Exporing Military encryption to China

[Declan McCullagh]

Politech coverage:

"Feds nab two PC crypto-exporters allegedly shipping to China"
http://www.politechbot.com/p-02453.html


On Thu, Aug 30, 2001 at 08:58:27PM -0700, Malcolm Idaho wrote:
> Customs halts export to China, charges 2 
> By Jerry Seper
> THE WASHINGTON TIMES
> 
> 
> 
>      Two men, one a naturalized U.S. citizen and the other a permanent
> resident alien, were arrested yesterday by the U.S. Customs Service on
> charges of attempting to export military encryption technology to China. Top
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> 
>      Eugene You Tsai Hsu of Blue Springs, Mo., and David Tzu Wvi Yang of
> Temple City, Calif., were taken into custody by undercover Customs Service
> agents following a four-month investigation by the agency's Baltimore field
> office.
>      Mr. Hsu, who became a U.S. citizen in 1999, and Mr. Yang, a Taiwan
> native who is a resident alien, were accused in an affidavit of attempting
> to export to China encryption devices used to safeguard classified
> communications, in violation of the Arms Export Act.
>      A third man, identified as Charlson Ho, also was named in the
> conspiracy and is believed to be in Singapore. Mr. Hsu was arrested at his
> Missouri home. Mr. Yang was taken into custody at his office in Compton,
> Calif.
>      "The technology that these individuals were attempting to export to
> China is among the most sensitive items on the U.S. munitions list," said
> Agent Allan Doby, who heads the Baltimore office. "The sale of these units
> is so tightly controlled that the National Security Agency must approve it."
>      According to an affidavit by Customs Service Agent Mary Hamman, the
> agency was notified May 2 by the Defense Security Service that Mr. Hsu was
> attempting to purchase KIV-7HS encryption devices and user manuals for
> export to China. The devices, authorized for government use only, are
> designed to secure classified communications.
>      Ms. Hamman, in the affidavit, said Mr. Hsu sought to buy the equipment
> from Mykotronx Inc., a private company located in Columbia, Md. Officials at
> Mykotronx called the Customs Service office in Baltimore, which told the
> firm to direct Mr. Hsu to an "intermediary representative."
>      That representative, an undercover Customs agent, later engaged in what
> the affidavit said was a series of telephone conversations between May 2 and
> Aug. 18 with Mr. Hsu, Mr. Yang and Mr. Ho, which were tape-recorded. The
> telephone conversations showed that the men were working for a Singapore
> firm, Wei Soon Loong Private Ltd., that wanted to buy the encryption
> devices.
>      During the conversations, according to the affidavit, Mr. Hsu confirmed
> that the end user of the encryption devices was located in China. The
> affidavit does not elaborate.
>      Ms. Hamman wrote that Mr. Hsu, after being told that the purchase of
> the equipment would be illegal and that permits to send the devices to China
> could not be obtained, said he wanted to proceed anyway, suggesting to the
> undercover agent that "everyone will just keep their mouths shut."
>      The affidavit said Mr. Hsu then suggested that the agent talk directly
> with his buyer in Singapore, who would receive the equipment and forward it
> to China. The agent them spoke with Mr. Ho, who also confirmed that the
> equipment was bound for China.
>      In one conversation, the affidavit said, Mr. Ho told the undercover
> agent the Chinese buyers "don't want too many people to know" about the
> deal. The document said Mr. Hsu later suggested that instead of a check or
> wire transfer as payment for the encryption equipment, cash would be better
> "so there's no trail."
>      In a conversation with Mr. Yang, the affidavit said, the undercover
> agent was told by Mr. Yang that he had agreed to "move the merchandise" for
> Mr. Hsu and Mr. Ho, and that he "fully understands the whole situation."
>      "I've been doing this business for more than 20 years, I know how to
> handle these problems," Mr. Yang is quoted as saying.
>      The affidavit said Mr. Yang told the agent the encryption equipment
> would be shipped from Los Angeles through Taiwan to Singapore, where it
> would then be forwarded "to the end user in China."
>      Mr. Hsu and Mr. Yang were not available yesterday. Wei Soon Loong, the
> Singapore company, did not return calls for comment.
>      The maximum sentence for smuggling sensitive technology is 10 years in
> prison and a $1 million fine for each violation.
>      Customs spokesman Dean Boyd said people or companies engaged in the
> export of items included on the U.S. Munitions List to all foreign
> countries, except Canada, must be registered with the State Department. In
> addition, he said, persons or companies must obtain a license from the
> department for each item on the list before it can be exported.