Chinese Intelligence Officer Charged with Economic Espionage Involving Theft of Trade Secrets from Leading U.S. Aviation Companies
A Chinese Ministry of State Security (MSS) operative, Yanjun Xu, aka Qu Hui, aka Zhang Hui, has been arrested and charged with conspiring and attempting to commit economic espionage and steal trade secrets from multiple U.S. aviation and aerospace companies. Xu was extradited to the United States yesterday.
The charges were announced today by Assistant Attorney General for National Security John C. Demers, U.S. Attorney for the Southern District of Ohio Benjamin C. Glassman, Assistant Director Bill Priestap of the FBI’s Counterintelligence Division, and Special Agent in Charge Angela L. Byers of the FBI’s Cincinnati Division.
“This indictment alleges that a Chinese intelligence officer sought to steal trade secrets and other sensitive information from an American company that leads the way in aerospace,” said Assistant Attorney General Demers. “This case is not an isolated incident. It is part of an overall economic policy of developing China at American expense. We cannot tolerate a nation’s stealing our firepower and the fruits of our brainpower. We will not tolerate a nation that reaps what it does not sow.”
“Innovation in aviation has been a hallmark of life and industry in the United States since the Wright brothers first designed gliders in Dayton more than a century ago,” said U.S. Attorney Glassman. “U.S. aerospace companies invest decades of time and billions of dollars in research. This is the American way. In contrast, according to the indictment, a Chinese intelligence officer tried to acquire that same, hard-earned innovation through theft. This case shows that federal law enforcement authorities can not only detect and disrupt such espionage, but can also catch its perpetrators. The defendant will now face trial in federal court in Cincinnati.”
"This unprecedented extradition of a Chinese intelligence officer exposes the Chinese government's direct oversight of economic espionage against the United States,” said Assistant Director Priestap.
Yanjun Xu is a Deputy Division Director with the MSS’s Jiangsu State Security Department, Sixth Bureau. The MSS is the intelligence and security agency for China and is responsible for counter-intelligence, foreign intelligence and political security. MSS has broad powers in China to conduct espionage both domestically and abroad.
Xu was arrested in Belgium on April 1, pursuant to a federal complaint, and then indicted by a federal grand jury in the Southern District of Ohio. The government unsealed the charges today, following his extradition to the United States. The four-count indictment charges Xu with conspiring and attempting to commit economic espionage and theft of trade secrets.
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According to the indictment:
Beginning in at least December 2013 and continuing until his arrest, Xu targeted certain companies inside and outside the United States that are recognized as leaders in the aviation field. This included GE Aviation. He identified experts who worked for these companies and recruited them to travel to China, often initially under the guise of asking them to deliver a university presentation. Xu and others paid the experts’ travel costs and provided stipends.
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An indictment is merely a formal charge that a defendant has committed a violation of criminal law and is not evidence of guilt. Every defendant is presumed innocent until, and unless, proven guilty.
The maximum statutory penalty for conspiracy and attempt to commit economic espionage is 15 years of incarceration. The maximum for conspiracy and attempt to commit theft of trade secrets is 10 years. The charges also carry potential financial penalties. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes. If convicted of any offense, a defendant’s sentence will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.
This investigation was conducted by the FBI’s Cincinnati Division, and substantial support was provided by the FBI Legal Attaché’s Office in Brussels. The Justice Department’s Office of International Affairs provided significant assistance in obtaining and coordinating the extradition of Xu, and Belgian authorities provided significant assistance in securing the arrest and facilitating the surrender of Xu from Belgium.
Assistant Attorney General Demers and U.S. Attorney Glassman commended the investigation of this case by the FBI and the assistance of the Belgian authorities in the arrest and extradition of Xu. Mr. Demers and Mr. Glassman also commended the cooperation of GE Aviation throughout this investigation. The cooperation and GE Aviation’s internal controls protected GE Aviation’s proprietary information.
The case is being prosecuted by Assistant U.S. Attorneys Timothy S. Mangan and Emily N. Glatfelter of the Southern District of Ohio, and Trial Attorneys Thea D. R. Kendler and Amy E. Larson of the National Security Division’s Counterintelligence and Export Control Section.
Victim Company A has devoted
substantial resources to research and development in the field of using unique materials to
manufacture jet engine fan blades and fan containment structures. Victim Company A's design
and use of ce11ain types of composite materials in fan blades and fan blade encasements provide
greater engine durability, weight reduction. and lower costs. These fan blade and fan blade
encasement designs provide Victim Company A with a significant competitive advantage over
others in the industry.
U) After the trip to China. XU continued to communicate with Employee I. In
fact, XU invited Employee I to return to NUAA the following year.
