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JAVERS    Espionage ExposedSecrets and LiesThe Rise of Corporate Espionage in a Global EconomyEamon Javers   In 2008, thou...
SECRETS AND LIESmation that can help keep the country’s               credentials, the Mattel market intel-astonishing eco...
JAVERS    Espionage Exposedof Europe’s biggest power plants.3 They    agents have tried to steal Americanused the data to ...
SECRETS AND LIESmember of China’s Politburo Standing                  motivated by politics, it highlights theCommittee, h...
JAVERS    Espionage Exposedin the leadership and politics of a given    freelancers, each layer papered withcountry and in...
SECRETS AND LIESing to land Skilling as a new client of     cies have a vested interest in know-his London-based private i...
JAVERS    Espionage Exposedlaws. But even intelligence commu-          between Western companies cannity leaders profess i...
SECRETS AND LIESundermine America’s position as the                      the position. This is a far deeper threatnumber-o...
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Secrets and Lies The Rise of Corporate Espionage in a Global Economy

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  1. 1. JAVERS Espionage ExposedSecrets and LiesThe Rise of Corporate Espionage in a Global EconomyEamon Javers In 2008, thousands of employees at American defense Eamon Javers is a Washington corre-and technology companies received emails from an exec- spondent for CNBCutive-recruiting firm based in Tokyo called Fox Adams. and author of the book Broker, Trader, Lawyer, Spy:The correspondence hinted at lucrative job opportunities The Secret World of Corpo- rate Espionage.and urged the employees to reply with contact information.However, there was something wrong with the email: FoxAdams did not exist. Security experts and veteran U.S. intelligence agentsexamined the issue and concluded that Fox Adams was sim-ply a front for Chinese intelligence.1 According to theseauthorities, the spam emails were part of a very wide netcast by the Chinese to help identify American executiveswith access to sensitive technologies. Under the guise of ajob interview, anyone who replied to the email would likelybe quizzed for details about his or her work, access to tech-nology, and experience. Several veteran U.S. intelligenceofficers described the Fox Adams ploy as a routine Chineseintelligence probe of U.S. corporate infrastructure, some-thing they say has been on the rise in recent years as theBeijing government attempts to steal technology and infor- Winterr/Spring 2011 [ 53]
  2. 2. SECRETS AND LIESmation that can help keep the country’s credentials, the Mattel market intel-astonishing economic growth on pace ligence employees allegedly used spywith aggressive government goals. cameras to film secret demonstration All of this means that American models of toys that rival companiescorporate executives must be increas- planned to launch. Mattel said thereingly guarded against spying by current was no merit to the charges, which cameemployees, former employees, com- in the course of a long-running litiga-puter hackers, and the full gamut of tion battle over which company shouldCold War-style intelligence techniques. hold the rights to the Bratz dolls. In the second category—financialIt was this wave of Chinese hackingattacks that finally drove Google into the armsof the U.S. National Security Agency.Forms of Corporate Espionage. firms gathering information to use in market trading—corporate spy orga-China is not the only perpetrator. nizations operate around the globe,Corporate espionage can be separat- working for Wall Street, hedge funds,ed into three broad categories: spying and wealthy individuals. In one case,practiced by companies, by financial a private spy firm even flew aerial sur-firms, and by nations. veillance missions for the notorious An example of the first category of energy-trading firm Enron.corporate espionage—companies spy- This private spy firm was Diligence, aing against other companies in order company founded by two former intel-to harm competitors—came to light ligence officers (one previously workedlate this summer. MGA Entertainment for the CIA, the other for BritishInc., the maker of the wildly popular MI5). In the early 2000s, DiligenceBratz line of toy dolls, filed docu- was hired by Enron to develop infor-ments in federal court alleging that mation about the European powerrival Mattel Inc. maintained an inter- industry that might prove advantageousnal “market intelligence” unit whose in Enron’s daily buying and selling ofmembers traveled the country under energy contracts. However, Diligencefake identities, gaining entrance to operatives didn’t scour trade publica-confidential product briefings by pos- tions and interview experts, as a typicaling as potential customers of rival toy consulting firm might have; instead,makers.2 There, with their cover stories the spies-for-hire set up thermal imag-backstopped by fake business cards and ing equipment in fields around some[ 5 4 ] Georgetown Journal of International Affairs
