His tone was almost gleeful. In truth, he was satisfied that Robert had been arrested, but disappointed that after such a lengthy investigation no one else had. Much of his relief was due to the fact that after seventeen months as an FBI informant, he would no longer have to be so careful about what he said. “I am glad that they did not try to involve me in this industrial espionage and (allegedly) theft activity,” he concluded. He published the post.
The responses were quick. “Wow. . . . I now know a celebrity!!!” a friend wrote. “Thanks for not giving away our stuff to China!!!”
Kevin replied: “Not a celebrity; just a farm boy trying to help others grow more food for themselves.” Then he added, “Legally.”
TWENTY-NINE
2016
At times it seemed to me that Mark Betten, Robert Mo, and Kevin Montgomery were merely actors in a play directed by someone else. As the special agent overseeing the investigation, Mark had control over what leads he pursued, but the bureau’s larger priorities were beyond his control. Robert had enlisted for a very different sort of work, and he went along with DBN’s plan only reluctantly. And Kevin had never signed up to be either a stooge or an informant. In order to truly understand the case, I realized, I needed to get a sense for high-level discussions surrounding industrial espionage and China. One July, I traveled to a breathtaking resort in Aspen, Colorado, to attend the Aspen Security Forum, a conference frequented by U.S. intelligence and defense officials.
The list of speakers the year I attended included the secretary of the Department of Homeland Security, the CIA director, the U.S. central commander, several cabinet undersecretaries, and a smattering of foreign ambassadors to the United States—so many big names that I wondered whether for a few days of the year Aspen had to implement heightened security measures. The audience was filled out by CEOs, journalists, and spooks.
After years of attending Chinese science conferences, where lukewarm buffet food and lukewarm conversation were the norm, I found the atmosphere fascinating. There was an espresso bar, an afternoon chocolate service, and a caterer who elevated ancient grains to fine cuisine. Between events, participants traded war stories over superfood balls and lemon-raspberry water, or went for hikes in the surrounding mountains.
Despite the relaxing setting, a nervous energy pulsed through the gathering. At the Republican National Convention the week before, delegates had selected Donald Trump as the party’s nominee for the presidential election in November. At rallies, Trump frequently called out China, sometimes for vaguely delineated offenses and at other times for trade or intellectual property abuses. “We can’t continue to allow China to rape our country,” he said in Fort Wayne, Indiana, in May 2016. Then, channeling General Keith Alexander and sidestepping colonialism, he added, “It’s the greatest theft in the history of the world.” No one I talked to at the forum admitted to favoring Trump, though one man did tell me that if the celebrity candidate won he’d be the first to line up for a job. “He doesn’t have anyone to fill positions,” the man said jovially. I wandered off and I never learned whether he succeeded in getting a job in the White House. I ended up chatting with a goateed British man who said he had been a spy for Scotland Yard. The conversation turned to cybersecurity, and to illustrate a point he took out his phone and started scrolling through a list of all the devices that participants had connected to the resort’s unprotected Wi-Fi, as if toying with the idea of snooping on them.
Many participants had thoughts on the U.S.-China technology relationship. But none wielded as much influence over economic espionage prosecutions as John Carlin, who was then assistant attorney general in charge of the Justice Department’s National Security Division. He oversaw work on industrial espionage cases—including the case brought against Robert Mo.
The National Security Division was created in 2006 to prevent some of the mistakes that led to the September 11 attacks. The idea was that by combining the counterterrorism and counterintelligence units, the Justice Department could guard against future intelligence failures. From the start, this was controversial. The first head of the division took office amid protests against warrantless wiretapping and U.S. prisoner detention practices. As the years passed, though, the controversy died down. By the time the division’s mandate broadened to include acts that did not physically endanger Americans, such as the theft of corn, the critics had mostly retreated.
I sat down with Carlin one afternoon on a balcony overlooking a lush mountain landscape. He was clean-cut and boyish, and he smiled as he talked. The handler he brought along did not. As a Justice Department rookie in the 1990s, Carlin was assigned cybercrime cases because, as he told it, he could use email and operate the printer. Later he became chief of staff for FBI director Robert Mueller. Then he returned to the Justice Department, filling several roles within the NSD before being confirmed as assistant attorney general in 2014. To his young daughter, he explained that his new job meant fighting the wolf in “Three Little Pigs.”
Soon after he took office, he announced the indictment of the members of Unit 61398, a Chinese People’s Liberation Army hacking outfit that was accused of penetrating giants like Alcoa, U.S. Steel, and Westinghouse Electric. At the press conference where Carlin and other officials unveiled charges, the hackers’ faces were splashed across FBI WANTED posters. Justice Department attorneys under Carlin’s direction had spent two years building the case against the men, who went by colorful monikers like KandyGoo and UglyGorilla, but since they were in China, there was little hope that they would ever be apprehended. National security experts were quick to question the utility of the indictment. At an event at the Brookings Institution in Washington, D.C., senior fellow Benjamin Wittes asked Carlin whether it was “a very sophisticated form of legal PR.” Others speculated that the bold move was an effort by the NSD to carve out a new mission as terrorism cases declined.
