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I-Team: How the Cincinnati FBI cracked the Chinese spy case at GE Aviation

U.S. Attorney: Chinese espionage can destroy jobs
Posted: 5:00 AM, Mar 04, 2019
Updated: 2019-05-08 15:39:26-04

CINCINNATI — He was an obvious target for Chinese spies.

The GE Aviation engineer was deeply involved in the design and analysis of new commercial jet engines, a technology at the top of the shopping lists of Chinese intelligence operatives.

It took the spies only a few months to get him to accept their offer: A $3,500 fee paid in U.S. currency, and free travel, lodging and meals for a one-hour presentation in China.

"That really is Espionage 101. We've seen numerous cases of the Chinese extending these invitations to targets," said Scott Stewart, who investigated the actions of foreign intelligence as a longtime State Department special agent.

RELATED: Chinese spies covet Cincinnati's corporate secrets

Stewart now supervises national security analysis for Stratfor, a global security group. He told WCPO the internet allows spies to identify potential targets easily, inexpensively and safely. The Center for Strategic and International Studies estimates Chinese economic espionage costs American companies $600 billion a year.

On May 25, 2017, the 41-year-old engineer loaded five GE Aviation documents to the hard drive of his personal laptop, then drove from Cincinnati to Detroit, where he boarded a flight to China.

His decision would eventually cost him his job.

It also opened the door to arrest Yanjun Xu, an accused senior level Chinese spy, who is in a federal prison facing charges for attempting to steal trade secrets from GE Aviation. Xu is the first Chinese spy extradited to the U.S., according to Ben Glassman, the United States Attorney for the southern district of Ohio.

WCPO is not naming the engineer because he has not been charged with a crime. He has not responded to our requests for comment.

RELATED: Chinese intelligence officer arrested in attempt to steal GE Aviation secrets

What follows is the most detailed public chronology of the events leading to Xu's arrest, events that shed new light on how brazenly China shops for America's corporate secrets and the kind of effort required to keep these alleged spies from ringing up a sale.

Part I: Laying the trap

A message arrived in the LinkedIn mailbox of a GE Aviation engineer in early 2017.

It was from a man claiming to represent a prestigious Chinese university. The man — whom the FBI identified as CF — claimed to be the deputy director of the International Cooperation and Exchange Office at the Nanjing University of Aeronautics and Astronautics, also known as NUAA.

In March of that year, CF and the engineer began trading emails. CF asked the engineer to come to Nanjing for an "exchange" based on his GE Aviation experience, according to a sealed affidavit filed by FBI special agent Bradley Hull.

On May 10, 2017, CF emailed the engineer to tell him that China's "Institute of Energy and Power" had proposed a report for him to present. CF emphasized the importance of sharing information about the "latest developments in the application of composite materials in aeroengine." GE Aviation is widely considered a world leader in the technology.

The engineer responded five days later. He agreed to the topic but indicated GE Aviation "needs to sign a technical agreement" adding that "a lot of things can't be shared," according to Hull's sealed affidavit. The engineer said he could only present a "general report," but on May 20, in an email to CF, he confirmed his presentation would be titled "Aerospace composite structure design analysis and manufacturing technology development."

He ultimately didn't tell GE Aviation he was making the presentation. He also didn't tell them that he planned to take confidential company documents with him to China. The engineer's co-workers believed that he was going to attend a family wedding.

He later admitted during an interview with the FBI that he didn't attend a wedding, according to the sealed affidavit.

Here's what he did do:

On the morning of May 25, he loaded the GE Aviation documents on his laptop to help him prepare for the presentation. Agent Hull wrote that GE Aviation indicated one of the documents may have included "technical data controlled for export to China for National Security reasons." One day later, he landed in Shanghai. He crossed the Yangtze River and spent several days traveling throughout the area where he was born and raised.

He also finished his Power Point presentation for NUAA. Months later, he told the FBI the presentation did not include GE Aviation trade secrets.