  3. 3. JAVERS Espionage Exposedof Europe’s biggest power plants.3 They agents have tried to steal Americanused the data to develop a comprehen- hybrid car technology, insecticidesive, real-time look at the production manufacturing techniques, and—in theof energy being sold into the market. most high profile case to date—theThe more energy being moved into the cyber secrets of the search-engine giantmarket, the lower prices would be. The Google.less energy, the higher prices would be. In order to keep their economicThat is invaluable information for an growth miracle going, the Chinese areenergy trader like Enron. trying to move up the manufacturing Diligence did not stop with thermal food chain, evolving from low-costimaging. Veteran CIA officer and co- providers of unskilled labor to pro-founder Mike Baker chartered private ducers of more technically complicatedairplanes and flew surveillance missions goods at higher price points.6 Sinceover the power plants, looking for signs the United States is far ahead in a wideof when the plants might be taken off array of industries, one way to catchline for maintenance.4 A power plant up is to steal the plans, formulas, andshutting down has a dramatic effect algorithms that allow American com-on supply and demand in the market, panies to dominate world markets. Ifand pinpointing the dates of such a the Chinese can steal such secrets fastershutdown in advance could yield arbi- than Americans can develop new ones,trage opportunities for Enron. Baker they will close the gap between therelentlessly circled the plants, look- two economies. Andrew Arena, Specialing for declining coal stacks—because Agent in Charge of the FBI office inthe power companies would not order Detroit that conducted one investiga-more coal in advance of a shut down. tion into Chinese corporate espionage,The planes even searched for port-o- noted that “theft of trade secrets is apotties being set up on the property threat to national security,” demon-since annual maintenance can involve a strating the U.S. government’s concernlarge number of workers.5 By watching with these intrusions.7for such mundane details, Diligence In secret diplomatic cables revealedwas able to spot trading opportunities by the website Wikileaks in late 2010,in the market. American diplomats in Beijing con- The last category of corporate espio- cluded that the electronic attacks onnage—nations spying on companies— Google’s home servers to obtain thecan be difficult to prove. Government identities of Chinese dissidents andintelligence agencies operate behind Google’s proprietary source code hadlayers of plausible deniability. The been ordered at the highest level of thebogus Fox Adams emails were ham- Chinese government. In one cable, thefisted in comparison to a slew of recent diplomats said they had a well-placedcases in which Chinese-connected source who said that Li Changchun, a Winter/Spring 2011 [ 55]
  4. 4. SECRETS AND LIESmember of China’s Politburo Standing motivated by politics, it highlights theCommittee, had been shocked to find willingness of foreign countries—andnegative information about himself China in particular—to resort to illegalwhen he Googled his own name on activities in order to collect the secretsthe Chinese language version of the of private companies.search engine’s website. Another cable If it is any consolation to Westernrevealed that Mr. Li was a key leader in intelligence, Chinese economic espio-China’s anti-Google efforts, and that nage is not always flawless. Fox Adams,his self-Googling likely led to his inter- the bogus executive recruiting firmest in the company.8 experts suspected of being a front The effort was part of a wider cam- for Chinese intelligence, made somepaign of corporate espionage against noticeable mistakes. Emails comingAmerican companies and government from purported “Fox Adams” recruit-agencies that began as early as 2002, ers used names that looked like theythe American cable-writers concluded. had been randomly mixed and matchedParticularly vulnerable were Chinese from American phone books—and bysubsidiaries of non-Chinese compa- someone with little feel for Americannies, whose local executives were often culture. One email was signed by aafraid to inform their Western bosses recruiter supposedly named “Jesusabout the extent of Chinese govern- Black.” The Internet domain regis-ment meddling. “Contacts in the tech- tration for the website www.foxadams.nology industry tell us that Chinese com was listed to a New Jersey addressinterference in the operations of for- that does not seem to exist. The phoneeign businesses is widespread and often number listed was “1-234-5678.”11underreported to U.S. parent compa-nies,” reported one U.S. diplomat.9 The Rise of Private Intelligence It was this wave of Chinese hack- Firms. Corporate intelligence gath-ing attacks that finally drove Google ering has created a new market for ainto the arms of the U.S. National rising class of private espionage firms—Security Agency, announcing a part- companies set up by veterans of thenership with the American techno- world’s intelligence agencies that selllogical spy agency to help Google fend their services on a contract basis tooff intrusion attempts.10 For Google, companies and financial firms. In theas for many companies, one option 21st Century, companies and financialwhen faced with government-funded firms have a greater need for infor-spying is to team up with another gov- mation than ever and—particularly inernment. Even in a global economy, emerging markets—the best providersit seems, companies sometimes have of that information are former intel-to choose sides. Although it appears ligence officers who are deeply steepedthat the Google incident was partially[ 5 6 ] Georgetown Journal of International Affairs
