Subject: [NEXTEL-1] Spy catcher focuses on economic espionage

From: [email-masked]
Date: Tue, 11 May 2004 14:05:14 -0400

http://www.usatoday.com/money/2004-05-10-espionage_x.htm

Posted 5/10/2004 2:18 AM
Spy catcher focuses on economic espionage
By Edward Iwata, USA TODAY

MOUNTAIN VIEW, Calif. - The former Cold War warrior was fired up. His
mandatory retirement at 57 had been waived, and FBI Director Robert
Mueller
had asked him to strengthen the counterintelligence operation, which had
lost much luster in recent years.
Decades ago, the biggest danger to U.S. national security came from the
Soviet Union, said 60-year-old David Szady, the FBI's top spy catcher
and
assistant director of counterintelligence.

Now, he warned, some of the worst threats involve economic espionage
from
dozens of enemy and ally nations spying quietly on U.S. companies and
swiping technology and trade secrets.

"We can put an umbrella around our national assets," said Szady,
speaking
last week in Silicon Valley at the FBI's first conference on economic
spying. "We can prosecute criminally if we have to. We can neutralize it
if
we have to. It's crucial that we do this."

   What spies are after
Economic spying by foreign nations - enemies and allies alike - is on
the
rise. Here's what they were after in 2003:
Technology Countries targeting Pct. of reported suspicious incidents
Information systems 63 22%
Sensors and lasers 46 17%
Electronics 32 9%
Armaments, energetic materials 44 9%
Aeronautics 35 10%
Source: Office of the National Counterintelligence Executive

The event at Moffett Federal Airfield drew 250 corporate security and
law
enforcement officials nationwide. After his talk, Szady sat down with
USA
TODAY for an hour-long interview.

In the past, corporations feared investigations and bad publicity, or
worried that trade secrets might emerge in court. But now more high-tech
firms and other companies are starting to work with the FBI, the CIA,
the
military and other government bodies to choke espionage cases before
they
worsen.

Economic spying by foreign industries and governments - such as China,
South
Korea, India, Pakistan, France, Israel, Japan and others - has increased
in
recent years and is costing U.S. firms billions of dollars, say Szady
and
other experts.

Spies are targeting defense firms, research centers and universities in
California, Texas, Arkansas, Colorado, Iowa, Kansas, Connecticut and
other
states where military and commercial trade secrets can be found.

"The threat is huge," Szady says.

Their favorite spy methods? Posing as foreign business people and
scientists. Paying off U.S. citizens who are already inside corporations
and
research centers. Hacking into computers to steal data. Or setting up
bogus
companies that export technology.

China has the largest spy program, Szady says, with 3,500 suspected
front
companies and many business and academic delegations visiting the USA.

Take the federal sting operation disclosed last week by the Department
of
Homeland Security and the Justice Department. According to criminal
complaints, a California man and a Chinese national were arrested
Thursday
at a Los Angeles airport and charged with conspiring to buy and export
to
China electronic parts used in radar and satellites.

John Chu, a 44-year-old Pasadena resident, and Zhu Zhaoxin, 55, of
Shenzhen,
China, were charged in federal court in Boston after meeting with
undercover
agents who posed as arms dealers. Chu and Zhaoxin allegedly had
negotiated
for several months to purchase the parts, called traveling wave tubes.

The lanky Szady joined the FBI in 1972, investigating murder and
gambling
cases in Alabama.

Over the next three decades, Szady became an expert on Soviet espionage
and
other intelligence subjects in Washington, Silicon Valley, San Francisco
and
Portland, Ore. He also served as a CIA counterespionage chief seven
years
ago. His biggest FBI case: the investigation of John Walker, the
American
who spied for the Soviet Union's KGB for nearly 20 years.

Now, Szady is sweating to revive the FBI's counterintelligence, which
has
taken hits in recent years.

Critics have blasted the FBI for bumbling the case of Wen Ho Lee, the
Chinese-American scientist wrongly accused of espionage.

And since the Sept. 11 terrorist attacks, the FBI, other law enforcement
agencies and the White House have come under fire for not anticipating
the
attack on the World Trade Center.

Funding and staffing were cut for counterintelligence in recent years.
Morale was low, and intelligence was seen as a dead-end career move for
FBI
agents, who favored hunting killers and bank robbers.

But now counterintelligence is hot, with squads in every FBI field
office.

About 270 agents have been transferred or hired to work intelligence,
and
the FBI is recruiting analysts and experts on foreign cultures. Szady
estimates the FBI needs an additional 800 agents to handle
counterintelligence matters. "Counterintelligence is our No. 2 priority
after terrorism," he says. "If we need the resources, we will get them."

A ChevronTexaco security official who attended the Silicon Valley
conference
says that most companies are very concerned about espionage and
terrorism.

Since the Sept. 11 attacks, ChevronTexaco has doubled its security
against
spy and terrorist threats worldwide. The oil giant also works closely
with
the FBI and Homeland Security to strengthen security at its refineries,
R&D
centers and other facilities, says Steve Steinhauser, a ChevronTexaco
manager of global security and a former FBI agent.

Szady says that companies teaming with law enforcement won't totally
stop
economic espionage. But they can slow the spies and nab more of them.

Meanwhile, Szady, who shares a Washington apartment with another FBI
agent,
plans to retire one day with his mathematician wife at their Cape Cod
home.

Says Szady, grinning, "I think I'm the oldest, gun-toting agent at the
FBI."

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