Part II: Sampling the goods?

Ming Palace Campus of Nanjing University of Aeronautics and Astronautics
Ming Palace Campus of Nanjing University of Aeronautics and Astronautics

Early morning fog spread across Nanjing on the engineer’s last day in China. By noon on June 2, 2017, the heat index had climbed to 101.

The engineer had a lunch date with CF and Qu Hui, a man who claimed to represent a Science and Technology Association. In reality, Qu Hui was one of several aliases allegedly used by Yanjun Xu . After the meal, the engineer left to give his presentation.

But the engineer had technical problems from the beginning. Months later, the engineer told the FBI that university officials in Nanjing had trouble getting his presentation to work properly with the projector, so he allowed a NUAA employee to "place a USB drive into...personal laptop, which contained all five documents."

It's unclear from WCPO's review of federal court records if the engineer shared any GE Aviation documents, even unwittingly, with Chinese officials that day. In an October 2018 statement provided to the I-Team, GE Aviation described the impact as "minimal."

One day after the engineer's presentation in Nanjing, he was back in the United States. In the months that followed, the engineer continued to communicate with Xu, still known to him as Qu Hui, according to the sealed affidavit.

The engineer's travel to China caught the attention of Cincinnati FBI agents, who worked with GE Aviation to investigate the incident. The U.S. Attorney, FBI, DOJ and GE Aviation have declined to discuss how federal investigators learned about the engineer's trip.

Part III: Paying the price

Sitting in his spacious home in a Cincinnati suburb, the engineer began to tell his story to the FBI on Nov. 1, 2017. Agents had executed a search warrant on his home, cellphone and vehicle. Hull's sealed affidavit indicates the engineer volunteered information that furthered the investigation.

Nearly four months after the Cincinnati FBI searched the engineer's home, Hull filed his sealed affidavit.

The document, dated Feb. 16, 2018, disclosed that the engineer was still under federal investigation "for taking technical information from GE Aviation without authorization." Hull also wrote that the FBI probe had concluded that the engineer "may have provided this technical information as a benefit to the Chinese government or its agent, through NUAA." In addition, the engineer "has also been investigated for violating U.S. export control laws."

Because the allegations against the engineer are part of a sealed document, the U.S. Attorney, FBI and GE Aviation have declined to comment on the information contained in the affidavit.

Part IV: Breaking the case

Hull had been an FBI special agent for seven years when he was assigned to one of the Cincinnati Field Office's Counter-Intelligence squads, according to his sealed affidavit.

He and other Cincinnati FBI agents had investigated violations of federal laws relating to espionage, but this case was special. It appeared to present unprecedented opportunity to catch and prosecute a Chinese spy on American soil.

During the FBI's investigation, federal agents executed search warrants that allowed them to gain access to online accounts used by CF and Xu. The evidence obtained from the LinkedIn that had been account used to contact the engineer exposed ongoing "criminal activity" and more potential targets of Chinese spies, according to the sealed affidavit.

The American agents used information collected from one search warrant to convince a federal judge to issue more search. The growing trail of evidence took the FBI deeper into Xu's alleged network of secret contacts.

On Nov. 21, 2017, three weeks after the FBI searched the engineer's home, CF informed him that Xu — still believed to be Qu Hui — would help cover the engineer's travel expenses and handle details of the "exchange," according to the indictment.

Three weeks later, the FBI obtained a search warrant for an iCloud account that was allegedly used by Xu. Federal agents combed through it and concluded that Xu was the "true user" of the account. Messages in the account documented Xu's undercover operations and the technologies he wanted to collect.

In early January 2018, Xu urged the engineer to "please prepare the plane ticket and date as soon as possible" for a second trip to China. Xu had promised to deliver requests from Chinese experts. Xu said they could discuss it when they meet in person, possibly during one of Xu's European business trips.

