ENFORCEMENT OF FEDERAL ESPIONAGE LAWS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CRIME, TERRORISM,
AND HOMELAND SECURITY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
JANUARY 29, 2008
__________
Serial No. 110-133
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California LAMAR SMITH, Texas
RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
MAXINE WATERS, California DANIEL E. LUNGREN, California
WILLIAM D. DELAHUNT, Massachusetts CHRIS CANNON, Utah
ROBERT WEXLER, Florida RIC KELLER, Florida
LINDA T. SANCHEZ, California DARRELL ISSA, California
STEVE COHEN, Tennessee MIKE PENCE, Indiana
HANK JOHNSON, Georgia J. RANDY FORBES, Virginia
BETTY SUTTON, Ohio STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois TOM FEENEY, Florida
BRAD SHERMAN, California TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota
Perry Apelbaum, Staff Director and Chief Counsel
------
Subcommittee on Crime, Terrorism, and Homeland Security
ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman
MAXINE WATERS, California LOUIE GOHMERT, Texas
WILLIAM D. DELAHUNT, Massachusetts J. RANDY FORBES, Virginia
JERROLD NADLER, New York F. JAMES SENSENBRENNER, Jr.,
HANK JOHNSON, Georgia Wisconsin
ANTHONY D. WEINER, New York HOWARD COBLE, North Carolina
SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
ARTUR DAVIS, Alabama DANIEL E. LUNGREN, California
TAMMY BALDWIN, Wisconsin
BETTY SUTTON, Ohio
Bobby Vassar, Chief Counsel
Michael Volkov, Minority Counsel
C O N T E N T S
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JANUARY 29, 2008
Page
OPENING STATEMENT
The Honorable Robert C. ``Bobby'' Scott, a Representative in
Congress from the State of Virginia, and Chairman, Subcommittee
on Crime, Terrorism, and Homeland Security..................... 1
The Honorable J. Randy Forbes, a Representative in Congress from
the State of Virginia, and Member, Subcommittee on Crime,
Terrorism, and Homeland Security............................... 2
WITNESSES
The Honorable J. Patrick Rowan, Principal Deputy Assistant
Attorney General, National Security Division, United States
Department of Justice, Washington, DC
Oral Testimony................................................. 5
Prepared Statement............................................. 8
Mr. David G. Major, President, The Centre for Counterintelligence
and Security Studies, Alexandria, VA
Oral Testimony................................................. 13
Prepared Statement............................................. 16
Mr. Larry M. Wortzel, Ph.D., Chairman, United States-China
Economic and Security Review Commission, Washington, DC
Oral Testimony................................................. 21
Prepared Statement............................................. 22
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Prepared Statement of the Honorable J. Randy Forbes, a
Representative in Congress from the State of Virginia, and
Member, Subcommittee on Crime, Terrorism, and Homeland Security 3
APPENDIX
Material Submitted for the Hearing Record........................ 35
ENFORCEMENT OF
FEDERAL ESPIONAGE LAWS
----------
TUESDAY, JANUARY 29, 2008
House of Representatives,
Subcommittee on Crime, Terrorism,
and Homeland Security
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:06 p.m., in
room 2237, Rayburn House Office Building, the Honorable Robert
C. ``Bobby'' Scott (Chairman of the Subcommittee) presiding.
Present: Representatives Scott, Sutton, Forbes, Gohmert and
Coble.
Staff Present: Bobby Vassar, Subcommittee Chief Counsel;
Ameer Gopalani, Majority Counsel; Mario Dispenza (Fellow), ATF
Detailee; Veronica Eligan, Majority Professional Staff Member;
Kimani Little, Minority Counsel; and Kelsey Whitlock, Minority
Staff Assistant.
Mr. Scott. I would like to welcome my colleagues to the
first hearing of the Subcommittee on Crime, Terrorism, and
Homeland Security for the second session of the 110th Congress.
I would also like to thank former Ranking Member Forbes for
his initiative and foresight in helping to put this hearing
together. Because of his initiative, he is going to be serving
today as the Ranking Member pro tem at the request of the
gentleman from Texas, Mr. Gohmert.
The topic of today's hearing extends back to the 106th
Congress, when espionage was one of the most crucial concerns
of that time, as the Cox Committee had released its findings on
U.S. technology transfers to China. I was on that select
Committee, which found that China had acquired classified
information on the most advanced U.S. thermonuclear weapons,
giving them design information--significant design information.
The report noted that information on the United States
nuclear weapons was obtained through espionage, a rigorous
review of unclassified technical and academic publications, and
extensive interactions with United States scientists and
Department of Energy laboratories. We found that much of this
information was obtained due to lack of adequate safeguards and
lack of security in our laboratories and inadequate controls of
technology transfers, in addition to espionage.
The Cox Committee report has enormous relevance today, as
individuals here in the United States continue to export
technology and secrets abroad. Today's technology targeting
differs from classic Cold War era spying, which pitted American
Cold War intelligence agents against their KGB counterparts and
their surrogates. Along with using intelligence professionals,
foreign countries now seek to capitalize on some of the
thousands of foreign engineers, researchers, scientists, and
students who fill key positions in United States industry and
academia.
One of the most prevalent forms of espionage in the United
States is economic espionage, which is prohibited under the
Economic Espionage Act of 1996. That Act prohibits the theft of
trade secrets in which the perpetrator acts intending or
knowing that the offense will benefit a foreign government.
A number of countries have mounted aggressive economic
espionage campaigns here that vacuum up advanced United States
technology secrets from defense and civilian companies alike.
The rationale is that if you can steal something rather than
figure it out yourself you save years and gain a real
advantage.
The Department of Justice has had some success in fighting
this type of espionage. I look forward to hearing their
testimony today.
But it would be a gross mistake to believe that the
espionage problem lies only with China. This is an
international problem.
In sum, we need to make sure that we are doing everything
we can to strengthen the Nation's national security. We want to
make sure that we are not in a situation where our own
government's lax security, indifference and incompetence
results in damage to our national security. During the time of
the Cox report, the loss of much of the nuclear weapons
information to China was an embarrassment and an incredibly
important loss.
So we look forward to hearing from our witnesses today to
see how we can improve the situation; and there are going to
be, obviously, many things that we can do, many of which will
be under the jurisdiction of the Committee on Foreign Affairs,
some in Intelligence, some Armed Services, some Commerce and
maybe Education. Our focus is what we can do on the Judiciary
Committee.
With that said, I now recognize my colleague from Virginia,
the former Ranking Member of the Subcommittee, the gentleman
from Virginia, Mr. Forbes.
Mr. Forbes. Thank you, Mr. Chairman; and, Mr. Chairman,
with your permission, I would like to put my statement in the
record. But I would like to just say a couple of opening
statements.
First of all, I want to personally thank you for holding
this hearing, and your leadership in this matter. And I want to
echo what you said, and that is that our desire is to try to
see how we can improve the situation. It is not designed to be
a finger-pointing expedition. It is designed to say how can we
come together, bring individuals and Congress together so that
we can help protect the United States of America.
I also want to thank my good friend from Texas, Congressman
Gohmert, who is the Ranking Member of this Subcommittee, for
his leadership and for allowing me to participate in this
capacity today.
And, to our witnesses, we particularly thank you for taking
your time, your expertise and energy to be here with us. There
are so many people that work in this area and do great jobs. We
have the FBI, DOD, Homeland Security, Justice, U.S.-China
Economic and Security Review Commission. All of them do
wonderful work, and we just appreciate what you are doing.
The one thing I would just encourage our witnesses at some
point in time, whether it is in your presentation or your
answers today, is if you could just kind of address also what
you think the scope of this problem is. You know, if we try to
fight today's wars with yesterday's strategies, we lose. If we
try to deal with espionage today the way we did deal with it
yesterday, sometimes we are not successful. So we would love
for you to kind of give us an idea, your opinion from your
experience what the scope of the problem is.
And then the other thing is, just kind of for lack of being
able to articulate it any other way, when you go to bed at
night and you think about some of these issues, what is it that
keeps you awake? What is the thing that you worry about that we
need to be worried about? Because if you are worrying about it,
we probably need to be worrying about it, too.
The third thing is, what do you think the government is
doing right today? But, also, what do you think they are doing
wrong in terms of dealing with some of these problems?
And the final thing is what the Chairman alluded to: How
can we improve? What is the direction we need to go so that we
are protecting the United States and making it a safer place
for our citizens?
