New Jersey Defense Contractor Convicted for Sharing U.S. Military Technology with China

On Thursday, September 20, 2012, a federal jury convicted a former employee of a New Jersey-based defense contractor of exporting sensitive U.S. military technology to China, stealing trade secrets and lying to federal agents. The joint case was investigated by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI), the FBI and U.S. Customs and Border Protection (CBP).

Sixing Liu, aka "Steve Liu," 49, a Chinese national, who had recently lived in Flanders, N.J., and Deerfield, Ill., was taken into custody following the verdict, based on risk of flight considerations. He is scheduled to be sentenced Jan. 7, 2013 before U.S. District Judge Stanley R. Chesler.

"Exporting military weapons and technical data, and the theft of sensitive technology in violation of the Arms Export Control Act, are serious crimes with global consequences," Andrew McLees, special agent in charge of HSI Newark, said. "Illegal foreign procurement networks continue to threaten our safety and this conviction reinforces that HSI has no tolerance for those who try to undermine our nation's safety and security."

"The jury found that in order to promote himself, Liu took highly sensitive defense information and trade secrets to China, violating the rules of his company and the laws of this country, and then lied about it upon his return to the United States," District of New Jersey U.S. Attorney Paul J. Fishman said. "We will not tolerate the exploitation of this country's opportunities through the theft of our secrets."

"This specific investigation is troubling on many levels," FBI Special Agent in Charge Michael B. Ward said. "Mr. Liu helped develop technology critical to our military, then took a computer with that information on an unauthorized trip to China to present at a conference sponsored by the Chinese government. The United States spends billions of dollars each year on research and development, and this ‘intellectual capital' is very attractive to others. If they are able to acquire this research, they can save billions and quickly develop their own products to compete against the United States, be it in the world economic market or on the battlefield."

Robert E. Perez, director of field operations for CBP New York, said, "This arrest demonstrates the determination of Customs and Border Protection's frontline officers, who work closely with our law enforcement partners to safeguard the American public from potential threats."

The jury convicted Liu of nine of the 11 counts in the second superseding indictment with which he was charged, including six counts of violating the Arms Export Control Act and the International Traffic in Arms Regulations, one count of possessing stolen trade secrets in violation of the Economic Espionage Act of 1996, one count of transporting stolen property in interstate commerce and one count of lying to federal agents. The jury acquitted Liu on two counts of lying to federal agents.

According to court documents, in 2010, Liu stole thousands of electronic files from his employer, L-3 Communications, Space and Navigation Division, located in Budd Lake, N.J. The stolen files detailed the performance and design of guidance systems for missiles, rockets, target locators and unmanned aerial vehicles. Liu stole the files to position and prepare himself for future employment in China. As part of that plan, Liu delivered presentations about the technology at several Chinese universities, the Chinese Academy of Sciences and conferences organized by Chinese government entities. However, Liu was not charged with any crimes related to those presentations.

On Nov. 12, 2010, Liu boarded a flight from Newark Liberty International Airport to China. Upon his return to the United States Nov. 29, 2010, agents found Liu in possession of a non-work-issued computer found to contain the stolen material. The following day, Liu lied to agents of the Department of Homeland Security about the extent of his work on U.S. defense technology, which the jury found to be a criminal false statement.

The U.S. Department of State's Directorate of Defense Trade Controls later verified that several of the stolen files on Liu's computer contained export-controlled technical data that relates to defense items listed on the United States Munitions List (USML). Under federal regulations, items and data covered by the USML may not be exported without a license, which Liu did not obtain. The regulations also provide that it is the policy of the United States to deny licenses to export items and data covered by the USML to countries with which the United States maintains an arms embargo, including China.

The jury heard testimony that Liu's company trained him about the United States' export control laws and told him that most of the company's products were covered by those laws.
After the verdict, Judge Chesler ordered Liu taken into custody, citing the penalties Liu faces, his ties to China and the lack of an extradition treaty with China, among other reasons.

Liu faces the following maximum penalties, per count:

·                             Export violations – 20 years in prison; $1 million fine,

·                             Stolen trade secrets violation – 10 years in prison; $250,000 fine,

·                             Interstate transportation of stolen property – 10 years in prison; $250,000 fine, and

·                             False statement – five years in prison; $250,000 fine.