If Xu was going to be arrested, Glassman told WCPO, it was most likely to occur in one of the 11 European countries with an FBI Attache office and extradition practices that improved their chances of bring Xu to America.

On Jan. 23 and Feb. 3, 2018, Xu asked the engineer in an email to collect GE Aviation documents focusing on system specifications and design for engine production and "containment analysis" for a fan blade encasement, according to the indictment, which also accuses Xu of knowing the information he requested included GE Aviation's commercial secrets.

GE Aviation was playing a critical role in the investigation. Glassman told WCPO the company's experts worked closely with federal authorities and pre-approved all documents and communication the engineer was sharing with Xu.

Search warrants obtained in December revealed Xu was much more than just a spy. He was a manager of spies, a regional deputy director of an agency under the control of China's Ministry of State Security, also known as the MSS.

In March 2018, Xu emailed the engineer suggesting how to download GE Aviation records and to "download more data ... anything design related would work," according to the indictment. They agreed to meet in Belgium.

The U.S. Attorney's office prepared charging documents that identified Xu and his alleged crimes, then provided the records to Belgian authorities, who required the evidence before making an arrest.

Xu arrived in the Saint Catherine district of Brussels on Easter Sunday, then waited for the GE Aviation engineer, according to the BBC. The engineer never showed up. Instead, Xu was greeted by Belgian police and FBI agents, who launched the investigation from Cincinnati — 4,000 miles from where Xu stood that day wearing handcuffs.

"There's no doubt that Xu would not have gone to Belgium but for his communication with that engineer," Glassman told WCPO.

A few days after Xu's arrest, a Cincinnati grand jury indicted him. The accused spy was unable to communicate with his wife and 10-year-old son during the six months he was locked up in Belgium, according to a federal court filing by his Cincinnati attorneys.

On Oct. 9, 2018, WCPO broke the story of the investigation, Xu's arrest and his extradition to Cincinnati. A day later, the case became public when Xu appeared in federal court and the indictment was unsealed.

Todd Wickerham, special agent in charge of Cincinnati's FBI office

It was a big day for the U.S. Attorney's Office, the Cincinnati FBI and many others who assisted in the investigation.

"Really proud of the team," FBI special agent in charge Todd Wickerham told WCPO I-Team reporter Dan Monk. "And that team is inside and outside of the FBI."

Chinese Spy Xu Public Indictment by WCPO Web Team on Scribd

Read the full indictment above.

Part V: Next steps

Shortly after his arrest, Xu hired Cincinnati attorneys Jeanne Cors and Ralph Kohnen, according to a federal court filing by Cors. Both attorneys are partners at Taft Stettinius & Hollister, a prominent Downtown law firm with offices near Nanjing.

On Oct. 11, 2018, Cors filed a motion opposing the federal government's request to detain Xu without bond. She emphasized the low risk posed to the community if Xu was released and monitored.

Xu "has been employed by the same company in China as a Marketing Manager for over a decade," Cors wrote. She indicated Xu should be released on bond because he was not a flight risk, had no passport or criminal history, and "is not in possession of any confidential trade secret information that could now be disclosed."

She also wrote that Xu's wife and son had obtained visas and planned to be in Cincinnati to support him.

U.S. Magistrate Stephanie Bowman wasn't swayed. She ordered Xu detained. He is still being held in a federal prison in Milan, Michigan.

The Cincinnati-based FBI probe has also opened doors for other investigations of Chinese economic espionage. In Chicago, federal prosecutors charged Ji Chaoqun with being a Chinese spy. The criminal complaint refers to evidence uncovered by the Cincinnati FBI. The Chicago investigation determined Yanjun Xu was one of Chaoqun's Chinese contacts. Xu has not been charged in that case.

"It's a great story," Wickerham told WCPO as he reflected on the importance of cooperation between federal agents, prosecutors, GE Aviation and Belgian authorities.

It'll be told for the first time inside a federal courtroom in Cincinnati.