Chinese Attempt to Steal Radiation-Hardened Computer Components

Chinese national indicted in Colorado for trying to illegally export to China radiation-hardened computer circuits used in satellite communications  

“..He attempted to illegally export to China radiation-hardened computer memory circuits used in satellite communications, with a value of almost $550,000. The indictment charges He with conspiracy, attempted unlawful export of defense articles and attempted smuggling of defense articles, all related to his attempt to export to China items listed on the U.S. Munitions List. He had been residing in Oakland, Calif…”

Chinese_espionageDENVER – Philip Chaohui He, aka Philip Hope, a Chinese national, made his initial appearance in U.S. district court on Thursday after he was named in a three-count indictment charging him with attempting to export defense articles without U.S. State Department authorization.

The indictment was announced by U.S. Attorney John Walsh, District of Colorado and Michael A. Holt, special agent in charge of the Denver office of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI). The indictment was originally sealed in Denver pending He’s return; it was unsealed in San Francisco on Jan. 12.

During his initial appearance Feb. 2, He was advised of his rights, the charges pending against him and the penalties associated with those charges. He is next due in court on Feb. 8 for arraignment and a detention hearing.

According to the indictment, He attempted to illegally export to China radiation-hardened computer memory circuits used in satellite communications, with a value of almost $550,000. The indictment charges He with conspiracy, attempted unlawful export of defense articles and attempted smuggling of defense articles, all related to his attempt to export to China items listed on the U.S. Munitions List. He had been residing in Oakland, Calif.

“Enforcing the Arms Export Control Act is critical to the national security of our country,” said U.S. Attorney John Walsh. “Thanks to HSI and the other agencies working with them, we were able to prevent sensitive technology from getting into the hands of foreign nationals overseas who are not legally entitled to possess it.”

“Illegally exporting radiation-hardened computer components is a serious threat to U.S. security,” said Holt. “Our HSI special agents in Colorado Springs, San Francisco and Los Angeles worked together to investigate and eliminate this threat.”

According to the indictment, He, the only employee of Oakland-based Sierra Electronic Instruments (SEI), purchased 312 radiation-hardened circuits from a Colorado manufacturer. The circuits purchased by He are categorized as defense articles within the International Trafficking in Arms Regulations. Lawfully exporting defense articles requires licensing from the U.S. State Department’s Directorate of Defense Trade Controls.

On April 28, 2011, an unindicted co-conspirator caused two wire transfers totaling about $489,720 to be sent to He’s bank account in California. On or about May 9, 2011, He provided payment in full, $549,654, at the time He placed the order with the Colorado manufacturer. According to the indictment, on or about May 17, 2011, He provided false certification to the Colorado manufacturer that his company was purchasing the integrated circuits for an end-use in the United States only, and that He further acknowledged that the items were controlled by U.S. export laws and could not be transferred, transshipped or otherwise disposed of in any other country without the prior written approval from the U.S. Department of State.

On Dec. 11, 2011, He drove to the Port of Long Beach, Calif. and met with two men in front of a docked ship bearing a Chinese flag. The Chinese-flagged ship was registered to Zhenhua Port Machinery Company LTD, a subsidiary of the China state-owned corporation China Communications Construction. The ship had recently arrived from Shanghai, China, and was scheduled to return on Dec. 15, 2011.

He allegedly concealed 200 integrated circuits in several plastic infant formula containers placed inside five boxes which were sealed and labeled as “milk powder” written in Chinese. He transported the boxes in the trunk compartment of his vehicle. Neither He, nor his company, SEI, had a license to export defense articles of any description.

If convicted of count one, conspiracy to violate the Arms Export Control Act (AECA) and to smuggle goods from the U.S., He faces not more than five years in federal prison and a fine of up to $250,000. If convicted of count two, attempted export of defense articles in violation of AECA, He faces not more than 20 years imprisonment, and a fine of up to $1 million. If convicted of count three, smuggling goods from the U.S., He faces not more than 10 years in federal prison, and a fine of up to $250,000.

The Defense Security Service and the Defense Criminal Investigative Service provided critical assistance to HSI with this investigation. Assistance was also provided by the U.S. Attorneys offices located in the Northern and Central Districts of California.

He is being prosecuted by Special Assistant U.S. Attorney John Canedy with assistance from Assistant U.S. Attorney Matthew Kirsch.

The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.

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