With that, Mr. Chairman, I yield back, and once again thank
you personally for holding this hearing today.
Mr. Scott. Thank you very much.
[The prepared statement of Mr. Forbes follows:]
Prepared Statement of the Honorable J. Randy Forbes, a Representative
in Congress from the State of Virginia, and Member, Subcommittee on
Crime, Terrorism, and Homeland Security
I would first like to thank Chairman Scott for scheduling this
hearing and Ranking Member Gohmert for his cooperation and interest. I
would also like to thank the witnesses for being here today. I look
forward to your testimony.
As the former Ranking Member of this Subcommittee and the Chairman
of the Congressional China Caucus, I look forward to hearing the
witnesses discuss the methods by which espionage is conducted in the
U.S., the role of the various departments and agencies in the U.S.
Counterintelligence Community in identifying, investigating and
prosecuting cases, and the adequacy of current federal espionage and
export control laws. Furthermore, through this hearing and the
classified briefing we just heard, the Subcommittee should gain a
better understanding of the extent to which Chinese espionage and
cyber-attacks threaten the security of the United States and what
legislation and resources may be useful to aid law enforcement
activities in this area.
Chinese military doctrine considers computer network operations as
a force multiplier in the event of a confrontation with the United
States or any other potential adversary. We know that Chinese cyber-
warfare units are attacking computer systems in the United States
today. In 2006, there were several attacks on U.S. government sites
traced back to the People's Republic of China. In fact, the Department
of Defense confirmed a cyber-attack on the offices of Defense Secretary
Robert Gates in June of 2007.
The Attorney General has testified before this Committee that China
represents the number one espionage threat to the United States. It is
estimated that there are between 2,000-3,000 Chinese front companies
operating in the U.S. to gather secret or proprietary information.
Foreign intelligence operations gather sensitive information through
legal and illegal means, such as: business solicitations; circumvention
of export controls; and university research and product development;
attendance at seminars and conventions; and acquisition of American
companies.
Furthermore, in testimony before the House Judiciary Committee on
September 18, 2007, Mike McConnell, the Director of National
Intelligence, stated that ``China and Russia's foreign intelligence
services are among the most aggressive in collecting against sensitive
and protected U.S. systems, facilities and development projects, and
their efforts are approaching Cold War levels.'' The most recent Annual
Report to Congress on Foreign Economic Collection and Industrial
Espionage (published August 2006) states that ``the Counterintelligence
Community is unanimous in the view that this illegal outflow of
technology imposed huge costs on the United States.''
While our enemies have been developing new intelligence and
techniques to spy against American interests, our criminal laws have
not been changed to adapt to the new threat. Criminal penalties are
negligible and criminal statutes are archaic and in need of reform.
That is why Judiciary Committee Ranking Member Smith and I have
introduced the ``Supporting Prosecutions of international Espionage
Schemes Act of 2007'' or ``SPIES'' Act.
The SPIES Act:
(1) reforms existing espionage laws to respond to criticisms by
courts and commentators concerning the outdated statutes and the need
for reform; (2) increases criminal penalties for espionage crimes;
(3) moves criminal prohibitions from title 22 and The Atomic Energy
Act to the criminal code;
(4) expands coverage of espionage laws to terrorist organizations
not just foreign nations;
(5) increases penalties for violations of the Arms Export Control
Act and the Export Administration Act of 1979; and
(6) improves coordination among the Justice Department, DHS, State
and Commerce on enforcement of export controls.
The recent recalls and safety concerns with products imported from
China, including pet food, toothpaste, and toys, should remind us that
the United States is ultimately responsible for protecting its citizens
from any and all threats. In light of China's expansive military
modernization and its tremendous economic growth, we cannot afford to
ignore the threat that espionage and cyber-attacks directed by China
towards the United States poses to our national security.
I yield back the balance of my time.
Mr. Scott. Mr. Gohmert, do you have a statement?
Mr. Gohmert. Not other than to say how much I appreciate
Chairman Scott having this hearing. It obviously is such an
important issue. And for the continued diligence of my friend,
former Ranking Member Randy Forbes, for pushing the matter
forward. Thanks so much, Chairman.
Mr. Scott. Thank you.
Mr. Coble.
Mr. Coble. Mr. Chairman, very briefly, I, too, thank you
for holding the hearing. Mr. Chairman and Ranking Member, I
know of no issue any more significant than the one we will
discuss here today. Yield back.
Mr. Scott. Thank you.
We have a distinguished panel of witnesses here to help us
consider the important issues currently before us.
Our first witness will be J. Patrick Rowan, who is the
Principal Deputy Assistant Attorney General in the National
Security Division of the Department of Justice. As the
Principal Deputy, Mr. Rowan leads the NSD's prosecutors in the
counterterrorism and counterespionage sections and focuses on
the Department's efforts to disrupt terrorists and other
national security threats through investigation and
prosecution. Prior to his current position, he served as the
Associate Deputy Attorney General and assisted in the
management of national security functions at the Department of
Justice.
Next witness will be David G. Major. He is the President of
the Centre for Counterintelligence and Security Studies. Mr.
Major is a retired senior FBI supervisory Special Agent who
served in the Bureau from 1970 to 1994, where he specialized in
working, supervising, and managing counterintelligence and
counterterrorism cases. During the Reagan administration, he
was appointed the first Director of Counterintelligence and
Intelligence Programs to the National Security Council staff
and briefed and advised President Reagan on counterintelligence
policy and operations matters from 1985 to 1987.
And our last witness will be Dr. Larry Wortzel, Chairman of
the U.S.-China Economic and Security Review Commission. He is a
leading authority on China and Asia, with more than 37 years of
experience in intelligence, foreign policy, and national
security matters. He had a distinguished 32-year military
career, retiring as an Army colonel in 1999. He has previously
served as an Army attache to the U.S. Embassy in China and has
written numerous books on China's military.
Each of the witnesses' written statements will be made part
of the record in it's entirety. We would ask that the witnesses
summarize your testimony in 5 minutes or less. And to help you
stay within that time there is a timing device which will start
green. With 1 minute left, it will turn to yellow and finally
red when the 5 minutes are up. So we would ask you to stay
within 5 minutes.
We will begin with Mr. Rowan.
TESTIMONY OF THE HONORABLE J. PATRICK ROWAN, PRINCIPAL DEPUTY
ASSISTANT ATTORNEY GENERAL, NATIONAL SECURITY DIVISION, UNITED
STATES DEPARTMENT OF JUSTICE, WASHINGTON, DC
Mr. Rowan. Thank you, Mr. Chairman.
Chairman Scott, Ranking Member Gohmert, Congressman Forbes,
Congressman Coble, thank you for having me here today.
I am testifying on behalf of the Department of Justice and,
specifically, the National Security Division, which, as you
well know, was created by the Congress as part of the Patriot
Act reauthorization in 2006; and I, at the outset, want to
thank you for your role in creating the new division.
As you know, the National Security Division is comprised of
the counterterrorism and counterespionage prosecutors in the
Department of Justice, as well as our Office of Intelligence
and Policy Review attorneys. Those are the attorneys that work
on FISA matters. We are the Department's liaison to the
intelligence community, as well as being the prosecutors who
are supervising or actually engaging in the terrorism and
counterespionage prosecutions across the country. It is my
pleasure to appear before you today to discuss the Department's
enforcement of Federal espionage laws.
As you know, the clandestine intelligence collection
activities of foreign nations include not only traditional Cold
War-style efforts to obtain military secrets but increasingly
sophisticated operations to obtain trade secrets, intellectual
property, and technologies controlled for export for national
security reasons. Accordingly, these activities and others
implicate a wide array of Federal criminal statutes. But no
matter what form of espionage is being used or which statutes
are implicated, there is one common denominator: Our national
security is always at stake.
The Federal Criminal Code gives the government a variety of
different tools to prosecute different types of espionage, and
I thought I would just briefly summarize for you sort of the
different sets of statutes that we are primarily using to
attack this problem.
The first set of statutes are those for the traditional
espionage involving national defense information or classified
information. The primary two statutes in that area are 18
U.S.C. Section 793 and section 794.
18 U.S.C. Section 793 generally prohibits anyone from
willfully communicating information relating to the national
defense to any person not entitled to receive it. The term
``information relating to the national defense'' has been
defined by case law to mean information that is closely held by
the government, usually through proof that the information was
classified. Section 794 is more narrow. It criminalizes the
communication of national defense information to foreign
governments.