“There was immense skepticism in certain quarters after we brought the case,” Carlin told me on the balcony. “Time has shown that it made a difference.” He argued that the indictment sent a message through “naming and shaming” the perpetrators. “The approach is a giant ‘no trespass’ sign,” he had explained on stage in Aspen. “It’s, ‘Get off our lawn.’”
Carlin became the public face of the Justice Department’s economic espionage effort. He spearheaded a reorganization of the department that increased resources for technology theft cases, and he traveled the United States trying to persuade CEOs to cooperate with federal prosecutors and with the FBI. “Right now, companies that have been breached can be reluctant to come forward because they’re afraid they’re going to suffer civil or regulatory consequences,” he told me. “The big concern that I don’t think has been fully addressed is, ‘If I come forward to the FBI, is that going to get fed somehow to a regulator and used against me?’”
I knew that there was truth to what Carlin said. Regulators were one threat. Executives also worried that if they pressed charges in industrial espionage cases, their company’s stock price would plunge, or they would lose market access in China. As the head of China operations for a Fortune 500 firm put it to me, “In China you can face significant retaliation. The fact that your second latest technology is stolen is no longer as important as the fact that you are generating $5 billion in revenue and $1 billion in earnings. Very few CEOs will seize the problem and say, ‘Enough is enough. Fix it.’”
But over time, some in the U.S. business community in China had grown dissatisfied with the limits on their market access. As upstart Chinese competitors began challenging U.S. companies in other markets, American CEOs calculated that assisting with trade secrets actions might be worth their time. Corporations with little China business had even less to lose.
In fact, some critics feel the problem is not too little cooperation between the Justice Department and the private sector but too much. In seminars, printed material, and even dramatic films, the FBI’s Stra
tegic Partnership Program emphasizes its close relationship with business. Around the time of Robert’s arrest, the office published a brochure on agricultural espionage. The cover featured a tiny seedling, glowing against a black backdrop. “You and the FBI: Sowing the seeds of cooperation to defeat the IP threat,” it read. At moments, the FBI has gone so far as to stage international sting operations to defend U.S. companies’ technology. In one of these stings, an informant lured to the United States two Chinese entrepreneurs who had targeted trade secrets connected to the Missouri-based company Pittsburgh Corning’s glass block insulation. In a film that the FBI produced about the sting, a gong sounds as the villains enter the scene. Later, the hero’s wife intones, “Just say no to the Chinese!”
In arguing to executives that they should cooperate on technology theft investigations, Carlin sometimes pointed to the case of Robert Mo. “Hailong and his co-conspirators brazenly stole inbred corn seeds from production fields,” he said at a roundtable discussion on intellectual property at Iowa State, referring to Robert by his given name rather than his surname. “Our entire nation, including Iowa, is under constant attack from foreign adversaries and competitors who try to steal trade secrets and other intellectual property—at the expense of our economy and national security.”
Close cooperation between government and business meant that companies’ claims about their technologies might be accepted uncritically—and that prosecutors could become front men for companies interested in suppressing competition. “What the government should do when it gets one of these cases is not take the word of the obviously interested company that this is proprietary or trade secret information,” said John Cline, a defense attorney in San Francisco who represented Wen Ho Lee and who briefly worked on Robert’s case. “The government ought to get an independent expert to carefully examine the technology at issue. But it rarely seems to do that.” A failure to seek out independent experts could lead to errors like the one committed in Xiaoxing Xi’s case, in which innocuous exchanges are read as nefarious because of a misreading of the science behind them.
Like other U.S. national security officials, Carlin sometimes talked about industrial espionage in moralistic terms. “We didn’t help Boeing get a leg up by learning what Chinese aviation firms were doing or help Monsanto learn about Chinese agricultural systems,” he wrote in his book, Dawn of the Code War. China, he added, “uses the power and assets of the government to create an unfair playing field for businesses.” He told Lesley Stahl of 60 Minutes: “They’re targeting our private companies. And it’s not a fair fight. A private company can’t compete against the resources of the second largest economy in the world.” But I wondered, wasn’t bringing cases on behalf of large corporations its own type of assistance?
* * *
• • •
OUTSIDE THE REALM of Chinese intellectual property theft, there are plenty of examples of trade secrets cases that have played out in civil court as battles between two giants, or sometimes as brutal whompings, with Goliath going after David. Starwood sued Hilton over luxury boutique hotels. Google Waymo sued Uber over self-driving cars. Kraft sued Schwan over self-rising pizza dough. When I spoke with attorneys in the field, they pointed out that intellectual property law is often wielded to the advantage of the powerful, and more protections are not necessarily good for innovation. Restrictions can prevent something called knowledge spillover, which is critical to the dissemination of new ideas. One of the reasons often cited for Silicon Valley’s success is California’s ban on noncompete agreements, which has allowed talented employees to break off and start their own firms.
In civil suits, legal costs are borne by the companies that bring them. In federal cases involving economic espionage–related charges, though, corporations often figure behind the scenes. One area in which companies wield significant influence is in the question of value, or how much a stolen technology is worth—a number that affects how much a perpetrator has to pay in restitution.
