US charges Chinese soldiers for hacking

by Shaun Tandon, Agence France-Presse

Posted at May 20 2014 03:38 AM | Updated as of May 20 2014 03:18 PM

US Attorney General Eric Holder announces the indictments of 5 Chinese nationals on cyber espionage charges for allegedly stealing trade secrets from American companies, during a news conference at the Justice Department in Washington on Monday. Photo by Keith Lane, Reuters

WASHINGTON - The United States on Monday charged five members of a shadowy Chinese military unit for allegedly stealing trade secrets as it vowed to ramp up the fight against hacking.

In the first-ever prosecution of state actors over cyber-espionage, a federal grand jury indicted the five on charges they broke into US computers to benefit Chinese state-owned companies, leading to job losses in the United States in steel, solar and other industries.

Attorney General Eric Holder called on China to hand over the five men for trial in the steel city of Pittsburgh and said the United States would use "all the means that are available to us" if, as expected, Beijing refuses.

President Barack Obama's administration "will not tolerate actions by any nation that seek to illegally sabotage American companies and undermine the integrity of fair competition," Holder told reporters.

"This case should serve as a wake-up call to the seriousness of the ongoing cyber threat," Holder told reporters.

The grand jury indicted each of the five --Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu and Gu Chunhui -- on 31 counts, which each carry penalties of up to 15 years in prison.

Prosecutors said that the five officers belonged to Unit 61398 of the People's Liberation Army. A report last year by security firm Mandiant said that the unit had thousands of workers operating out of a non-descript, 12-story building on the outskirts of Shanghai where they pilfer intellectual property and government secrets.

China's foreign ministry on Monday rejected the US indictment, warning the move threatened relations between the two countries.

The indictment, "based on fabricated facts, grossly violates the basic norms governing international relations and jeopardises China-US cooperation and mutual trust," ministry spokesman Qin Gang said in a statement.

Loss of US jobs

US officials said they investigated the unit for several years and believed that the hacking had contributed to "substantial" job and profit losses in the United States.

Hackers stole secret designs from Westinghouse, the US nuclear plant giant owned by Japan's Toshiba, just as it was negotiating with a Chinese state-owned company, said John Carlin, the assistant attorney general for national security.

He said that hackers also stole pricing information from the computers of company SolarWorld to help Chinese competitors in the solar energy sector, in which China has invested heavily.

"It is not conduct that most responsible nations within the global economic community would tolerate," Carlin said.

David Hickton, the US attorney for the western district of Pennsylvania, called cyber-espionage "21st-century burglary."

The indictment said that victims also included industry titans Alcoa and US Steel as well as the United Steelworkers labor union.

Officials declined to put a financial cost on the hacking. A report led by former US officials estimated last year that cyber espionage -- overwhelmingly by China -- was costing the US economy more than $300 billion each year, equivalent to what the United States sells each year to Asia.

Stepping up the fight

President Barack Obama has directly raised hacking concerns with Chinese President Xi Jinping. Defense Secretary Chuck Hagel, on a visit to Beijing last month, urged China to be more open about cyber capabilities to reduce the chances of inadvertent conflict.

Beijing has hit back that Washington is hypocritical as it conducts sweeping surveillance around the world, as revealed by former government contractor Edward Snowden.

Snowden's leaks have indicated that the United States has hacked into Chinese telecom giant Huawei -- whose own attempts to penetrate the US market have been blocked by lawmakers' concerns on national security.

The United States has invested heavily in cyber-warfare, with the Pentagon setting up a dedicated command, and is widely suspected to have worked with Israel to infect Iran's nuclear program.

Holder insisted that the US activities were different, saying: "All nations are engaged in intelligence gathering."

"What I think distinguishes this case is that we have a state-sponsored entity -- state-sponsored individuals -- using intelligence tools to gain commercial advantage," he said.