Now, in addition to those two statutes, which are the
traditional statutes, obviously, that most people think about
when they talk about espionage, we have a number in different
parts of the Code that we often use. In particular, in
instances where we identify individuals or groups that are
engaged in activities in the U.S. on behalf of a foreign
government, but we cannot actually show that they are
collecting classified or national defense information, we use
18 U.S.C. Section 951, which prohibits anyone from acting in
the U.S. as an agent of a foreign government without first
notifying the Attorney General.
18 U.S.C. Section 951 has been used successfully a great
deal recently, including to prosecute individuals who had been
affiliated with the Iraqi Intelligence Service under Saddam
Hussein and who had been sent to the United States to conduct
activities on behalf of Hussein's government.
One example of this is Khaled Abdul-Latif Dumeisi, who was
convicted in Chicago of violating section 951 for his
activities spying on Iraqi dissidents in the United States for
Saddam Hussein. We have had access to some Iraqi intelligence
files and have used those files to help us in making these
cases. Dumeisi is a good example of how we can use 18 U.S.C.
Section 951 against somebody who wasn't involved in collecting
classified information but was nonetheless working in this
country on behalf of a foreign government.
Of great concern recently is the substantial and growing
national security threat posed by illegal foreign acquisition
of restricted U.S. military technology. The National Security
Division launched a new initiative this past October to bolster
our enforcement efforts on that front.
In a general sense, the technology at the heart of the
initiative includes U.S. military items, dual-use equipment,
and other technical expertise or know-how, some of which have
applications in the weapons of mass destruction. These
materials are generally restricted and may not be exported
without a license.
China and Iran pose particular U.S. export control
concerns; and recent prosecutions have highlighted illegal
exports of stealth missile technology, military aircraft
components, naval warship data, night vision equipment, and
other restricted technology destined for those countries.
In one recent case, a former engineer with a U.S. Navy
contractor in California was convicted by a jury in May of 2007
for exporting sensitive defense technology to China. The
individual, Chi Mak, had been given lists from co-conspirators
in China that requested U.S. naval research related to nuclear
submarines and other information. Mak gathered technical data
about the Navy's current and future warship technology and
conspired to export this data to China. His four codefendants
also pled guilty. He is scheduled to be sentenced in March of
this year.
The export control laws are the third set of laws that we
use as a critical tool for addressing national security
threats. These include the Arms Export Control Act, which
prohibits the export of defense articles and services without
first obtaining a license from the Department of State; the
Export Administration Act, which has lapsed but is currently
enforced through IEEPA. That prohibits the export of certain
dual-use technology without first obtaining a license from the
Department of Commerce. And then the International Emergency
Economic Powers Act, or IEEPA, which authorizes restrictions or
prohibitions on transactions involving particular countries
such as Iran.
The National Security Division in October of last year
launched an export enforcement initiative to ensure that
prosecutors around the country have the training, tools, and
support from other agencies that they need to bring cases under
these statutes. This effort involves expanding our training of
prosecutors around the country, the creation of multi-agency
counterproliferation task forces in U.S. attorneys' offices
around the country, the designation of an 18-year veteran
Federal prosecutor to be a coordinator, our National Export
Control Coordinator, to ensure that we are working hard and
moving this effort forward across the country, and then greater
coordination between our prosecutors, export licensing
officials at the State Department and the Commerce Department
and the enforcement agencies, to include the Department of
Homeland Security, the FBI, the Commerce Department and DCIS.
That effort has already begun to pay off. We are very happy
with the success we have had so far, although we believe there
are more cases to be had out there, and we expect to see
additional prosecutions in the near future.
I appreciate the opportunity to appear before you today and
testify on behalf of the Department of Justice regarding
enforcement of Federal espionage laws. We look forward to
working with the Committee to improve our enforcement
capabilities in this area.
Mr. Scott. Thank you, Mr. Rowan.
[The prepared statement of Mr. Rowan follows:]
Prepared Statement of the Honorable J. Patrick Rowan
Mr. Scott. Mr. Major.
TESTIMONY OF DAVID G. MAJOR, PRESIDENT, THE CENTRE FOR
COUNTERINTELLIGENCE AND SECURITY STUDIES, ALEXANDRIA, VA
Mr. Major. Mr. Scott, Mr. Forbes, Members of the
Subcommittee, I already submitted my testimony. I would like to
make some general comments, if I could, about this, the bigger
issue of espionage.
It is one of these things that we have had a tough time in
our Nation to put our hands around and taking serious; and so
we have periods historically of being very serious about it,
other times kind of ignoring the reality of this problem. When
you ask the question what is the scope of the problem, that is
another example of difficulty we have had as a Nation trying to
come to grips with it.
The CI Centre was established in 1997 as a center of
excellence, and we primarily do counterintelligence training
for people in the intelligence community. And we do about 8,000
people a year and trained about 67,000 people in the last 11
years. These people are from everywhere within the intelligence
community.
And one of the things we learned is that our understanding
of both this discipline and counterintelligence is about as
deep as a puddle. Most people do not have a deep, rich
understanding of this, nor where it came from, nor how to
address it. One of the greatest things you can do to try to
address it is truly educate people, and this is one of the
great challenges we continue to have.
Counterintelligence historically in the United States is a
problem that we have tried to buy on the cheap. We spend a lot
of money on other issues, but counterintelligence is one that
we have never made--we vary in our ability to make a serious
commitment to make sure our personnel are fully trained and
fully capable of dealing with the problem.
If I go back historically and give you a sense of the
problem, there are 28 nations that have been involved in
legally identified espionage prosecutions in the United States.
These are members of NATO. These are adversaries. These are
friends. When you look at how big the problem is, since 1945 to
today there are 247 people who have been prosecuted or charged
with espionage in the United States. In the 21st century, since
2000 to this time, there have been 37 people who have been
charged with espionage or espionage-related crimes; and that
includes 794, 793, and 951, which was actually passed in 1938,
the agent of foreign powers legislation, which is very
effective today and one of the techniques that has been used to
try to deal with the reality of this issue.
Forty-nine percent of the 247 people who have been charged
with espionage since 1945 are, in fact, Russian cases. So we
learned our craft of counterintelligence by dealing with the
KGB and the GRU, who have run operations against us. One
hundred and twenty-one cases actually of the 247 are Russian-
based cases.
In 1992, the FBI changed its whole strategy of dealing with
counterintelligence and went to an issue called national
security threat list. The result of that is they begin to look
at many other countries and have publicly stated there are now
over a hundred nations that use part of their GNP to target the
United States to conduct intelligence operations leading toward
what we would call espionage in the generic context. And the
result of that is we have identified many nations, including
allies, who in fact run intelligence operations against the
United States because it is in their national interests to do
so. This is not an adversarial issue. This is one that a nation
finds in their interest to collect against us, and they do.
It was interesting that the law that we talked about today
actually is traced back to 1917, when the espionage law of 1917
was passed as a result of a terrorist attack against the United
States. The terrorist attack was Black Tom Island. It took
place in New York City. Over $20 million worth of damage, three
people killed, and it really mimicked the 9/11, except, instead
of killing people, it had a huge explosion, destroyed a huge
munitionary dump, and the result was we had no law to respond
to that.
Actually, there were calls to court-martial citizens in the
United States. Cooler heads prevailed, and they passed the
espionage law of 1917, which is, just as 793 and 794, a very
restrictive law. You have to do two things: to prove that
national defense, which means military defense of the United
States, has to be proven. That has to be proven in a courtroom.
And, number two, based on the Heine espionage case of 1940, it
has to be protected information. It doesn't have to be
classified information, but if it meets the standard of being
defense information and it is protected, it also meets the
standard of being classified.
The result is that it is a very narrow, restricted aspect
of espionage that you have to prove in a courtroom to get what
I call ``big'' espionage, 793. That is why these other statutes
such as 951 and 794, preparatory acts, are also important to do
that.
But when you say, how do we deal with this problem and what
is the scope of this, we struggle with that issue, how big is
the problem. I remember when I was in the government and we
started a study on that and we realized there were many nations
that found it in their interests to do it.
As you certainly know, in other hearings, the Bureau is
always having hundreds of actual investigative cases but to
actually bring it to prosecution is very difficult to do; and
there are very few cases where you find somebody actually
conducting espionage. So almost always these are conspiratorial
cases. It is a very rare case that has actually been caught
with someone committing espionage. Bob Hanssen is an exception,
when they allowed him to actually commit espionage to do it.
So it is a very complex issue and one that we have had a
tough time sometimes putting our arms around.