One oft-cited statistic, for example, holds that the intellectual property stolen by China every year is worth more than $300 billion. Some estimates go as high as $600 billion. I set out to find a reliable source for this figure. The exercise became a lesson in statistical manipulation. The number $300 billion first showed up in a 1997 survey of private companies conducted by the American Society for Industrial Security, an industry association for corporate security officers. The society asked members how much they had lost to both domestic and foreign spies. Reports sourced from ASIS information suggest that members reported domestic theft as the bigger threat. Beyond that, ASIS gave little insight into how the number was calculated, claiming, with no hint of irony, that the methodology was considered proprietary information. A group of analysts who later analyzed the survey concluded that the results were likely “laden with company bias.”
In 2002, the number $300 billion appeared in the Office of the National Counterintelligence Executive’s Annual Report to Congress on Foreign Economic Collection and Industrial Espionage. In 2010, General Alexander began using it in speeches. In 2013, the figure cropped up in a report from the IP Commission, an independent body headed by former ambassador to China Jon Huntsman, Jr. Somewhere along the way, it morphed from an estimate of all intellectual property losses suffered by U.S. companies to an estimate of the damage inflicted by China alone. One scholar bemoaned efforts to calculate total losses as “based on anecdotes, extrapolation, and bad math.”
Nor were estimates of losses in cyberspace any better. In 2011, a report from the cybersecurity firm Symantec put the cost of intellectual property theft from cyberattacks at $250 billion. Its competitor McAfee claimed that cybercrime cost the global economy $1 trillion a year. One expert who conducted research for McAfee described the rigor of the $1 trillion estimate as “below abysmal.” Others in the field wrote that surveys on cybercrime losses “are so compromised and biased that no faith whatever can be placed in their findings.” Much as ASIS is in the business of promoting corporate security, Symantec and McAfee are in the business of selling cybersecurity products. None of these organizations are impartial observers.
In federal economic espionage cases, estimates of the value of a stolen technology often come from the company whose technology has been targeted. Companies frequently argue that value is whatever they spend on research. But the market isn’t guided by that logic. If a company spends $50 million researching a product, and a competitor with a legitimate research program gets the same product to market first, the investment is lost. The real value of a technology is in the profit it generates, and when a trade secret is stolen, profit becomes a matter of speculation. More to the point, the company that produces the technology has a stake in estimating high.
As I lunched with CEOs and intelligence officials in Aspen, allegations of close cooperation struck me as apt. Anti-Monsanto activists often focused on the millions the company spent on lobbying and its adept use of the Washington revolving door. The opaque conclusion of the Justice Department’s antitrust investigation hadn’t helped this impression. Now, the U.S. government’s work to protect the company’s trade secrets stirred up other charges of machination. For activists who loathed the very name Monsanto, the corn seed case became further proof that the company was in bed with the federal government. Anti-GMO sites trawling for conspiracy were quick to pick up on Robert’s indictment. A headline on one of these sites read: THE FBI IS NOW WORKING FOR MONSANTO.
THIRTY
SPRING 2014
Robert ran in circles around the moldy Des Moines basement, a pair of location-tracking bracelets on his ankles. Spring had arrived, and he longed to breathe fresh air. Instead, he was stuck with this improvised routine in the only room in the house large enough for any sort of real exercise. Jog a few paces, turn. Jog a few paces, turn.
House arrest was supposed to be an improvement on the Polk County Jail, where Robert spent the first few months after his trans
fer to Iowa. His lawyers had worked hard to get him this deal. His family in China had sent over $50,000 for bail, and now they were helping pay the rent and the exorbitant costs of the full-time security detail that was a condition of his release. Every day that he was here, he racked up $1,000 in charges from a private security company.
During the day the guards mostly sat around watching movies. As Robert lay in bed at night, they shone flashlights onto his face, to check whether he had somehow managed to wriggle free of the tracking bracelets and circumvent the sensors that surrounded the house. I was asleep until you came in with the light, he wanted to say. When he did manage to sleep, he dreamed of death.
In Robert’s account of his house arrest, the guards didn’t even allow him to speak Chinese on the phone. What was he going to do, he thought, summon People’s Liberation Army commandos from the sky? It was a funny thought, him trying to signal for help from Iowa, smack in the middle of America, but he wasn’t in the mood for humor now. House arrest was spiritual torture, and all on his own dime (or his family’s, at least). He was allowed to call Carolyn and his kids and talk to them in English—which was his kids’ primary language anyway—but he felt distant.
The visits with his lawyers and doctors were his only contact with the outside world. He had a conflicted relationship with both categories of professional, and not just because the security company slapped on an additional $500 for transportation each time he left the house. While in the county jail, he had noticed that the rubbery lump in his groin had grown. The jail clinician did an ultrasound and assured him that the lump was a benign growth called a lipoma. He handed Robert a two-page pamphlet and told him there was no need to do anything. But every time he examined it the lump seemed to be larger. Benign or not, it looked as if an alien had laid eggs under his skin. Now that he was out of jail, he booked appointments with specialists in an effort to figure out what was wrong, but he mistrusted their advice.
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