FRANCE is the country that conducts the most industrial espionage on other European countries, even ahead of China and Russia, said leaked US diplomatic cables quoted today by Norway’s Aftenposten.
“French espionage is so widespread that the damages (it causes) the German economy are larger as a whole than those caused by China or Russia,” an undated note from the US embassy in Berlin said, according to a Norwegian translation by Aftenposten.
The Norwegian daily of reference said last month it had obtained all the 250,000 US diplomatic cables WikiLeaks had accessed and would publish stories based on them independently of the whistleblowing website’s own releases.
Its article based on leaked cables included an October 2009 comment from Berry Smutny, the head of German satellite company OHB Technology, quoted in the diplomatic note.
“France is the Empire of Evil in terms of technology theft, and Germany knows it,” a Norwegian translation of Smutny’s comment in the cable read.
OHB Technology became known to the general public in January 2010 when it obtained a contract for the construction of several satellites for the Galileo satellite navigation system, a much-delayed European challenger to the American-developed Global Positioning System (GPS).
The small German firm won the bid for the contract over Astrium, a subsidiary of pan-European giant EADS.
A leaked US cable posted yesterday by Aftenposten described Franco-German competition in terms of spy satellite development.
The cable said Germany was developing, with the help of the US, its own High Resolution Optical Satellite System (HiROS), despite the objections of France, which is leading pan-European efforts in the field with its Helios satellites.
A chain of restaurants affiliated with the North Korean government recently opened a Dubai branch. Visitors to the Okryu-Gwan restaurant have the rare chance to enjoy traditional North Korean dishes while putting valuable hard currency into Pyongyang’s pocket.
Okryu-Gwan is basedin Pyongyang and also maintains outlets in China, Nepal, and
Thailand. The Dubai edition, which opened last summer, is a joint venture between an undisclosed United Arab Emirates-based partner and several other unnamed shareholders. But according to Abu Dhabi’s The National newspaper, the real shots are called by North Korea through an intermediary drawn from the expatriate Chinese community:
The Chinese businessman Gavin Tang, who has worked in the Emirates for
more than two decades, has said he also has a stake in the venture.
Still, there’s no question about its management according to the
manager. “Everyone knows that it is run by the North Korean government,” said that executive, who identified herself only as Ms Jin. “A group of
people from the foreign ministry direct the restaurant.”
Mr Tang agreed to act as a local fixer for the business after meeting Ms
Jin at a franchise restaurant in Beijing, where she also worked as a
manager. Though he denied North Korean officials were directing
operations, he said there were “special people” taking care of
them.”
Okryu-Gwan is also reportedly opening their first European branch in the
Netherlands. The restaurant in the Netherlands will instead be called Pyongyang and is scheduled to swing open its doors later this year.
But the big question for any restaurant is of course: How’s the food? The
Korean Central News Agency, North Korea’s state news agency, ran
this blurb on the central Pyongyang restaurant in 1998:
National dishes are mainly served in it. Those include Pyongyang cold noodle,
cold noodle on shallow round plate, gray mullet soup and boiled rice,
Pyongyang Onban, beef rib soup, sinsollo and green bean pancake. In
particular, Pyongyang cold noodle is popular among the people at home
and abroad. The dish is chiefly made of buckwheat. The thin and tough
noodles with various kinds of mince are served with noodle broth
processed with much care. The noodle broth is made of water boiled
with pheasant, beef and chicken and cooled. It makes people’s mouth
water…Cuisines of other countries are served for foreign tourists…General Secretary Kim Jong Il sent thanks to the employees for their
excellent services on some 50 occasions.”
More pictures
of the food, which look like the North Korean take on haute cuisine, can be viewed here.
Arecent NPR visit to the Dubai branch found a surreal scene:
Asthe food begins to arrive, a synthesizer strikes up a
theremin-sounding introduction, and soon the waitresses are onstage,
belting out Korean songs and decades-old American pop. […]
Potential staff members are thoroughly vetted for political
reliability, he added, and pressure may be used against family
members to minimize the risk of defection. But as long as the
restaurants meet their monthly revenue quotas, the regime tends not
to interfere.
The restaurants have also been also tied to the murky world of intelligence and
espionage. A North Korean man defected to India through the Kathmandu restaurant.
The man was reportedly the former manager of the Kathmandu Okryu-Gwan
and fled to India with a large amount of cash taken from the restaurant.
