of an impending deal. As the chart below shows, it shares did not surge until after the news came out. Often in recent years, there is a jump in shares of a target company in the days before a transaction is announced. Â For example, Merckâs acquisition of Schering-Plough. Shares and options, which had been languishing for more than a year, had spikes in the days before the $32.6 billion offer.
What about the options market? Deal Journal colleague Brendan Conway reports
In the stock-options market, the big Atheros action came only after the first reports of the deal. There were dribs and drabs of trading activity Monday and then a tidal wave of volume on Tuesday afternoon that continued into Wednesday.
In the options market, a favorite venue for traders who make speculative takeover bets, itâs always possible that some of the dribs were the work of traders acting on inside information. But, as in the stock market, market participants werenât crying foul the way they often do when others have acted illegally on their knowledge.
A French official, meanwhile, sought to play down the possibility of Chinese involvement in the matter, saying the government would wait for the results of an investigation.
In an interview published Saturday in the French newspaper Le Monde, Patrick Pelata, Renaultâs chief operating officer, said that an internal investigation that began in August had led the company to conclude it was the target of âa system organized to collect economic, technological and strategic information to serve interests abroad.â