To show you the breadth of the scope of the problem,
remember during World War II when the Soviet Union was our ally
and between 1942 and 1945 there were over 250 Americans who
were agents of the foreign power in that one period. In fact,
if you could break that down to the year 1944, every element of
the U.S. Government was penetrated by our ally, the Soviet
Union; and the only exceptions to that were the FBI and ONI,
which the FBI made up with with the Hanssen case in the modern
era. But that shows when we did not have an effective
counterintelligence program in World War II that didn't mean
that you won't be targeted.
But the one thing I have learned in my 38 years of studying
this is you can never stop it, like you can't stop any crime,
but you can address it. And you need to address it through
education, you need to address it by taking it serious. And
sometimes we have and sometimes we have not as a Nation.
Mr. Scott. Thank you very much.
[The prepared statement of Mr. Major follows:]
Prepared Statement of the David G. Major
Mr. Scott. Dr. Wortzel.
TESTIMONY OF LARRY M. WORTZEL, Ph.D., CHAIRMAN, UNITED STATES-
CHINA ECONOMIC AND SECURITY REVIEW COMMISSION, WASHINGTON, DC
Mr. Wortzel. Chairman Scott, Mr. Forbes, Members of the
Subcommittee, thank you for inviting me to address this hearing
on Federal espionage laws.
I will address the issues raised about Chinese espionage in
the convention of the U.S.-China Economic Security Review
Commission's annual report to Congress. I also have some 25
years of personal experience as an intelligence officer, so I
will add a few of my own views.
The Commission concluded that China's defense industry is
producing new generations of weapon platforms with impressive
speed and quality. We believe that some of these advancements
are due to a very effective manner in which Chinese companies
are integrating commercial technologies into military systems.
However, we note that espionage provides Chinese companies an
added source of new technology, and it leaps them ahead, while
saving them time and money.
My own view is that it is often very difficult to
distinguish between what we define as espionage related to the
national security under the espionage act and economic
espionage, or the theft of proprietary information and trade
secrets. And even if we can make the distinction, we may not be
able to prove it in court.
For American companies, however, for the defense of the
United States, the impact of this espionage is the same. It
robs companies of the cost of their research. It gives
technology to China's armed forces. It undermines the security
of American military personnel and our national security.
Mr. Rowan mentioned the Chi Mak case in California. I want
to talk a little bit more about it, because I think it is a
great example of the difficulties our intelligence and law
enforcement agencies face in pursuing these cases.
You have five members of a California family who are
charged with conspiring to export defense articles to China,
which was a violation of the Arms Export Control Act. Yet they
focused on corporate proprietary information and embargoed
defense technology as related to propulsion weapons and
electrical systems in U.S. warships.
Agents of the FBI and the Naval Criminal Investigative
Service found direct tasking documents with Chi Mak, and it
looks like the espionage effort was directed by a Chinese
academic out at Zhongshan University in Guangzhou. The
information that was going back to China was embedded in
computer disks, CDs that seemed to be television broadcasts
with pictures and sound.
It has a lot of the earmarks of traditional espionage
tradecraft and state-directed espionage, but I will tell you
that this practice is so widespread in China that it could have
been an effort by some Chinese company, through a research
institute at a university, to leap themselves ahead, or the
university itself to market itself and get money from the
government.
The Gowadia case out in Hawaii, where stealth missile
technology was acquired by the Chinese, is another very
important case.
Now we also noted in our report our concerns that computer
or cyber penetrations of U.S. companies and government agencies
represents another spectrum of the serious espionage threat
from China that our Nation faces. Our Commission concluded
that, as Chinese espionage against the U.S. military and
American business continues to outpace the overwhelmed U.S.
counterintelligence community, critical American secrets and
proprietary technologies are being transferred to the People's
Liberation Army and Chinese state-owned companies.
Now, among our recommendations were that Congress address
the adequacy of funding for export control enforcement and
counterintelligence efforts, that you also look at the adequacy
of and the funding for specific military intelligence and
homeland security programs that protect critical American
computer networks. We felt that the Director of National
Intelligence should run a capabilities assessment and identify
specific strategies for addressing U.S. weaknesses.
In closing, Mr. Chairman, the law enforcement and the
intelligence communities have been effective in meeting this
challenge; and I think we all have to remember that there are a
lot of other national security issues, like terrorism, that
they face. So they have done a good job.
I should also note for you that our Commission prepared a
classified report to the Congress. It is available to read in
the Office of Senate Security.
I want to thank you again for the opportunity to appear
before you and for holding this hearing, and I would be happy
to respond to any questions you may have.
Mr. Scott. Thank you very much.
[The prepared statement of Mr. Wortzel follows:]
Prepared Statement of Larry M. Wortzel
Chairman Conyers, Chairman Scott, Ranking Members Smith and Forbes,
and Members of the Subcommittee, thank you for inviting me to address
this hearing on the enforcement of federal espionage laws.
My name is Larry Wortzel and I presently serve as the chairman of
the twelve member, bipartisan, bicameral United States-China Economic
and Security Review Commission. As you know, the Commission members are
appointed by the Congressional leadership. I have served on the
Commission since 2001 and I also served as chairman for the 2006
reporting year. By mutual agreement, the twelve commissioners elect a
chairman and a vice-chairman each year, rotating the positions between
a Republican and a Democratic appointee. I was appointed to the
Commission by Speaker Hastert.
I will address the issues raised about espionage by China by the
Commission in its yearly report to the Congress, issued in November
2007. I also bring some personal experience on the matter to bear.
During my 32 year military career, I spent 25 years in military
intelligence with the United States Army. This experience involved
gathering signals intelligence and human source foreign intelligence,
primarily about China. For about five years I was a military attache at
the American Embassy in China. I was also trained as a
counterintelligence officer and spent a number of years conducting
counterintelligence investigations and developing programs to protect
emerging defense technology from foreign espionage.
I should note that when I refer to the Report to Congress by the
US-China Economic and Security Review Commission, I will summarize the
views and consensus of the commissioners, as outlined in the report.
You could have read that yourselves, however; therefore, given my
background and experience, I will also express my own views. When I do,
I will identify them as such.
The Commission concluded in 2007 that China's defense industry is
producing new generations of weapon platforms with impressive speed and
quality. We believe that some of these advancements are due to the
highly effective manner in which Chinese defense companies are
integrating commercial technologies into military systems. However, we
note that espionage provides Chinese companies an added source of new
technology without the necessity of investing time or money to perform
research. After a year of hearings, research, and classified briefings
from agencies of the U.S. intelligence community, the Commission
concluded that China's espionage activities are the single greatest
threat to U.S. technology and strain the U.S. counterintelligence
establishment. This illicit activity significantly contributes to
China's military modernization and acquisition of new capabilities.
There is a long record in China going back over two centuries of
sending government directed missions overseas to buy or shamelessly
steal the best civil and military technology available, reverse
engineer it, and build an industrial complex that supports the growth
of China as a commercial and military power. Indeed, my own view is
that today it is often difficult to distinguish between what we define
as espionage related to the national defense under the Espionage Act
(18 USC 792-9), and economic espionage or the theft of proprietary
information and trade secrets covered by the Economic Espionage Act (18
USC 1831-9). Indeed, for American companies and for the national
defense of the United States, the impact of espionage can be the same,
robbing U.S. companies of the costs of their research, giving
technology with military application to China's armed forces, and
undermining the security of American military personnel and our nation.
One reason that China's industries have been so effective at
espionage is the centralized approach they have taken. In March 1986,
the PRC launched a national high technology research and development
program with the specific goal of benefiting China's long-term high
technology development. This centralized program is known as the ``863
Program'' (or Torch Program). China's state council allocates money to
acquire and develop biotechnology, space technology, information
technology, laser technology, automation technology, energy technology
and advanced materials.\1\
---------------------------------------------------------------------------
\1\ The 863 name comes from the month and the year that the program
was proposed.
---------------------------------------------------------------------------
Our Commission recognizes that part of China's defense industrial
base modernization strategy is to acquire advanced foreign equipment
and technologies. While in some cases Chinese planners have chosen to
purchase entire weapon systems directly, some Chinese and Western
analysts do not see this as beneficial for the long-term modernization
of China's defense industry.\2\ Direct purchases are generally used as
a temporary measure to fill critical gaps that China's indigenous
defense companies are unable to fill. Some items purchased from foreign
companies are dual-use components--those that can be used in military
as well as civilian applications such as computers, semiconductors,
software, telecommunications devices, and integrated circuits.\3\
---------------------------------------------------------------------------
\2\ U.S.-China Economic and Security Review Commission, Hearing on
China's Proliferation and the Impact of Trade Policy on Defense
Industries in the United States and China, testimony of James Mulvenon,
July 13, 2007. Mulvenon sees this as a ``scathing indictment of the
failures of the PRC defense-industrial base to fulfill its long-
standing promises to the PLA.''