According to media reports, foreign branches of the restaurant are required to send home at least $30,000 annually in addition to paying their own expenses. While returns sent by the restaurants back to the mother country remain relatively small, they still play an important role. While North Korea’s primary method of raising foreign capital is weapons sales, it is also generally believed that the North Korean government has a major hand in Japan’s pachinko industry.
Follow the author of this story,
Neal Ungerleider, on Twitter.
Indian private investigator fits a compact camera he uses for surveillance in the pocket of his shirt, at his office in Mumbai, May 30, 2007. (Sajjad Hussain/AFP/Getty Images)
NEW DELHI, India — For the past month, Indian business leaders have watched in horror as a series of tapped telephone conversations between a powerful lobbyist and top industrialists have surfaced in the press.
But local security experts say the revelations associated with the alleged 2G telecom scam are just the tip of the iceberg when it comes to vulnerable company secrets. In India’s fast-growing economy, they say, no industry is booming bigger than corporate espionage.
“If you look at all the companies doing business in the electronic sector in India, the chances are that four out of 10 would invariably have faced or are facing such issues,” said Pavan Duggal, a supreme court lawyer who specializes in cyber law. “The reality is that these thefts of intellectual property rights and confidential data are hitting the corporate world in a big way.”
Cut-throat competition provides ample motive, as companies battle to carve out brand positions, retain top talent and develop new products. A lax legal environment allows spies to operate with relative impunity. And a boom in white collar jobs means that employees shift jobs every few months — making it all too easy for companies to plant a mole in competing operations, and all too tempting for job-jumpers to walk away with sensitive information or protected intellectual property.
“The perpetrators of unauthorized access of corporate data do it with impunity, knowing full well that the law is deficient and that it will take a long time for them to be prosecuted,” said Duggal.
According to a recent survey conducted by the consultancy firm KPMG, 14 percent of Indian companies have been victims of corporate spying, while another 39 percent fell prey to intellectual property theft and computer-related fraud — and business-sensitive information and user IDs/passwords were the principal targets.
The potential losses from this kind of spying are difficult to calculate — since nobody knows what effect a stolen ad campaign might have had, or how a stolen design might have dominated the market. But there’s no doubt that big money is at stake. Early this year, for instance, India’s Thermax agreed to pay Pennsylvania-based Purolite International $38 million to settle a lawsuit over the alleged theft of proprietary water purification technology.
“You may not use [your competitor’s] research work,” said Kunwar Vikram Singh, president of the Indian Council of Corporate Investigators. “But suppose you have already developed your own brilliant idea. Even to launch that brilliant idea in the shape of a product you must know the market.”
The spies aren’t always after new technology. The targeted information ranges from client lists to proprietary software to advertising strategies, says Singh.
Not long ago, for instance, a company was readying a new ad blitz when, on the day before the launch, executives saw their planned slogan all over the city on their morning commute — on billboards advertising one of their competitors.
In another case, one of the country’s foremost motorcycle and scooter manufacturers lost the design and specifications for an upcoming model to a competitor through a spy planted with the contractor that was running the company cafeteria.
“They planted a guy … who knew a little about IT and could become friendly with people, and then when the office was closed he would access employees’ computers and get the information out,” said Ravi Kapur of ACE Detectives, the private investigator hired to plug the leak.
Part of the problem is that Indian laws governing these areas are weak and ambiguous. India has no specific data protection law, so the theft of sensitive information like marketing strategies or employee salaries — which is not governed by intellectual property laws — throws up a host of legal questions.
And while the unauthorized downloading or copying of computer files is illegal, the civil and criminal penalties are minor compared with the sums at stake for corporations. A criminal booked for data theft under the Information Technology Act, for instance, faces a maximum three-year term in prison and a maximum fine of around $10,000, and the most a victim can seek in civil damage is about $1 million — which the Thermax-Purolite settlement reveals as a pittance.
“It’s extremely lax,” said Kapur. “People don’t generally get caught. Then, even if this guy gets caught, they’re not after this guy [who took the information] — they’re after the competitors. Now, to ensure that the whole chain gets into the loop is not the easiest of tasks.”
Private investigators have been the biggest beneficiaries, as the budding industry profits from both sides of the information war. While none of the detective agencies interviewed would admit to conducting actual corporate espionage, firms that perform similar work — such as planting spies for clients within labor unions — say that they get requests to steal competitive information on a daily basis.
