US To Charge Chinese Army Workers Who Allegedly Hacked US Firms

by The Daily Lede


The Justice Department plans to announce charges against individuals in the Chinese military, accusing them of hacking U.S. companies for trade secrets, the first time the U.S. government has publicly accused employees of a foreign power with cybercrimes against U.S. firms, according to people familiar with the matter.

The move to charge five individuals who allegedly worked for the People’s Liberation Army to hack into U.S. company systems marks a major escalation of the fight with China over such intrusions. U.S. government officials have long complained that China aggressively targets U.S. companies for trade secrets that would give Chinese companies a competitive advantage–a charge China has denied, saying such accusations have no basis in fact.

Attorney General Eric Holder and senior Federal Bureau of Investigation officials plan to announce the charges Monday morning, these people said.

The charges are to be filed against five people who allegedly worked for a part of the People’s Liberation Army known as Unit 61398 in Shanghai, these people said. The hackers allegedly stole some of the design information for a nuclear power plant, as well as cost and pricing information from a solar panel firm, these people said.

An indictment unsealed Monday charges five individuals, named Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu and Gu Chunhui, with conspiracy to commit computer fraud and abuse.

The suspects were allegedly part of a group that hacked into U.S. systems to obtain information about 1,753 computers at U.S. Steel, piping systems for nuclear power plants form Westinghouse Electric Company, and employee email accounts for officials at a union of manufacturing and energy workers, according to the indictment. The union, the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, also known as USW, had long criticized Chinese trade practices.

Another company, Allegheny Technologies Inc., a specialty metals manufacturer, had its network credentials for thousands of employees stolen, according to U.S. officials. The hacking allegedly took place from 2010 to 2012.

The hackers also targeted Alcoa Inc. executives, and were able to steal at least 2,907 emails and roughly 863 attachments from that company’s computer system, the indictment charges.

The indictment was handed up by a grand jury in Pittsburgh, a city close to many of the U.S. firms targeted.

In a highly unusual move, prosecutors also released photos of the suspects, including one man in military uniform. The release of the photographs points to one of the factors that make the case unique: It is highly unlikely China will turn the suspects over to the U.S. for prosecution, so the indictment may act instead as a public effort to name and shame the suspects.

The move was long-planned, dating back at least a year as the Obama administration was searching for more punitive measures to take against Chinese hackers.

In the first months of last year, the administration ratcheted up the public pressure in China to cease its cyberespionage against U.S. companies. Behind the scenes prosecutors were poring over Chinese hacking cases to find the ones they thought could withstand the most public scrutiny–and whose exposure wouldn’t damage the U.S. company. Companies are often reluctant to acknowledge hacking incidents because they fear the potential loss of trust by investors or the public.

That Obama administration offensive seemed to wane in the wake of disclosures starting in June 2013 by former National Security Agency contractor Edward Snowden exposing U.S. cyberspying efforts against China, including Chinese companies. Some disclosures specifically showed the U.S. penetrating Chinese telecommunications giant, Huawei, which U.S. officials say is a vehicle for Chinese government cyberspying.

The Obama administration has struggled in the wake of those disclosures to regain the upper hand.

It argues that it doesn’t conduct corporate espionage, as it accuses China of doing, but it relies on a nuanced argument. U.S. officials privately acknowledge they spy on companies for foreign intelligence purposes, particularly those they believe are at least in part state-controlled, but they say they won’t steal corporate secrets to provide an advantage to U.S. companies.

In China, where many companies are state-controlled in some fashion, that nuanced argument has fallen flat.

Write to Devlin Barrett at devlin.barrett@wsj.com and Siobhan Gorman at siobhan.gorman@wsj.com

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  (END) Dow Jones Newswires
  05-19-14 1011ET
  Copyright (c) 2014 Dow Jones & Company, Inc.
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