\3\ U.S. Department of Defense, Annual Report to Congress on the
Military Power of the People's Republic of China, (Washington, DC: July
2007), p. 29.
---------------------------------------------------------------------------
The report also notes that partnerships forged between foreign
companies and Chinese civilian companies also offer Chinese defense
industries access to advanced foreign technologies. The nature of the
regulatory and commercial environment in China places enormous pressure
on foreign companies, including those of the United States, to transfer
technology to Chinese companies as a part of doing business in China
and to remain competitive globally.\4\ Foreign companies are willing to
provide not only technology but capital and manufacturing expertise in
order to secure market access in China.\5\ Indeed, many are, in fact,
creating R&D facilities in China.
---------------------------------------------------------------------------
\4\ Medeiros et al., A New Direction for China's Defense Industry,
(RAND Corporation, Santa Monica, CA: 2005) p. 241.
\5\ Medeiros et al., A New Direction for China's Defense Industry,
(RAND Corporation, Santa Monica, CA: 2005) p. 241.
---------------------------------------------------------------------------
Still, we note in the report that access to restricted foreign
technology is obtained by China through industrial espionage. We have
heard from experts who advise us that China operates an aggressive
clandestine effort to acquire additional technologies.\6\ In recent
years, this has become such a problem in the United States that U.S.
Immigration and Customs Enforcement officials have rated China's
espionage and industrial theft activities as the leading threat to the
security of U.S. technology.\7\
---------------------------------------------------------------------------
\6\ U.S.-China Economic and Security Review Commission, Hearing on
China's Military Modernization and Its Impact on the United States and
the Asia-Pacific, testimony of William Schneider, Jr., March 29, 2007.
\7\ U.S. Department of Defense, Annual Report to Congress on the
Military Power of the People's Republic of China, (Washington, DC: July
2007), p. 29.
---------------------------------------------------------------------------
Our law enforcement agencies, our intelligence community, and our
corporate security professionals must contend with seven or more
Chinese state-controlled intelligence and security services that can
gather information for the state-owned industrial sector inside China
or overseas. These include
the Ministry of State Security and its local or
regional state security bureaus;
the Public Security Bureau;
the intelligence department of the People's
Liberation Army (PLA), or Second Department;
the PLA's Third, or Electronic Warfare Department;
a PLA Fourth Department that focuses on information
warfare;
trained technical collectors from the General
Armaments Department and the General Logistics Department of
the PLA;
the technical intelligence collectors of the military
industrial sector and the Commission of Science Technology and
Industry for National Defense;
and the Communist Party Liaison Department r PLA
General Political Department.
Frankly, I don't know if the Chinese government is funneling
information or technology back into some of the now-privatized
companies that engage in industrial or economic espionage in China.
Also, I believe that the various science and research parks that
operate under municipal control actively seek out new technology and so
do the newer companies that operate outside government control in
China.
The nature of the Chinese state also compounds the security
problems. China is a totalitarian state, even if today there is far
greater economic freedom there. The legal system in China still
responds to the direction of the Chinese Communist Party. Thus the
state has great power to compel citizens to cooperate and a far reach
to retaliate if citizens in China refuse to do the state's bidding. I
think that reach is decreasing as the economy offers more opportunity
for Chinese citizens and there are more opportunities for private
employment there. But it is still difficult to avoid the pressure that
a one-party, Leninist-structured state can bring to bear on its
citizens.
I would like to discuss one case brought to trial by the United
States Attorney's office in the Central District of California as an
example of how hard it is to know for certain whether our intelligence
and law enforcement agencies face economic espionage or more
traditional espionage designed to injure the national security of the
United States. In the Chi Mak case, in California, five members of a
southern California family were charged with acting as agents of the
People's Republic of China in 2005 and in 2006 with conspiring with
each other to export United States defense articles to the People's
Republic of China (a violation of the Arms Export Control Act, 22 USC
2778). This technology theft ring focused on acquiring corporate
proprietary information and embargoed defense technology related to the
propulsion, weapons and electrical systems of U.S. warships. Going
through Chi's residence, agents of the Federal Bureau of Investigation
and the Naval Criminal Investigative Service found instructions tasking
Chi to join ``more professional associations and participate in more
seminars with `special subject matters' and to compile special
conference materials on disk.'' \8\
---------------------------------------------------------------------------
\8\ CI Centre, http://www.cicentre.com/Documents/DOC_Chi_Mak.html
---------------------------------------------------------------------------
Chi Mak was a support engineer at L-3 Communications working on
navy quiet drive propulsion technology. In two documents instructing
Chi, one hand printed in Chinese and the other machine printed, the
military technologies Chi was to seek involved:
Space-based electromagnetic intercept systems
Space-launched magnetic levitation platforms
Electromagnetic gun or artillery systems
Submarine torpedoes
Electromagnetic launch systems
Aircraft carrier electronic systems
Water jet propulsion
Ship submarine propulsion
Power system configuration technology
Weapons system modularization
Technologies to defend against nuclear attack
Shipboard electromagnetic motor systems
Shipboard internal and external communications
systems
Information on the next generation of US destroyers
(DDX).
The espionage effort appears to have been directed by a Chinese
academic at a research institute for Southeast Asian affairs at
Zhongshan University in Guangzhou, China. The Chi family encrypted the
information it was passing back to China into a computer disk that
appeared to contain television and sound broadcasts. It was literally
embedded in the other data in encrypted form.
This effort has all of the earmarks of professional espionage
tradecraft and state-directed espionage, with sophisticated control and
sophisticated clandestine communications means. The government
university in Guangzhou could have been cover for a state-directed
espionage effort. However, Chi Mak and his alleged co-conspirators
could just as well have been part of a sophisticated economic espionage
operation run out of a university research institute.
Mr. Chairman, I could go on for a long time. The Computer and
Intellectual Property Section of the Department of Justice web site
lists 33 cases of alleged violations of the Economic Espionage Act
between 2000 and 2005, many of which seem to have involved China.
Immigration and Customs Enforcement has a large number of arrests and
indictments, as does the FBI. In the US-China Economic and Security
Review Commission's annual report, we note that ``Mr. Joel Brenner, the
top counterintelligence official in the Office of the Director of
National Intelligence, has noted that of the 140 foreign intelligence
agencies continuously attempting to penetrate U.S. agencies, China is
the most aggressive.\9\ The FBI stepped up counterintelligence efforts
against Chinese intelligence operations in the United States in July
2007, because of what FBI Director Robert Mueller called a
``substantial concern'' about those operations.'' \10\ An American
engineer living in Hawaii was indicted for working with a Chinese
government agent and supplying stealth missile technology over the
course of six visits to China. A Defense Intelligence Agency employee
was convicted on lesser charges but was indicted for leaking classified
information to China's military intelligence service and hoarding
classified U.S. documents in his home.
---------------------------------------------------------------------------
\9\ Jeff Bliss, ``China's Spying Overwhelms U.S.
Counterintelligence,'' Bloomberg, April 2, 2007.
\10\ Bill Gertz, ``FBI calls Chinese espionage `substantial,' ''
The Washington Times, July 27, 2007.
---------------------------------------------------------------------------
We also noted in our report concerns that computer, or ``cyber''
penetrations of United States companies and government agencies
represent another spectrum of the espionage threat from China with
which our law enforcement and intelligence community must contend. In
England, the head of one of Britain's intelligence agencies warned of
cyber-penetrations by China. The attacks allegedly targeted Royal Dutch
Shell and Rolls Royce. So China's espionage activities target advanced
technology, economic data and military secrets in many countries.
