US goes after Chinese military in big cyberspying case, alleging big-name companies targeted

The Associated Press

Press materials are displayed on a table of the Justice Department in Washington, Monday, May 19, 2014, before Attorney General Eric Holder was to speak at a news conference. Holder was announcing that a U.S. grand jury has charged five Chinese hackers with economic espionage and trade secret theft, the first-of-its-kind criminal charges against Chinese military officials in an international cyber-espionage case. (AP Photo/Charles Dharapak)

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By ERIC TUCKER, Associated Press

WASHINGTON (AP) — Accusing China of vast business spying, the United States charged five military officials on Monday with hacking into U.S. companies to steal vital trade secrets in a case intensifying already-rising tensions between the international economic giants.

The Chinese targeted big-name American makers of nuclear and solar technology, stealing confidential business information, sensitive trade secrets and internal communications for competitive advantage, according to a grand jury indictment that the Justice Department said should be a national "wake-up call" about cyber intrusions.

A company's success in the international marketplace should not be based "on a sponsor government's ability to spy and steal business secrets," Attorney General Eric Holder declared at a news conference.

The alleged targets were Alcoa World Alumina, Westinghouse Electric Co., Allegheny Technologies, U.S. Steel Corp., the United Steelworkers Union and SolarWorld. The indictment, which includes charges of trade-secret theft and economic espionage, was issued in Pittsburgh, where most of the companies are based.

China denied it all. In a statement, the Foreign Ministry said the charges were based on "fabricated facts" and would jeopardize China-U.S. "cooperation and mutual trust."

"China is steadfast in upholding cybersecurity," said the statement. "The Chinese government, the Chinese military and their relevant personnel have never engaged or participated in cybertheft of trade secrets. The U.S. accusation against Chinese personnel is purely ungrounded and absurd."

In a further move late Monday, China announced it was suspending cooperation with the U.S. in a joint cybersecurity working group and warned of further retaliation "as the situation evolves."

The working group was established in April 2013 following the publication of allegations of spying by the Chinese military and held its first meeting last July.

The announcement from Chinese Foreign Ministry spokesman Qin Gang posted to the ministry's website also sought to turn the spying allegations on the U.S. "China is a victim of severe U.S. cyber theft, wiretapping and surveillance activities," Qin said.

The charges underscore a longtime Obama administration goal to prosecute state-sponsored cyberthreats, which U.S. officials say they have grappled with for years. One government report said more than 40 Pentagon weapons programs and nearly 30 other defense technologies have been compromised by cyber intrusions from China. The cybersecurity firm Mandiant issued a report last year alleging links between a secret Chinese military unit and years of cyberattacks against U.S. companies.

Monday's prosecution was announced on the heels of a separate worldwide operation over the weekend that resulted in the arrests of 97 people in 16 countries who are suspected of developing, distributing or using malicious software called BlackShades.

The new indictment attempts to distinguish spying for national security purposes - which the U.S. admits doing - from economic espionage intended to gain commercial advantage for private companies or industries, which the U.S. denies it does. Classified documents disclosed by former National Security Agency analyst Edward Snowden have described aggressive U.S. efforts to eavesdrop on foreign communications that would be illegal in those countries.

Unlike in some countries, there are no nationalized U.S. industries. American officials have flatly denied that the government spies on foreign companies and then hands over commercially valuable information to U.S. companies. In China, though, many companies are state owned, particularly those that supply the military.