US fears Chinese industrial spies

China is the biggest espionage threat to the US, according to the nation's top spy-catchers.

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Newsnight gained exclusive access to the FBI's nerve centre in Washington.

Hundreds of counter-intelligence officers have been deployed across the country to combat Chinese attempts to target America's military and commercial technology.

Rudy Guerin, the FBI's top Chinese spyhunter says his team is convinced it is fighting "the biggest long term threat to the USA".

"I have agents working here who worked street gangs, drug cases, white collar crime and to everyone of them they say this is the most important work we have done at the FBI."

A different threat

It is a very different battle to the Cold War, and there are growing concerns about China's increasing economic and military might. But the government faces charges of racial profiling and is having trouble making some of its cases stick.

Ko-Suen Moo was found guilty of acting as an agent for a foreign power

Dave Szady, former Assistant Director for the FBI's Counterintelligence Division, says the nature of the threat is different to the one the country faced from the Soviet Union.

"Now the threat can be as serious in Idaho, Iowa and Mississippi or Alabama or any state because that's where the Research and Development is. That's where the secrets are, that's where the cutting edge technology is being developed and that's where you go to get it."

Conviction

One Chinese agent was convicted last month in Florida after months of investigation by customs agents came together.

Ko-Suen Moo, a Chinese businessman, came to a beach front hotel last November to finalise a deal to buy an engine for an F-16 jet fighter. Unknown to him he was meeting an American informer and an undercover agent.

The Chinese have found success in obtaining technology through stealing, essentially Don Przybyla, FBI agent

Moo was tried and found guilty of acting as an agent of a foreign power. His operation was backed by millions of dollars which he then tried to use to buy his way out of jail.

Tony Mangione, the Agent in charge of US Immigration and Customs, says Moo's behaviour was "extraordinary" and demonstrated that "Moo was more important than we thought he was".

'Shot-gun approach'

The magnet for those searching for hi-tech secrets is California's Silicon Valley. Newsnight gained access to the FBI's biggest effort to counter Chinese espionage, which occupies an unmarked floor in a Silicon Valley office park.

The FBI agent in charge, Don Przybyla has no doubt where the principal threat comes from. He says "the majority are coming from China. They are using a shot-gun approach, flooding the Silicon Valley with engineers and scientists.

"The Chinese have found success in obtaining the technology through stealing, essentially. Once successful they'll send more people over to do the same thing."

One software company that found itself targeted is 3DGeo. It deals with remote sensing equipment - searching for oil and gas from space. They had a contract with the Chinese national petrol company which included training opportunities in the US for six staff. The last two sent to California decided to help themselves to the company's secrets.

FBI agents arrested Yan Ming Shan as he attempted to board a flight to China. The boss of 3DGeo says if Shan had succeeded, "he'd be getting some technology that we keep guarded out into the industry and revealing secrets - that's something any company involved in Intellectual Property wants to avoid."

Witch hunt?

But was this espionage for commercial gain or something guided by Chinese spy chiefs nationally? Those who've studied the intelligence say there is a prioritised list of technologies the Chinese are seeking.

Scientist Wen Ho Lee was cleared of espionage charges - the FBI admits it "made mistakes"

"Through the normal course of investigation we have to prove foreign agents of a foreign power are behind this," says Rudy Guerin.

"Most of these institutes have some kind of tie to the Chinese Government, army and in some cases the Ministry of State Security."

In San Francisco some are nervous that the FBI may target their community. There have been several failed attempts to prosecute commercial espionage cases, leaving the lawyer for some of the acquitted Chinese wondering whether the FBI isn't unleashing a witch hunt.

Criminal defense lawyer Thomas Nolan says he is seeing "a lot of cases that are overblown, cases that should not be prosecuted". He thinks that "they are trying to stop Chinese people trying to do business [in America]".

Spy-phobia

The case of Wen Ho Lee, a scientist at Los Alamos nuclear laboratory, accused seven years ago of espionage, showed the dangers of spy-phobia.

Lee was acquitted and this month the government and several news organisations paid him damages. His case created fears among Chinese Americans of profiling, and taught the FBI a lesson.

David Szady says, "the FBI did make mistakes" but that "those errors have been corrected in terms of looking at the Chinese threat in the future".

When asked to respond to the investigators' charges, staff at the Chinese Embassy in Washington declined to give us an interview but a spokesman told us:

"We do not conduct espionage in this country and the accusations are totally groundless."

But while the commercial ties remain open so will the spying and America's best defence may ultimately prove to be the speed and variety of it's innovation.