Two Recent Illegal Export to China Cases

People's Republic of China

Takeaway quote:

“Oregon is rich with high-tech innovators and companies that power the U.S. economy. These companies can become targets for foreign nationals and governments who want to take advantage of American research and production while taking aim at American national security interests.”Greg Fowler, Special Agent in Charge of the FBI in Oregon

Two Chinese Individuals Charged in Scheme to Obtain Controlled Dual-Use American Technology

Defendants Allegedly Stole the Name of an American Business in Attempt to Purchase Programable Logic Devices Capable Of Military Applications

(FBI, 18 Dec 12) U.S. Attorney S. Amanda Marshall, FBI Special Agent in Charge Greg Fowler, and Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement Special Agent in Charge Julie L. Salcido announced today the unsealing of a 12-count indictment charging Wan Li Yuan and another unknown Chinese resident with conspiracy to violate the Export Administration Regulations and smuggle goods, conspiracy to commit money laundering, and 10 counts of money laundering in connection with an attempt to obtain dual-use programmable logic devices (PLDs), which are manufactured by Lattice Semiconductor Corporation of Hillsboro, Oregon, to perform at extended temperature ranges and tested to military specifications.

According to the indictment, while operating from the People’s Republic of China, Yuan used the alias “Nicholas Bush,” and a second Chinese resident used the alias “Jason Jiang” as they created a sophisticated scheme to conceal their true identity and location in order to mislead U.S. companies into believing they were dealing with American customers so that the defendants could procure and send sensitive technologies to China without the required export licenses.

Specifically, Yuan and Jiang sought to procure Lattice Semiconductor PLDs designed to operate at extreme temperature ranges and which can have military applications such as in missiles and radar systems.

To further his efforts, the indictment alleges that Yuan created a fake website and e-mail addresses using the name of a legitimate New York-based company.

Yuan requested U.S. companies to ship the desired parts to the address of a freight forwarder in New York, which he also falsely represented as being associated with the New York company whose business name Yuan had stolen.

Through the investigation and use of an undercover operation, the FBI and Department of Commerce were able to seize approximately $414,000 in funds sent by Yuan as down payments for the Lattice PLDs.

“The Department of Justice is committed to finding, charging, and prosecuting anyone who attempts to illegally procure American technology,” said Amanda Marshall, U.S. Attorney for the District of Oregon. “Even if we cannot arrest them overseas, we will seek to forfeit any assets we find in the United States.”

Oregon is rich with high-tech innovators and companies that power the U.S. economy,” said Greg Fowler, Special Agent in Charge of the FBI in Oregon.

These companies can become targets for foreign nationals and governments who want to take advantage of American research and production while taking aim at American national security interests.”

“The FBI works closely with our industry partners to prevent the illegal acquisition of export-controlled sensitive U.S. technologies.”

“This indictment tells illicit traders that violating the U.S. export regulations threatens our national security and will be dealt with accordingly,” said Julie Salcido, the Special Agent in Charge of the Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement.

Lattice Semiconductor cooperated with the government in this investigation.

“As a global technology company, Lattice is committed to strict compliance with United States and other applicable export controls,” stated Byron Milstead, Lattice’s General Counsel. “We appreciate the support provided by U.S. enforcement authorities in assisting us in our compliance efforts.”

A criminal indictment is only an allegation and not evidence of guilt. Defendants are presumed to be innocent unless and until proven guilty.

The investigation was conducted jointly by the Portland Office of the Federal Bureau of Investigation and the U.S. Commerce Department’s Bureau of Industry and Security’s Office of Export Enforcement, San Jose Field Office, and is being prosecuted by Assistant U.S. Attorney Charles F. Gorder, Jr.

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Manhattan U.S. Attorney Announces Arrest of Queens Resident for the Export of  Military-Use Items to Taiwan and Attempting to Export Them to China

 

(FBI, 16 Dec 12) Preet Bharara, the United States Attorney for the Southern District of New York; Sidney Simon, the Special Agent in Charge of the U.S. Commerce Department’s Bureau of Industry and Security’s Office of Export Enforcement New York Field Office (DOC); and George Venizelos, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (FBI), today announced the arrest of Mark Henry, a United States citizen and a resident of Queens, New York, in connection with a scheme to illegally export defense articles and goods with military applications from the U.S. to Taiwan and China.

Mark Henry, 49, was arrested earlier today at his home in Queens and was presented in Manhattan federal court before U.S. Magistrate Judge Gabriel Gorenstein this afternoon.

Manhattan U.S. Attorney Preet Bharara said, “As alleged, Mark Henry shipped sensitive military and dual-use materials in violation of federal laws that seek to prevent such materials from ending up in the wrong hands.”

“His arrest today demonstrates, yet again, the seriousness with which law enforcement takes its responsibility to catch and prosecute those who attempt to export prohibited items and materials and to violate trade embargos.”

DOC Special Agent in Charge Sidney Simon, “Preventing the illegal export of sensitive U.S origin commodities that enhance the military capabilities of foreign nations is our top priority. We are constantly striving to maintain the technological advantage of U.S fighting forces. I applaud the cooperative efforts of the Justice and Commerce Departments and the FBI that led to today’s arrest.”

FBI Assistant Director in Charge George Venizelos stated, “The illegal export of our intellectual property and restricted military material may not grab headlines, but it presents serious implications for our nation’s security. Shipping restricted products might line your pockets, but it could also land you in prison.”

According to the allegations in the indictment unsealed today in Manhattan federal court:

From April 2009 through September 2012, Henry operated an export company based in New York City that shipped goods from suppliers located in the U.S. to customers in Asia—specifically China and Taiwan.

Henry shipped military-grade materials that can be used as a protective coating for rocket nozzles, and which are designated as defense articles on the U.S. Munitions List, to customers in Taiwan.

He also attempted to ship microwave amplifiers, which have both commercial and military uses and are listed on the Commerce Control List to China.

Henry did not apply for or receive the requisite licenses for these shipments.

The indictment charges Henry in three counts:

  • Count one—conspiracy to violate the Arms Export Control Act
  • Count two—a substantive violation of the Arms Export Control Act and the International Traffic in Arms Regulations
  • Count three—an attempt to violate the International Emergency Economic Powers Act.

Count one carries a maximum sentence of five years in prison. Counts two and three each carry a maximum sentence of 20 years in prison.

Henry’s case is assigned to U.S. District Judge Jesse M. Furman, and the defendant will be arraigned before Judge Furman tomorrow at 9:30 a.m.

Mr. Bharara praised the extraordinary investigative work of the New York Field Office of the DOC’s Bureau of Industry and Security’s Office of Export Enforcement and the New York Field Office of the FBI’s Counterintelligence Division. Mr. Bharara also thanked the U.S. Department of Justice’s National Security Division.

This prosecution is being handled by the Office’s Terrorism and International Narcotics Unit. Assistant United States Attorneys Aimee Hector and Michael Lockard are in charge of the prosecution.

The charges contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.