Our Commission unanimously concluded that ``as Chinese espionage
against the U.S. military and American businesses continues to outpace
the overwhelmed U.S. counterintelligence community, critical American
secrets and proprietary technologies are being transferred to the PLA
and Chinese state-owned companies.'' \11\ In response to this
espionage, the Commission recommended the following steps:
---------------------------------------------------------------------------
\11\ U.S. Department of Justice Press Release, ``Former Chinese
National Convicted of Economic Espionage to Benefit China Navy Research
Center,'' August 2, 2007; U.S. Department of Justice Press Release,
``Two Men Plead Guilty to Stealing Trade Secrets from Silicon Valley
Companies to Benefit China: First Conviction in the Country for Foreign
Economic Espionage,'' December 14, 2006; Jeff Bliss, ``China's Spying
Overwhelms U.S. Counterintelligence,'' Bloomberg, April 2, 2007; Amy
Argetsinger, ``Spy Case Dismissed for Misconduct,'' Washington Post,
January 7, 2005; Bill Gertz, ``FBI calls Chinese espionage
`substantial,' '' The Washington Times, July 27, 2007; U.S. Department
of Justice Press Release, ``Guilty Plea in Trade Secrets Case,''
February 15, 2007; U.S. Department of Justice Press Release, ``Fifth
Family Member Pleads Guilty in Scheme to Export U.S. Defense Articles
to China,'' June 6, 2007.
In order to slow or stop the outflow of protected
U.S. technologies and manufacturing expertise to China, the
Commission recommends that Congress assess the adequacy of and,
if needed, provide additional funding for U.S. export control
enforcement and counterintelligence efforts, specifically those
tasked with detecting and preventing illicit technology
transfers to China and Chinese state-sponsored industrial
---------------------------------------------------------------------------
espionage operations.
The Commission recommends that Congress assess the
adequacy of and, if needed, provide additional funding for
military, intelligence, and homeland security programs that
monitor and protect critical American computer networks and
sensitive information, specifically those tasked with
protecting networks from damage caused by cyber attacks.
The Commission recommends that Congress instruct the
director of national intelligence to conduct a full assessment
of U.S. intelligence capabilities vis-a-vis the military of the
People's Republic of China, and identify strategies for
addressing any U.S. weaknesses that may be discovered as part
of the assessment
The Commission recommends that Congress urge the
Administration to engage China in a military dialogue on its
actions and programs in cyber and space warfare to include
threat reduction mechanisms, the laws of warfare, and
specifically how the laws of warfare apply to the cyber and
space domains.
In closing Mr. Chairman, I want to thank you and the Members of the
subcommittee for holding this hearing. The law enforcement and
intelligence communities have been effective in meeting this challenge,
even if overwhelmed by other national security challenges. In my view,
the Economic Espionage Act is a very helpful tool, especially since the
elements of proof of the Espionage Acts are often more difficult to
prove, as I tried to illustrate in my description of the Chi Mak case.
In other indictments the law enforcement community has relied on the
Arms Export Control Act and the Export Administration Act.
I should also note that the United States-China Economic and
Security Review Commission also prepared a classified report to
Congress. This report is available for Members and their appropriately
cleared staff to read in the Office of Senate Security.
Thank you again for the opportunity to appear before you and I
would be happy to respond to any questions you may have.
Mr. Scott. We will now ask you to respond to questions. I
will first recognize myself for 5 minutes.
As I indicated in my opening statement, this is the
Judiciary Committee. There are many other Committees that would
have jurisdiction on some of the solutions to the problem.
But let me just begin by looking at the acquisition of
technology. Mr. Rowan, you mentioned the dual-use technology
that may be an issue and that that statute had lapsed. Did I
understand that right?
Mr. Rowan. That's right.
Mr. Scott. What problems occur by virtue of the fact that
that statute has lapsed?
Mr. Rowan. Well, some of the penalties that would otherwise
be available under the Export Administration Act are not
available.
What has occurred is that the regulations that were imposed
and support the Export Administration Act have been adopted
through IEEPA. So we are able to reach a lot of the conduct,
but we have to reach it through IEEPA, and so the sort of
statutory regimen that exists under the Export Administration
Act is not available to us. And that means that penalties and
everything else that sort of was thought up to directly target
dual-use technologies is not available to us.
We, you know, obviously prosecuted cases using that
statutory or regulatory fix, but it is a statute that we
would--we could certainly use more effectively if it was in
effect.
Mr. Scott. In terms of commercial activities and export
controls, do we need to do anything from the Judiciary
Committee point of view with universities or businesses in
terms of protecting the information?
Mr. Rowan. Well, Mr. Chairman, we certainly would be
pleased to work with you on any proposals in that area, but I
don't come to you today with any proposals for how this
Committee might be able to target that specific problem.
Mr. Scott. Mr. Major or Dr. Wortzel, do you have any
recommendations as to what this Committee could do to protect
our military and commercial secrets?
Mr. Wortzel. Mr. Chairman, dual-use technologies are a real
problem; and it has been very difficult to get the Export
Administration Act passed through Congress. I would encourage
you to work on that.
I think that the problem of universities and contracts and
research laboratories is a huge one; and it is very difficult
to know, when a contract is given to a university or
corporation, who some of the subresearchers are, who is
actually working on it. That is an area I think that would be
useful to address.
A second area that we have explored with the Commission is
the problem that many corporations are beginning to move both
manufacturing and research overseas into other countries,
specifically into China. In order to get in there, they
increasingly have to provide access to manufacturing techniques
and proprietary information; and they lose that.
So those are areas I believe that we could tighten up and
that with the help of the Justice Department there might be
improved legislation.
Mr. Major. A couple general comments.
In front of you we have provided you a chart, if you have a
chance to look at it, that will illustrate the extent of this
problem. Because when you open it up you realize what we try to
make is a list of every single espionage case publicly
identified in the last hundred years, starting from 1900 to
2006. And if you look at that and you realize how long this
problem has been with us and how we deal with it.
Now, to respond to this problem, it is interesting that it
is not--first of all, the most difficult thing in an espionage
case is finding out who might be the betrayer, who might be the
agent; and you either have to target who the collector is and
the methodologies they use or you have to try to find other
mechanisms to say who that person is. That is the first, very
important step.
If you notice when you look at that chart, you can see that
by year we have listed both congressional actions over the
years, FBI reorganizations, CIA reorganizations, world events,
and then the number of individual cases by year. And the one
thing it does indicate, this problem is not going to go away,
no matter how much we want it not to be the case.
China represents a very unique problem because China
doesn't spy the way God intended people to spy. You do not have
an intelligence officer filling a dead drop. China's location
for espionage is a couch in Beijing. It is very difficult to
fashion or put a case together like this.
And one of the other issues you have is exactly as you just
heard, that when Americans are trying to expand their business,
as they go to China, since they do not have copyright laws to
the same degree in Asia that you do in the United States, is
you say to many corporations color it gone, and soon you will
be talking about your competitor that is there. So the real
issue is it is an education one to make sure people know what
they are walking into and how they are doing it.
One of the things that has worked in an espionage case is
that you find out who the agent is, but then what do you do
about it? And a good example is on the list I gave you. Of the
37 people arrested for espionage this year, one was a North
Korean espionage agent by the name of John Yai, who they
investigated for some time, but they couldn't prove he had
passed national defense information. So it turned out to be
that 951 was the only way that you could go after him, which is
the agent of a foreign power.
And if someone examined beefing that law up, expanding the
amount of penalties you would have for that particular crime--
because it is the one thing that you can prove. I can prove
that you are an agent, but I can't prove that you have actually
passed national defense information, which really limits the
kind of response you can have to deal with it.
Mr. Scott. If you are an agent of a foreign government, is
that a crime?
Mr. Major. If you are an unregistered agent of a foreign
power. Whether you are a lobbyist or a spy, if you come to the
United States, you have a requirement to go down to the
Department of Justice and say I am a trained spy. And if you
don't do that, you are in violation of the law.
Well, most spies don't do that. Lobbyists do it, lawyers
do, but spies don't. And it is like spitting on the sidewalk
for espionage. There is the 1-year sentence and then you can
get a bigger one. And it is the one that has been used against
the Iraqis recently. We went through a period of time that we
didn't want to use that, but now in the last--this century we
have been using it more. But, still, the penalty for it is
significantly lower than it is for what you and I would define
as big espionage.
Mr. Scott. Mr. Forbes.
Mr. Forbes. Thank you, Mr. Chairman; and thank you,
witnesses, for being here.
This is both impressive and frightening as we look at this.
But there is one major sea change that has taken place
throughout all of this that isn't totally reflected on here.
And that is, based on testimony that we have received in this
Committee before, would any of you disagree that today the
number one espionage threat in the United States is China?
Mr. Major. I am not sure it is the largest. I would expand
on that that the size of the Soviet intelligence service, which
has always been large, one of the ways to look at it is it is
coming back, the size of their intelligence service--the Soviet
Union in 1991, when it collapsed, had about 296 million people,
and the size of their intelligence service was 496,000 people.
