Brower_GregMoschellaWilliamE@2xFeatured Expert Contributor, White Collar Crime & Corporate Compliance

Gregory A. Brower, a Shareholder with Brownstein Hyatt Farber Schreck, LLP in Las Vegas, NV and Washington, DC, with William E. Moschella, a Shareholder in the firm’s Washington, DC office.

The Department of Justice (DOJ) recently announced an indictment charging a Chinese government official with attempting to steal trade secrets and other sensitive information from an American aerospace company.  This is not the first indictment of its kind.  In fact, in announcing the indictment, Assistant Attorney General John Demers remarked that “[t]his is not an isolated incident.”  He explained that this case “is part of an overall economic policy of developing China at American expense.”  What makes this case unique is that fact that the Chinese defendant is now in U.S. custody after being extradited from Belgium.

In a sealed indictment filed on April 14, 2018 in the Southern District of Ohio, the United States charged Yanjun Xu with conspiracy, attempted economic espionage, and attempted theft of trade secrets.  According to the indictment, Xu is a deputy division director with the Chinese Ministry of State Security (MSS).  The MSS is the intelligence and security agency for China and is responsible for counterintelligence, foreign intelligence, and political security.

According to the indictment, beginning in 2013, Xu targeted certain companies inside and outside the U.S. that are recognized as leaders in the aviation field.  He identified experts who worked for these companies and recruited them to travel to China, often under the guise of asking them to deliver a university presentation, and paying their travel costs.  Xu was arrested in in Belgium last April in what appears to have been a sting operation that lured Xu from China to Belgium to meet a potential target.  Upon Xu’s successful extradition, the indictment was unsealed and announced by DOJ.

This is believed to be the first time that a Chinese intelligence officer has been not only indicted, but arrested for prosecution in a U.S. court.  Xu’s successful capture and extradition is a remarkable departure from the usual indictments of foreign government actors that never result in the defendants being arrested or facing trial in the U.S.  This development appears to demonstrate that U.S. law enforcement authorities are capable of not only detecting and disrupting economic espionage crimes committed by foreigners abroad, but that arrests and prosecutions are also possible with the help of international partners.

The case also reveals an increasingly aggressive approach to prosecuting such crimes by DOJ’s National Security Division.  U.S. business community should be very encouraged by the arrest and indictment, as Chinese theft of American intellectual property is estimated to cost U.S. businesses between $200 billion and $600 billion annually.