Alleged Espionage: Meng; Ye/Zhong

Engineer Indicted for Alleged Espionage
Thursday December 14, 10:19 pm ET
By Jordan Robertson, AP Business Writer
Engineer Indicted in Alleged Plot to Sell Military Trade Secrets to Asian Governments

SAN JOSE, Calif. (AP) -- A Chinese engineer was charged Thursday with stealing trade secrets from a Silicon Valley company that made military training software and attempting to sell them to Asian governments.

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Xiaodong Sheldon Meng, 42, a Chinese national with Canadian citizenship, was indicted on 36 felony counts, including the rare charge of economic espionage to benefit a foreign government and various violations of military technology export laws.

In an unrelated but similar economic espionage case, two other engineers pleaded guilty Thursday to stealing proprietary computer chip designs from four technology companies and attempting to smuggle them to China.

Prosecutors say Meng stole the code for software made by his former employer, Quantum3D Inc., that's used to train military fighter pilots, and tried to sell it to the Royal Thai Air Force, the Royal Malaysian Air Force and a company with ties to China's military.

Under U.S. law, anyone attempting to sell such information overseas must first obtain a license from the State Department and is subject to strict regulations. Meng never applied for such a license.

No foreign government or agent was named as a conspirator in the case, and prosecutors declined to discuss whether any of the secrets were sold or whether any foreign officials or agents knew about the alleged scheme.

In economic espionage cases, the law does not require proof of complicity by a foreign government, and investigators often don't know the extent of foreign involvement.

Meng's case marks only the third time in a decade prosecutors have charged someone with economic espionage to benefit a foreign government, the most serious crime under the Economic Espionage Act of 1996. A conviction carries a maximum penalty of 15 years in prison.

Meng's defense lawyer, Angela Hansen, called the charges "baseless" and said in a statement the government has "misinterpreted innocent acts."

U.S. Attorney Kevin Ryan said the case highlights the threat U.S. businesses face from thieves looking to sell hard-won intellectual property overseas. Few cases allege intent to benefit a foreign government because it's difficult to prove, but he said U.S. companies are frequently targeted by overseas concerns.

"Silicon Valley understands full well the threat they are faced with here," he told The Associated Press. "It's not only a threat to the economic value of the products being produced, but in some cases it's a threat to our national security and military infrastructure."

In the second case, Fei Ye, 40, a U.S. citizen from China, and Ming Zhong, 39, a permanent resident of the U.S. from China, pleaded guilty in San Jose federal court to two counts each of economic espionage to benefit a foreign government as part of a deal with prosecutors. Ye and Zhong initially faced 10 counts each, and had been scheduled to go to trial in January.

They were charged with stealing confidential microchip blueprints and other trade secrets from their employers and attempting to smuggle them to China. The indictment alleges they planned to start a microprocessor company with the financial backing of various Chinese government agencies.

Ye and Zhong were arrested in 2001 at San Francisco International Airport, attempting to board a flight to China. Their luggage was allegedly crammed with thousands of pages of trade secrets stolen from four Silicon Valley companies -- NEC Electronics Corp., Sun Microsystems Inc., Transmeta Corp. and Trident Microsystems Inc.