Now we roll the camera forward to 2007, there are about 141
million people in Russia today, which is half the population,
and their intelligence service is down to about 400,000 people.
Which means they have 400,000 people as members of their
intelligence service, which means the population is half the
size, but the size of the intelligence service is 20 percent
less, which means there are more intelligence officers per
capita than during the Cold War. And there are as many Russian
intelligence officers in the United States as there were Soviet
intelligence officers during the Cold War, and we have had a
tougher problem coming to deal with that.
If you read policy papers today, it is interesting that we
seem to have an awakening to China. You can look at it, a
number of strategic papers that are made, some of the cases
made, I think there is a slow awakening, starting with the Cox
report, which is a very significant one, to wake up to China.
For a long time, we did not recognize China, because China
is a very difficult country to penetrate their intelligence
collection. Because they don't do it the way you are supposed
to do it. They don't use intelligence services to do it. So it
was for a very long time we were not very successful against
China. And I would suggest in the last 7 to 8 years we are
getting better at dealing with China.
During the same time, the Soviet Union is coming back, and
we now find that there are as many intelligence officers here.
And, as you well know, FSB has the authority, that is the
counterintelligence service, to go around the world and conduct
assassinations. It is like Stalinism is back.
The one other thing you do see happening, which is a real
transition in espionage, is the marriage between Islamic
terrorism and espionage, like the case with Yemen and other
cases that we are seeing that you didn't used to see any
connection between terrorism and espionage. You do like the
China case, Paul Hall, who in fact was providing classified
information from the Navy, but he was doing it to support
terrorism. And I think that is a new trend that we are seeing
in just the last few years here in the United States.
Mr. Forbes. Mr. Wortzel?
Mr. Wortzel. Mr. Forbes, one of the unique things about
China obviously is the population, 1.3 or 1.4 billion people.
But the nature of the state and its ability as a totalitarian
Leninist state allows seven or eight intelligence services and
technology collection organizations to literally target and
train people or compel people during their routine activities
of travel and work to gather information.
I doubt that everybody complies that is told by the Chinese
Government to do something. There are more opportunities in
China today to avoid that repressive state and get another job.
But it really does, as a state, have the capability to say you
are not traveling unless you go here and you do such and such.
Mr. Forbes. Your Commission concluded or at least indicated
that China's espionage and industrial theft activities were a
leading threat to the security of U.S. technology. Is that an
accurate statement?
Mr. Wortzel. Yes, sir. That is the unanimous consensus of a
bipartisan Commission of 12 people.
Mr. Forbes. And do any of you have any information that we
have had any cyber penetrations, as you talk about, or
invasions of elected officials in the United States or
government officers or American corporate executives by Chinese
espionage?
Mr. Wortzel. Mr. Chairman or Mr. Ranking Member, we would
have to address that--it is addressed in our classified report.
I can't address that here.
Mr. Forbes. Okay. The other thing I would ask is, we had
testimony, I think that there are a number of companies here
that are front companies in China or Chinese companies that are
doing espionage activities. The question I would ask you is
what is the extent of that? If you have any information on that
that you can share with us.
And, also, Mr. Rowan, how do we identify those companies?
Or do we have a capacity to do it so that we can stop them from
those activities? Or is there just no opportunity to do it?
So either of the three of you.
Mr. Major. Well, the first thing you have is to even
identify which companies, because the numbers are
breathtakingly large, to even look at which companies to be
looked at.
As you well know from talking to the counterintelligence
community in China, the numbers are so large, how many of the
companies there are. And then the point is, what are their
activities and how do I investigate them? Are they in fact
doing it is the biggest problem.
Because there is no magic bullet to say, well, these five
companies are involved in doing it. You make a very good point
when you say you don't have to be a front company to do it if
the company finds itself, its methodology of collecting, and
you are going to have a company that will use that area. It is
a problem. It is probably a resource problem more than a law
problem.
Mr. Forbes. And my time has expired, so I ask you if you
all could submit those for the record for us.
[The information referred to can be found in the Appendix.]
Mr. Forbes. And also, Mr. Wortzel, I would like for you to
comment in your written statement, just because my time is out,
about the Commission's recommendation that Congress instruct
the Director of National Intelligence to conduct a full
assessment of this and give us a report back. If you could
comment on that.
[The information referred to can be found in the Appendix.]
Mr. Forbes. And I want to stop so we can have the other
Members ask their questions before we go to vote.
Mr. Scott. Thank you.
Ms. Sutton?
Ms. Sutton. Thank you, Mr. Chairman. Thank you for having
this hearing today. It is an extraordinarily important subject,
and I appreciate the distinguished witnesses who have
testified.
You know, it is fascinating to hear you talk about sort of
the unique nature of the challenge we are dealing with with
China. And I think it is crucial that this body, that Congress
and our government as a whole get a good grasp of what exactly
we are facing. Because, as you say, it is not traditional.
Now, I have more of a bent toward the commercial, you know,
the stealing of trade secrets. One of my colleagues recently
told me about a situation in his district where an employee
working for a company in his district, an employee who came in,
worked for this company, stole trade secrets, fled to England.
When it was discovered, the Chinese government brought him out
of England, took him back to China and is shielding him from
prosecution by the U.S. Now, how common is that?
Mr. Wortzel. It is pretty common, Ms. Sutton. One of the
points I make in my written testimony is that, in 1986, the
central leadership of the People's Republic of China and the
Communist Party made a decision to create a nationwide program
to target about 16 technologies across the world that
specifically had dual-use in military applications and send
people out to gather these technologies and ensure that as they
began to put them into industrial production for state-
controlled defense industries that they would at the same time
be able to spin them off into civil production. Almost the
opposite of what we have done.
They have been very successful at it, and it is not like
the program ended. In July of last year, the Second Artillery
Corps, the strategic missile forces of the People's Republic of
China, ran a national strategy commission, and they brought in
the intelligence departments, they brought in the operations
departments of the People's Liberation Army, they brought in
the Navy and the Air Force and the defense industry, and
central at the table was the 863 Program Office of the Division
of Science and Technology for National Defense.
So this hasn't gone away. It is centrally orchestrated. I
don't think that every person that comes out has a specific
task, but I think that they are able to draw on their own
ability to monitor people and know who has access and to touch
them and get what they can.
Ms. Sutton. And I guess the question and one of the
purposes of this hearing is, what do we do about that? What do
we do about dealing with the country that is now shielding this
person from prosecution? How do we fight back on this?
Mr. Wortzel. Well, first of all, I wouldn't look at every
Chinese student or worker and think you are dealing with a spy.
Ms. Sutton. Right.
Mr. Wortzel. I would be very careful about that. I don't
think everybody necessarily complies, and I doubt that
everybody is touched. But I think that in these cases it is
very important to have a strong counterintelligence and
industrial security education program. The Defense Criminal
Investigative Service runs one.
At the time I dealt with Mr. Major, the FBI had a very good
defensive program out in industry. I have been away from it. I
don't know what they are doing today.
But, out in industry, industrial security and corporate
security have to be enhanced; and there has to be a partnership
between corporations and the government.
Mr. Major. You can't ride in from Washington to solve the
problem to say these are the five companies you have to worry
about.
Probably one of the greatest assets you have, if you can
make a commitment to educate your employees and to educate
these corporations, one of the things that the CI Centre does
is we are in the education business, and so we do a lot of
these kinds of trainings today. We go into large corporations,
and we try to give them a feel exactly of the problem that you
are talking about.
One of the things we do also is to try to say how big is
this problem? Which was what the Chairman's question was, also.
That is in our Web site that we update every single day. We
list all of these cases about China on a daily basis. And if
you actually study that, you can spend all day just reading
them.
Because it is not just an American problem. It is a
European problem, also. Because, remember, as I said, China has
a copy culture. It is honorable. They don't have copyright
laws. It is perfectly acceptable to do that.
So my point is that if you are going to stop the problem,
the people being victimized sometimes are the best ones to come
forward and say I have a problem with you doing this.
But is it a serious problem? Yes, it is. Is it growing? I
would suggest more so than I have seen in a long time for
China.
Ms. Sutton. Yeah. And I would just say it is not really--my
concern is perhaps even less in dealing with the individuals
than dealing with the country. Okay. And so what kind of
leverage do we have to deal with a country who is acting in
concert to get every advantage they can gaining this
technology? That is just--I know my time is up.