Moreover, there’s almost as much money to be made in protecting firms from spies as there is from spying on them, not only through investigating leaks, but also in risk analysis, security systems design and — since it’s the enemy inside that’s most feared — employee background checks.
And that means going to work for an outsourcing company is starting to seem like applying to the Pentagon.
“Before, people were reluctant to snoop around,” said Singh. “Now, they go deep.”
The hedge fund industry must be shuddering as Federal authorities in the U.S. release more details of its widening insider-trading investigation.
The latest complaint filed by prosecutors provides some unflattering excerpts of telephone conversations between a California-based technology consultant, Winifred Jiau, and two unnamed hedge funds.
According to prosecutors, Jiau was paid over $200,000 between September 2006 and December 2008 to provide the details of quarterly earnings reports before their public release.
During two telephone calls in May 2008, Jiau was recorded telling one of the hedge fund managers the exact details of Marvell Technology Group’s quarterly revenue, gross margin and earnings per share. For some inexplicable reason, one of the hedge funds kept digital recordings of their phone calls with Jiau that are now being used as evidence in the investigation.
Jiau has been charged with conspiracy and securities fraud. She stands accused of leaking inside information from Marvell as well as Nvidia Corporation to the hedge funds.
Investigators say one of the funds netted a profit of more than $820,000 by trading Marvell’s stock within the weeks immediately prior and after the company’s earnings report.
The latest arrest brings even further unwelcome attention to the hedge fund industry, which has managed to avoid regulatory oversight for decades. The FBI raided the offices of three hedge funds last month as part of its ongoing probe into insider trading.
The investigation has also shed light on the so-called expert-networking firms that allegedly conspired to provide confidential information to clients that included hedge funds.
According to various reports, Jiau, 43, had worked for Nvidia as a contractor for an unspecified period. A graduate of National Taiwan University with a Master’s degree from Stanford University, she had also been a consultant with one of the firms at the center of the investigation called Primary Global Research.
Four other consultants from the same firm had already been arrested; they include James Fleishman, Mark Anthony Longoria, Manosha Karunatilaka, Daniel Devore and Don Ching Trang Chu.
The recent slew of insider-trading cases stem from last year’s prosecution of the Galleon Group hedge fund founder Raj Rajaratnam. The Galleon case led to charges against 23 traders, which included another former hedge fund manager, Richard Choo-Beng Lee. In return for a more lenient sentence, Choo has reportedly been co-operating with authorities, and it was his relationship with Ching that ultimately led investigators to focus on Primary Global Research.
In announcing the creation of an interagency task force to fight economic fraud in November 2009, Attorney General Eric Holder promised not only to hold accountable those who caused the collapse, but also “to prevent another meltdown from happening.” If past is prologue, the latest roundofperp walks and show trials, far from administering justice or engendering real economicreform, will be much closer to what the ancient Romans called diversionary “bread and circuses.”
Attorney General Eric Holder announces the creation of the Financial Fraud Enforcement Task Force (Washington; November, 17 2009).
Last month, a three-year federalprobe into Wall Street malfeasance reached fever pitch.At least six people—three technology company executives and three consultants—were arrested on fraud charges related to “insider trading,” following a ten-week span in which dozens of companies were subpoenaed and three hedge fund offices raided. More arrests are anticipated in the coming weeks.
This ever-expanding crackdown will doubtless net somereal corporate criminals. But the very nature of insider tradingfraud laws, and the dragnet techniques used by U.S. Attorneys, will likely result in the prosecution, even conviction and incarceration, of some innocents. At the very least, some defendants may be deprived of their fundamental right to due process of law—a problem whose immediacy may be best illustrated when compared to regimes without such protections for the criminally accused (a topic further explored below).
Believers in the rule of law would do well to step back and ask: What, if anything, will this sweeping inquisition do to prevent the next economiccollapse? In a country where an increasingly larger share of the wealth is concentrated in an ever smaller slice of the population, show trials will not suffice to cure any real ills.
Figures from the not-so-distant past back this up. Arrest rates for white collar fraud have surged in the wake of recentfinancial scandals, according to data generated from the FBI’s Uniform Crime Reports. Over a two-year period after the savings-and-loan scandal (1990–1992), the number of fraud arrests increased 53%; over the same period following the dot-com bust (2000–2002), arrests jumped 26%. Yet these prosecutorial surges did nothing to prevent Wall Street’s most recent cratering.