  5. 5. JAVERS Espionage Exposedin the leadership and politics of a given freelancers, each layer papered withcountry and intimately familiar with its strict non-disclosure agreements.local powerbrokers. In public, they describe their services There is nothing wrong with compa- as “strategic advisory consulting,” “risknies turning to such intelligence advi- mitigation analysis,” or “litigation sup-sors for information on potential new port.” With names like “Diligence,”business partners and advice on the “Control Risks Group,” and “Hakluyt,”political landscape in unfamiliar coun- these private intelligence firms hide intries, but there is enormous poten- plain sight, offering extremely lucra-tial for abuse by corporate intelligence tive post-government career optionsfirms. The ways in which they gather for veterans of the CIA, the Britishinformation can wander into a legal MI5, and the former Soviet intelli-gray area, and their offensive opera- gence agency, the KGB.tions—efforts to damage competitors The industry’s growth is driven bythrough underhanded tactics includ- several trends. The increased globaliza-The corporate espionage industry isdeliberately hidden in a thicket ofcomplex relationships.ing surveillance, placing of operatives tion of commerce has created a demandinside competitors’ firms, and other for companies to understand the rela-techniques the companies would be tionships between business and politi-embarrassed to admit in public—can cal elites in countries they often knowdeprive legitimate businesses of oppor- little about. Who better to help piecetunities to succeed. together the puzzle than the men and Indeed, the corporate espio- women who spent their careers gath-nage industry is deliberately hidden ering the same information for theirin a thicket of complex relationships governments?designed to obscure just who is work- And, of course, there is the romanceing for whom. Often, these firms are of it all. Globe-hopping corporatehired as subcontractors for corporate executives sometimes cannot resistlaw firms and they argue that everything the glamour of the spy business. Thethey do is covered by attorney-client romance factor is often implicit inprivilege.12 Thus, their operations do the spies’ sales pitches to prospec-not surface to the public. In other tive clients. In 2001, for example,cases, these private spy firms protect the former British secret intelligence ser-secrecy of their operations around the vice officer Christopher James wroteworld by using a series of cutouts and to Enron executive Jeff Skilling, hop- Winter/Spring 2011 [ 57 ]
  6. 6. SECRETS AND LIESing to land Skilling as a new client of cies have a vested interest in know-his London-based private intelligence ing where such people are employedfirm, Hakluyt. “Dear Mr. Skilling,” and they should therefore track thathe wrote, “Your office has asked me to information. Retired spies working inoutline Hakluyt’s services. … I would corporate espionage are not motivatedsimply say this: Hakluyt is what you by love of country any longer; they aremake of it—it places an unparalleled motivated by love of money. When theprivate intelligence network at the per- spies have taken their skills and gonesonal disposal of senior commercial to work for paying clients, the govern-figures.” 13 ments that trained them with taxpayer money should monitor their activitiesResponding to Corporate to make sure that they are not deploy-Espionage. What is astonishing about ing those skills in ways that underminethis private spy industry is how little the the very governments that provided them.What is astonishing about thisprivate spy industry is how little the U.S.government seems to know about it.U.S. government seems to know about What is more, Western governmentsit. The CIA says it does not know where should be working harder to learn justits former agents are working today how intertwined their intelligence ser-and argues that tracking where they are vices are with companies in the globalemployed would violate the civil rights of economy. American intelligence agen-those agents; it surely behooves the U.S. cies, for example, have long had a policyintelligence community to have some stating that their operatives are allowedsense of where its alumni are plying their to “moonlight” in their off hours andtrade, however, and whose payrolls they work for private sector firms.15 Thatjoin when they enter the private sector.14 is, active duty intelligence officers, The CIA and similar organizations including those of the CIA, are allowedshould know where their alumni work, to work for private companies in orderparticularly when they are being hired to make extra money. This creates aby foreign governments, oligarchs, and conflict of interest; agents who havepolitical parties. Some of the infor- access to classified materials of nationalmation is not difficult to come by; security are also working with pri-the websites of some of the private vate firms that sometimes engage inintelligence firms are a handy place questionable practices and undermineto start. Western intelligence agen- or violate domestic and international[ 5 8 ] Georgetown Journal of International Affairs