Mr. Major. The one comment that often happens is you find a
case like this, you bring it up in the political sense to the
leadership of the government, and China's leadership says we
don't do that, and then it moves away.
And we have multiple examples, of ``we don't do that,''
``we are not involved with that,'' and ``we never do that.''
And there is a flat denial, and there is no political price to
pay for that.
And that is a much bigger issue to talk about, because
there are economic connections with it. But China does not pay
any kind of price for finding it to have an open door ability
to collect intelligence against us. And their big attitude is,
so what? In essence, you can take the next line, so what are
you going to do about it? Because we really do not do much
about it. So down at the prosecutable individual level we try
to deal with it.
Ms. Sutton. Well, I have a problem with that. Thank you.
Mr. Scott. Thank you.
I think we have about 5 minutes for the gentleman from
Texas.
Mr. Gohmert. Okay. Well, I realize our time is very
limited, and I need the witnesses to really contemplate this
more than 4 or 5 minutes. So what I am going to do is lay my
predicate very briefly and then give you the questions and, if
it is all right with the Chairman, ask them to submit
thoughtful responses in writing back to this Committee.
Because you pointed out--first of all, let me say it has
been mentioned they don't have copyright laws like ours. I met
with some of their officials who were supposed to enforce their
copyright laws. They do have copyright laws. They just don't
enforce them. And therein lies a huge problem. And it is
actually against their pecuniary interest at this point to
enforce them, because they make so doggone much money off of
them. And so one of the things is we have got to make it--I
think, as Ms. Sutton alluded to, we have got to get their
attention by making it worth their interests to enforce them.
But it was mentioned earlier we need to beef up 951 to
allow more penalties, if I understood it. Is 951, that is the
section that is applicable?
So here is my question to you. What penalties should we
have? As a former judge, it is nice to say we should have
different penalties, but there is only one way to get those,
and that is if you have different levels of the offense. And if
you have different levels of the offense, then you are creating
additional burdens of proof for a prosecutor to have to jump
over.
So, question one, what penalties should we have?
And then the next question, number two, is what different
categories or levels of the crime can we have so that we don't
make it unprovable?
And then, number three, since China doesn't do espionage
like they are supposed to, how do you prove they are trained
intelligence officers and not just a regular person that has
been asked to pick up some piece of information?
Because it seems to me that is a real problem for the
Chinese espionage, whether it is a student, whether it is a
corporate officer or somebody saying we are not training you,
but we do need this piece of information, just get it however
you can. So that is my third question. How do we get to those
people who maybe really aren't trained intelligence officers?
Maybe we can't get them through the means you are suggesting.
How do we get to them?
And, really, I see that as just follow-up to what Ms.
Sutton is saying. How do we get the leverage we need to enforce
this stuff?
And I appreciate the chart. That is terribly helpful. As an
old history major, I think we can't do very well in the future
if we don't know where we have been in the past. But just
because espionage has always been and will always be doesn't
mean that we throw up our hands and say, well, just get what
you want. We have got to make an effort to defend this country.
Mr. Scott. Thank you, and I would like to thank the
witnesses for their testimony today. As the gentleman from
Texas indicated, we have additional questions for our witnesses
which we will forward to you and ask that you answer as
promptly as you can so the answers can be made part of the
record. Without objection, the hearing record will remain open
for 1 week for submission of additional materials.
And, again, I would like to thank my colleague from
Virginia for his leadership on this issue.
Without objection, the Committee stands adjourned.
[Whereupon, at 2:59 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing Record
Prepared Statement of the Honorable Betty Sutton, a Representative in
Congress from the State of Ohio, and Member, Subcommittee on Crime,
Terrorism, and Homeland Security
Supplemental Prepared Statement of Larry M. Wortzel, Ph.D., Chairman,
United States-China Economic and Security Review Commission,
Washington, DC
Chairman Conyers, Chairman Scott, Ranking Members Smith, Gohmert
and Forbes, this supplemental testimony addresses questions posed in
the January 29th, 2008 hearing on ``Enforcement of Federal Espionage
Laws.'' With respect to Chinese front companies, several years ago,
officials of the Federal Bureau of Investigation gave rough estimates
of the number of Chinese front companies operating in the United
States. My discussions with FBI officials more recently suggest that
the Bureau is not confident that it can provide such an estimate. I
believe that the reticence of FBI officials to provide a number for
Chinese government front companies in the U.S. is reasonable. Beginning
in 1998, the Chinese military began to divest from its front companies,
spinning some off to other government agencies, privatizing some, and
creating conglomerates from others. That process has continued to date.
My opinion is that absent a concerted effort by the intelligence
community to penetrate the network of state, provincial, and locally
owned businesses of the People's Republic of China, we will not be able
to identify front companies.
I suggest, instead, that the law enforcement and intelligence
communities would be more productive and effective if they focused on
any illegal activities conducted on behalf of the Chinese government or
PRC companies, public or private.
2) With respect to the US-China Economic and Security Review
Commission's recommendations about a Director of National Intelligence
assessment of U.S. intelligence capabilities vis-a-vis China, the
Commissioners generally believe that there are some weaknesses in our
intelligence on the PRC. We note in our annual report that the speed
with which China is fielding new or improved weapons systems is
increasing. In the case of new submarines and new missiles, our
impression is that the U.S. government was surprised by the numbers and
timing of the fielding of new systems in China. We note that the U.S.
national security advisor opined that in the case of China's January
11th, 2007 satellite shoot-down, the President and Communist Party
Chairman of China, Hu Jintao, may have been taken by surprise. Yet
officials of the PRC Foreign Ministry and People's Liberation Army were
firm when we questioned them on this point in April 2007, that as
Chairman of the Communist Party Central Military Commission, China's
President was aware that the test would take place. This suggests that
at the highest levels of the U.S. government, our understanding of
decision-making processes in China could be improved. Commissioners
also think that better language capabilities in the intelligence
community may lead to improved intelligence collection and analysis as
well as better counterintelligence. We therefore recommended a broad
assessment of all U.S. intelligence capabilities vis-a-vis China and
that the DNI identify strategies to address any weaknesses such as
assessment may discover.
3) With respect to espionage cases and the burden of proof, I noted
in my testimony that prosecution often relies on lesser charges or on
violations of the Arms Export Control Act, the Export Administration
Act (and related Executive Orders) or on 18 USC 951, or acting as an
agent of a foreign government. My own experience in counterintelligence
investigations and my observations of other prosecutions tells me that
in many cases we are able to establish that an individual illegally
obtained, removed, or collected and hoarded classified information or
information respecting the national defense, but we can't prove
espionage. In some cases investigations have lead to charges that an
individual acted as an agent of a foreign power, and in at least one
case a polygraph examination led to an individual admitting that he
communicated classified information to a foreign power. Hoarding or
removing classified documents illegally, however, does not prove intent
or espionage. Some individuals do this because they want to write
memoirs, while some have such egos that they think they are smarter
than classification authorities and can ignore security
classifications. I investigated one case where a U.S. Army officer was
hoarding classified U.S. documents and probably giving them to Chinese
military officers in trade for research materials for his own academic
efforts; however, we could not prove espionage. That officer was
punished for improper handing of classified documents. I am convinced
he was guilty of espionage. Therefore, I suggest that the Committee
examine 18 U.S.C. 793 (e) and (f) with a view toward strengthening the
language, specifying a large fine, and increasing the maximum penalty
beyond 10 years. With respect to 18 U.S.C. 798, I recommend that the
Committee increase the penalties for violations concerning
communications intelligence and cryptographic activities. Finally, I
note that there is no specific mention of imagery intelligence or other
electronically gathered forms of intelligence. I recommend that the
Committee consult with the DNI and other relevant agencies of the
intelligence community to examine whether other mediums of U.S.
intelligence should be addressed in the law.
4) With respect to identifying trained intelligence officers or the
recruited assets of trained intelligence officers, success really
depends on good counterintelligence, careful investigation, and good
surveillance on the part of U.S. intelligence and law enforcement
personnel. Our intelligence professionals need the tools of electronic
surveillance and must be able to conduct offensive counterintelligence
operations to penetrate a foreign intelligence service and learn its
methods of operation. Investigations may take some time however; there
is always the danger of allowing damaging vital information to be
conveyed to a foreign power while trying to gather more information on
espionage methods or to broaden a case. There is no formula here, but
good cooperation among the law enforcement community, the intelligence
community and the Department of Justice is key to success.