Like scandals before, prosecutors have at their disposal an arsenal of ambiguous laws. Securities, wire, or mail fraud are the go-to statutes in financial probes; fall backs such as making “false statements” to a federal official or engaging in a “conspiracy” are often used when costly investigations turn up little or no dirt. With roughly 4,500 separate criminal offenses on the federal books—no one, not even Congress knows the precise total,especially when administrative regulations that expand criminal liability are added to the total—there’s no shortage of hooks on which to hang potential targets.
This time, professionals associated with“expert network” firms,which employ specialists to help assess industry developments, appear to be in the Justice Department’s cross hairs. In existence since the late 1980s, these firms exploded in popularity over the past decade and, according to a survey taken by Integrity Research, were consulted by some 36% of investment-management firms in 2009. Whether these networks, in providing their expertise, gathered or divulged inside information gleaned illegally appears to be the central question now before investigators.
It should be noted, however, that even before a single case has gone before a judge in this latest insider-trading probe, a “frigid chill” has swept over the expert network industry. Major investment banks have reportedly abandoned the firms altogether. Regardless of one’s inclinations toward expert networks, we must recognize the immense power of U.S. Attorneys and their regulatory-agency allies—they have completely up-ended an entire industry, virtually overnight.
Ambiguous laws serve to reinforce this prosecutorial power. Take regulations concerning insider trading, for example. In theory, insider trading involves the buying or selling of securities based on material corporate information still unknown to the public. Yet in fact the lines demarcating forbidden insider information from ordinary corporate data sharedbetween companies and investors or analysts areblurred, empowering prosecutors to define the outer-reaches after-the-fact, on a case-by-case basis.
Thisambiguity is hardly due toinadvertence. Rather, it is policy: When Washington wants to appear tough on Wall Street, prosecutors have an all-purpose “securities fraud” statute from which flowsan endless stream of newly minted definitions—and hence criminal cases.
Congress and the SEC had a golden opportunity to provide clarity in the 1980s. The Insider Trading and Securities Fraud Enforcement Act of 1988, which provided increased penalties, passed unanimously (410-0) in the House and by voice-vote in the Senate. But it did nothing to define the crime.
In response to suggestions that essential clarity was lacking, John Dingell, then Chairman of the House Committee on Energy and Commerce, said that defining criminal insider trading would provide a “roadmap for fraud.” He further explained that his committee “did not believe that the lack of consensus over the proper delineation of an insider trading definition should impede progress on the needed enforcement reforms.” Dingell apparently saw no need for a roadmap for the law-abiding.
The abuse of vague criminal statutes stands out particularly glaringly, perhaps, to those who have lived under repressive regimes. Ninth Circuit Court of Appeals Chief Judge Alex Kozinski, who lived in Romania while under Soviet control, penned a stinging rebuke to federal prosecutors in a December 10 opinion. Agreeing that the securities fraud conviction of a former corporate chief financial officer should be vacated and the defendant acquitted, Kozinski pointed out that the prosecution “is just one of a string of recent cases in which courts have found that federal prosecutors overreached by trying to stretch criminal law beyond its proper bounds.”
Proper bounds, of course, begin with providing fair warning as to what the law forbids, an essential element of the “due process of law” guaranteed by the Fifth Amendment. Kozinski gets this, possibly because he recalls Soviet laws against “hooliganism,” which allowed the Kremlin to essentially declare criminal any and all critics of the regime.
Or perhaps a more current analogy better demonstrates the importance of due process. Consider the detention of Chinese-born American citizen Xue Feng, an employee of a Colorado-based research firm who obtained information in 2005 on oil wells in his native country. Three years later, Beijing authorities retroactively declared such information to be “state secrets,” arrested Mr. Feng, and, after a lengthy trial, sentenced him to eight years in prison.
To most Americans, something is plainly wrong with a researcher being imprisoned for gathering data deemed only after-the-fact to be off-limits. But to what extent, onemust ask, do vaguely-worded laws against securities fraud in the U.S. provide a similar lack of notice?
Those interested in fundamental economic reform, or even simply in reform of the markets, should look at the forthcoming insider trading show trials with a skeptical eye. Are theymeant to keep the system honest or, instead, to merely divert attention from the myriadregulatory and systemic failures? And, if the latter, are they diverting attention at the expense of innocent people caught up in the latest DOJ circus?
Paralegal Kyle Smeallie assisted in the preparation of this piece.