  7. 7. JAVERS Espionage Exposedlaws. But even intelligence commu- between Western companies cannity leaders profess ignorance of the include unethical and even illegal tac-entire moonlighting system. In pub- tics, resulting in economic victorieslic testimony, Director of National for the most underhanded firms, notIntelligence Dennis Blair said he had necessarily for the most innovative.been surprised when the moonlight- That is bad for capitalism. Corporateing was first revealed in the media. espionage by financial firms results in“Sometimes I too am surprised about a transfer of information—and hugewhat I read in the press about my own financial rewards—into the hands oforganization,” Blair told Congress in the most powerful and wealthy, rob-February.16 bing average investors of a chance to As of fall 2010, the Director of participate in the benefits of the finan-National Intelligence has promised that cial markets. That too, is damaging toa full review of such moonlighting the market economy, causing marketwill be completed and turned over to participants to conclude that the systemCongress.17 That is a promising first is stacked against them. Markets onlystep, but the American taxpayers need work best when all players—large andto know much more about the moon- small—have confidence that the ruleslighting habits of their intelligence are fair.officers. How often, for example, are Finally, Western intelligence agen-active duty officers going to work for cies must ratchet up their counter-intelligence contractors—effectively intelligence capabilities in the eco-forcing the taxpayer to pay twice for the nomic space. The intelligence com-same work? munity needs to focus on the threat to American executives, too, need to American global economic dominanceeducate themselves on the range of cor- that comes from Chinese economicporate espionage tactics arrayed against espionage. One of the United States’them. Unfortunately, the best way for greatest advantages in its competitionthem to do that right now is to reach with China is its corporate ingenu-out to some of the very private spy firms ity, inventiveness, and sophistication.that are already in the corporate espio- If Chinese intelligence is able to chipnage business. Companies would be away at that advantage though corpo-well advised to create internal monitor- rate espionage techniques, it will do asing units so that they can increase their much or more for China’s position inability to recognize and respond to the world than traditional spying oncorporate espionage. Some firms have America’s military capabilities or polit-already implemented these practices, ical leadership. Corporate espionagebut these are few and far between. against the United States is one of many At its worst, corporate espionage tools that China uses in its effort to Winter/Spring 2011 [ 59]
  8. 8. SECRETS AND LIESundermine America’s position as the the position. This is a far deeper threatnumber-one economy on the planet, to free-market capitalism and is whyand to take for itself the geopolitical America’s counter-intelligence effortpower and influence that comes with had better be up to the challenge. NOTES 1 Eamon Javers. Anonymous interview, July ing by a China Fearful of the Web,” The New York2009. Times, 4 December 2010. 2 Jonathan Stempel and Dan Levine, “Mat- 9 “A Selection from the Cache of Diplomatictel accused in Bratz battle of spying on rivals,” Dispatches,” Internet, http://www.nytimes.com/Internet, http://www.reuters.com/article/idUS- interactive/2010/11/28/world/20101128-cables-TRE67G4FZ20100817 (date accessed: 17 August viewer.html#report/china-99BEIJING999 (date2010). accessed 5 December 2010). 3 Eamon Javers, Broker, Trader, Lawyer, Spy: The 10 Ellen Nakashima, “Google to Enlist NSA toSecret World of Corporate Espionage (New York: Harper- help it Ward off Cyber Attacks,” The WashingtonCollins Publishers, 2010) 18. Post, 4 February 2010. 4 Ibid. 11 See supra note 1 5 Ibid. 12 Eamon Javers, Broker, Trader, Lawyer, Spy: The 6 Li Cui and Murtaza Syed, “IMF Working Secret World of Corporate Espionage (New York: Harper-Paper: The Shifting Structure of China’s Tradeand Production,” Internet, http://books.google. Collins Publishers, 2010), 265.com/books?hl=en&lr=&id=dADHBsFWJLQC&oi= 13 Archived Enron emails available at the web-fnd&pg=PA3&dq=Chinese+economy+more+sophis site of the Federal Energy Regulatory Commission:ticated+manufacturing&ots=FBaAzl5ZPY&sig=7uC http://www.ferc.gov/industries/electric/indus-act/-JIlzZD5igh1Bm1xtcBjQB34#v=onepage&q&f=false wec/enron/info-release.asp.(date accessed: September 2007). 14 Interview by the author with CIA public 7 The Associated Press, “Ex-General Motors affairs office, 2009.worker, husband accused of stealing hybrid vehicle 15 Eamon Javers, “CIA moonlights in corpo-secrets,” Internet, http://www.mlive.com/auto/ rate world,” Politico, 1 February 2010.index.ssf/2010/07/ex-general_motors_worker_ 16 Kasie Hunt, “CIA Moonlighting to be Inves-husba.html (date accessed: 23 July 2010). tigated,” Politico, 3 February 2010. 8 James Glanz and John Markoff, “Vast Hack- 17 Ibid.[ 6 0] Georgetown Journal of International Affairs

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