(k) On November 21, 20 17, unindicted co-conspirator CF expressed an interest
in having Employee l travel to China to exchange ideas and instruct again at NUAA. Unindicted
co-conspirator CF infom1ed Employee I that he had spoken with Qu Hui (XU) from JAST. and
that Qu Hui would be able to help with travel expenses and handle the details ofthe "exchange."
(I) On or about January 8, 2018, XU wrote to Employee I, "I will touch base
with the scientific research department he re to see what technology is desired and I will let you
know what to prepare. For your end, please prepare the plane ticket and date as soon as possible."
(m) On or about January 23, 2018, XU wrote to Employee 1, "Okay. Try your
best to collect and we can talk by then. Domestically. there is more focused [sic] on the
system code." XU later elaborated that the infonnation he wanted pertained to ·'system
specification, design process;· which is the application ofresearch data to engine production. XU
provided an email address for Employee I to use to send the requested infonnation. When
Employee I informed XU that the email may be blocked if Employee I used the company
computer, XU responded, " It might be inappropriate to send directly from the company, right?"
(n) On or about February 3, 2018, XU caused Employee I to send an excerptof presentation from Victim Company A, pertaining to "containment analysis" for a fan bladeencasement. The document contained a label warning that the presentation contained proprietaryinfonnation from Victim Company A.(o) On February 4, 2018, XU wrote to Employee I and acknowledged receivingthe document from Victim Company A pertaining to the "containment analysis." XU stated thathe wanted Employee I to spend time talking with the experts in China for a "more preciseconnection" and proposed a meeting date.(p) In the same message, XU sent Employee I a list of technical topicspertaining to composite materials in the manufacture offan blades and fan blade encasements thatXU's organization was interested in, after being sent infonnation that contained Victim CompanyA's proprietary warning label. Specifically, XU wrote, the ·'attached file is some domesticrequirements that I know of. can you take a look and let me know ifyou are familiar with those?"The attached list stated the following:Regarding the current development situation and future developmenrdirection o.f'Joreig11 countries ' structural material.,· fur .fan rntor !>ladesmade.from composite materials:{A question.fol/owed.}
Regarding the design criteria.for the.fhreign co1111tries ·composite material
rotor.fan h/ade, stator.fan blade, and.fan casing:
/ A list ofquestfo11sfol/011·ed.)
(q) When Employee I directly advised XU that some of the posed questions
involved Victim Company A's commercial secrets, XU replied they would discuss it when they
met in person.
(r) In February 2018, XU also began discussing with Employee I the
possibility ofmeeting in Europe during one ofEmployee 1 's business 11ips.
(s) On or about Febrnary 5, 20 18, XU asked Employee I to create and sort a
directory ofthe files on Employee 1 's computer relating to the files of Victim Company A.
XU asked Employee I to send a copy of the file directory for Employee 1 's company-issued
computer. XU sent specific directions for how Employee I should sort and save such a directory.
(t) On or about February 14. 2018, XU caused Employee I to send a computer
file directory from Employee I's company-issued computer to XU.
(u) On February 28, 2018, XU requested to speak with Employee I by
telephone. During the phone call, XU referred to the file directory that Employee I sent at XU's
request. XU told Employee I that "they" had looked at it and it is .. pretty good stuff." XU asked
ifEmployee I would be able to bring it with Employee I when Employee I traveled to Europe for
their meeting. XU further stated, "the computer you will bring along is the company computer,
right?" XU also asked ifthe material Employee 1 intended to bring could be exported out of the
computer. When Employee 1 infonned XU that it could be exported onto a portable hard drive,
XU replied. "Good, good, good." XU asked, ··so, ifpossible, we will look over the stuff. Can we
do that?" After Employee I agreed to XU's request, XU stated, "Do you understand? Carry the
stuff along."
(v) Later in the conversation on February 28, 2018, XU told Employee l that
what Employee 1 had sent so far was '·good enough." XU continued: "Ifwe need something new
later, we can.. . talk about that in person when we meet. .. What do you think? ... All right, we
really, we really don 't need to rush to do everything in one time, because, if we are going to do
business together, this won't be the last time, right?"
(w) On March 4, 2018, Employee I informed XU that some ofthe documents
identified on the company directory were generated from a specific software and, as a result, some
documents could only be viewed and backed up when connected to Victim Company A's network.
In response, XU asked, "Does that mean I will not be able to view these documents after I bring
them back?" Employee I replied that Employee I did not know, because Employee 1 had never
tried to open the files while in China.
(x) On March 5, 2018, XU sent Employee I a message asking, ·'Regarding the
document directory you sent last time. is it possible to dump it to a portable hard drive or USB
drive from work computer in advance?"
(y) On March I 0, 2018, XU sent Employee l a message stating, "Since there's
still time, download more data and bring them back. Anything design related would work."
(zJ On or about April 1, 2018, XU traveled to the Kingdom ofBelgium to meet
Employee I for the purpose ofdiscussing and receiving the sensitive infonnation he had requested.
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