US To Press China Espionage Cases Regardless Of Trade Talks: DOJ

WASHINGTON: The head of the Justice Department task force on China pledged today to continue prosecuting espionage cases regardless of trade negotiations with Beijing.

“I don’t do trade, and I try to keep our cases well apart from what’s going on the trade front,” Assistant Attorney General John Demers told the CyberTalks conference this morning, “because we didn’t bring one of these cases because of what’s going on on the trade front. And we’re not going to drop them even if we reach an agreement.”

“We’re going to stop doing cases about China intellectual property theft when the Chinese stop doing intellectual theft,” Demers continued. “If they agree to a trade agreement and they actually change their behavior, great…That’s ultimately what we’re really looking at.”

The Trump administration has been accused of inappropriately entangling trade, national security, domestic politics, and the president’s family business in its dealings with foreign powers. Demers himself was a presidential nominee, working at Boeing before Trump tapped him to head Justice’s National Security Division. He’s not a career DOJ lawyer. But Demers had significant experience, having previously worked in what was a brand-new division under President George W. Bush from 2006 to 2009, right after he clerked for Supreme Court Justice Antonin Scalia.

Since Demers took charge in February 2018, the National Security Division has

• brought multiple espionage cases against Chinese nationals and Chinese-Americans alike,
• charged Russian Elena Alekseevna Khusyaynova for interfering in the 2018 election; and
• brought charges against a government-owned Turkish bank for violating sanctions on Iran. A key witness in that investigation was a former client of the president’s personal lawyer, Rudy Giuliani, who had tried to get the case against him dropped.

Demers and his division have also worked with the Commerce Department to impose sanctions on a Chinese company tied to industrial espionage against the US. Last year, after Jinhua Integrated Circuit Co. was accused of stealing intellectual property from US chipmaker Micron, Commerce placed Jinhua on its Entity List of companies restricted from doing business in the US. Unable to import US-made equipment for its factory, Jinhua was unable to use the stolen secrets to actually make chips, Demers said.

“The practical effect of that is this Chinese company…. is unable to import the tooling from the United States that it needs to produce a product that it stole the intellectual property to create,” Demers said today. “That means Micron is not facing that competition.”

(That said, Micron’s stock price has still slumped, in part because of rising Chinese competition and in part because it can no longer sell to Chinese tech giant Huawei, a major customer for many US firms until it, too, was put on the Entity List.)

The Micron case is an example of the kind of public-private cooperation Demers deems essential to combating Chinese espionage. “We crucially need that cooperation of the private sector to bring these cases,” he said, because it’s the companies that often detect the first signs that a network or an employee is being subverted.

Likewise, he went on, the companies need government help to counter the skills and resources of Chinese intelligence agencies like the Ministry of State Security, which has taken the lead in industrial espionage from the People’s Liberation Army.

“Looking at the way in which Chinese intelligence officers recruit employees of American companies, and comparing that to what we’re used to seeing on the traditional political espionage side,” Demers said, “it’s really the same tradecraft that’s now being aimed not at the government but being aimed at you all, being aimed at the private sector.”

“It’s hard sometimes for government employees to understand what’s going on and resist,” he said. “It’s just much harder for [private sector] employees who haven’t been trained in counterintelligence.”