The Daring Ruse That Exposed China’s Campaign to Steal American Secrets

“No one begrudges a nation that generates the most innovative ideas and from them develops the best technology,” John Demers, former assistant attorney general for national security, said in a 2018 hearing before the U.S. Senate Judiciary Committee. “But we cannot tolerate a nation that steals our firepower and the fruits of our brainpower.”

The accusation that China has been relentlessly stealing intellectual property from American companies and institutions — although China is now a manufacturing giant, for technology it still relies heavily on the United States and Europe — is neither new nor unfounded. In 2008, a Chinese-born engineer named Chi Mak who worked for a defense contractor in California was sentenced to more than 24 years in prison for having stolen and passed on to China information about several sensitive technologies, including systems for the U.S. Navy. The Chi Mak investigation led to the uncovering of another Chinese spy, Dongfan Chung, an engineer at Boeing who gave his handlers in China thousands of documents containing designs and other technical specifications relating to American fighter jets, the U.S. space shuttle and the Delta IV rocket. In the past decade, individuals working for Chinese entities have been caught taking or trying to take trade secrets across many industries. One notable case involved six Chinese nationals in the United States attempting to steal proprietary corn seeds from fields in Iowa and Illinois. A California engineer named Walter Liew was caught stealing secrets relevant to the production of titanium dioxide, which is used as a whitener in paint and toothpaste. Individuals of Chinese origin have been indicted in recent years for the theft of proprietary information relating to locomotives, semiconductors, solar panels and other high-tech products.

In recent years, China has been recruiting those it considers expat nationals through hundreds of formal “talent” programs, which identify experts in American schools and industries to help fill specific gaps in knowledge back home. “It’s a vehicle to get them to travel back to China to attend conferences, to provide lectures, which allows the opportunity to develop a relationship with them and later take advantage of that relationship to get intellectual property,” Gunnar Newquist, a former counterintelligence agent for the Naval Criminal Investigative Service, told me.

The guests are often hosted in luxury hotels, driven around in limousines, taken on sightseeing tours. After receiving this lavish treatment, Gaylord says, some feel obligated to provide information that they might not have initially planned to share. While at the F.B.I., Gaylord interviewed many scientists and engineers of Chinese origin who had been courted in this fashion. Some of them described how they had been pressured. “They would say: ‘Everything in my presentation was approved by my company. After I finished it and stepped down, a gaggle of students surrounded me to ask more questions. And they kept pushing me for more and more sensitive information,’” Gaylord says. “And a lot of them say: ‘You know, after a while, you start to break down. You can’t keep saying, “I can’t talk about this.” You then start answering around the edges, giving away more and more.’”

The Chinese government also offers financial incentives to help Chinese expats start their own businesses in China using trade secrets stolen from their American employers. Gaylord told me about Wenfeng Lu, an engineer who worked at Edwards Lifesciences in Irvine, Calif. Lu’s employer reported him to the F.B.I. after discovering that he had been downloading proprietary information about the company’s heart catheters. Gaylord and his colleagues opened an investigation and discovered, among other red flags, that Lu was often collecting this material right before trips to China. Agents arrested him as he was preparing to leave the country for another visit. On the laptop and thumb drives that he was carrying, investigators found information he had taken from his employer. Searching his house, agents found more documents he had collected from two other U.S. medical device companies where he had worked. “Then, in his laptop, we found agreements between him and municipal government officials in China offering him research offices in an industrial park in Nanjing that would be rent-free for the first three years,” Gaylord says. “In other words, he steals the R. & D. cost our companies incur, and he goes there and develops it for a lot cheaper. And has the whole China market without any revenues going to the American companies.” Lu pleaded guilty to charges of unauthorized possession of trade secrets and in 2019 was sentenced to 27 months in prison.