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Economic Espionage Essay

A small Mississauga electronics safety equipment company is broken into. Although filing cabinets and desks were rummaged through, nothing was seemingly taken. An officer discovered the company had drawn up a bid for $7 million dollar contract a day or so before the break-in. The contract in question was for a foreign country. It was later discovered that the company in question was known for its aggressive economic espionage. An iron ore shipping company was also broken into. At first it was thought that the target had been the firms computers. But, nothing was taken, it was assumed that the burglars had been cared off.

Within thirty minutes it was discovered that the company was approaching its fiscal year end. staff eventually found that most of the recent database backup tape was missing. A Quebec based company with the laser-based system for inspecting materials used in, among other things, the stealth aircraft, had three computers stolen. On their harddrives were confidential codes for specialized software used by the Canadian Armed forces. The above are all true examples of the modern threat facing international business today known as industrial or economic espionage.

The end of the cold and economic ressures have increased the risk of economic espionage. The collapse of the Soviet Union has left unemployed KGB and other former communist bloc intelligence agents selling everything from Russian night vision devices to completely assembled and functional bugging devices. Even friendly western European governments have been caught spying on private corporations based in the U. S. and other countries, while industrial competitors sometimes hire private companies to collect competitive intelligence from their corporate rivals( Lester:96).

What exactly is economic espionage? how prevalent is it? Who does it? How do they do it? nd what can we do to stop it. These are the questions that will be looked at in the following pages. First lets look at, what exactly is economic espionage. Espionage and intelligence is no longer the exclusive domain of monarchs and governments, it has become a must for modern international business. Large corporations around the world particularly in western Europe and Asia now hire agents to gather intelligence on their competitors and other countries.

The goal of economic espionage is to steal trade secrets, plans and confidential procedures or anything to give your company or country a competitive edge over another Perry:1996). The areas that interest industrial spies the most include radiation transfer technology, systems diagnostic and testing software, traveling wave tubes, aviation technologies, microwave monolithic integrated circuits, inferred signature measures software, radar technologies, wet processing systems, information management and processing, simulation technologies, physical security technologies, ram-jet engine and ram-jet technologies. Special Security news letter:1995).

Although this is not all of the areas that modern spies target, it will give you an idea of the scope of the problem. Peter Schweiser author of the book Friendly spies speculates that for the most part, modern industrial spies are motivated by pure greed of money. If we look back in history we can see that the majority of the spies that were caught, were motivated by the money. John walker head of the notorious Walker spie ring, sold submarine secretes to the Soviets for 17 years for one million dollars.

Larry Wu-Tai Chin and analyst of the CIA, passed secrets to China and was paid $180,000 over a three year period. Richard Miller worked for the FBI and was to be paid 2 million dollars to pass counter-intelligence secrets to he Soviets, but he was caught and was only paid one quarter of this amount. It is easy to see that spying for friendly countries is a profitable business. Is economic espionage really as bad as it is made out to be? Since 1985 economic espionage directed at American companies has increases 260 percent and the FBI’s industrial espionage caseload has jumped to well over five hundred investigations.

Espionage is costing American companies well over a 100 billion dollars a year in lost sales infact some sources put the loss at 260 billion. In Canada that Number translates to 10 billion a year and companies with verseas operations are estimated to lose 140 billion dollars per year. It is hard to get accurate numbers when it come to losses due to espionage for the simple reason that companies don’t want to admit to being victims, in fear of undermining the confidence of their suppliers and shareholders (Lester:1996).

The visible damage of economic espionage takes the from of Lost contracts, jobs and markets, and overall a diminished competitive edge. The companies that are hurt the most are the ones that earn under 11 million dollars annually. How do industrial spies go about collecting information. It is a well nown fact that modern spies have used all of the collection methods used during the cold war for collecting information on industrial competitors. Practitioners of modern espionage seldom use one method by itself, but combine them into concerted collection programs. ountries and corporations have been known to turn legitimate transactions or business relationships stealthy collection opportunities.

Some of the methods of information collection listed below are most often used for legitimate purposes. Including them here is not to imply illegal activity, they are used to show as potential elements of a broader, oordinated intelligence effort(Security Online:1996:5). Classic agent recruitment is an intelligence collectors best source. This method provides a trusted member inside a company or organization who the collector cans task to provide classified information.

An information collector’s interest in recruiting personal is not limited to a high ranking personal in a company or organization. It is true that researchers, key business managers, and corporate executives are a good target for industrial spies, but support personal such as secretaries, computer operators, technicians, and maintenance personal are also targeted. The latter may behave the best access to competitive information, and their low pay may provide good ground for manipulation by intelligence agencies. (Security On-line: issue 1) Next spies use what is called us volunteers.

The people that have the easiest access to companies information is the companies own employees. Employees who steal information from their companies exhibit the same motivations as the typical spie or thief, illegal or excessive use of drugs or alcohol, money problems, personal stress, and just plain greed. industrial spies will use ordinary surveillance and simple break and nter to gain access to sensitive information. Companies have reported break and enters were only laptops and disks were stolen when items of much more value were close by.

Some countries pursuade hotel operators to give their spies access to visitors rooms and luggage. during these break-ins known as bag ops luggage is searched for sensitive information and any useful documents are copied or simply stolen. (Security On-line: issue 1) Specialized technical operations constitutes the largest part portion of economic espionage. This type of collection includes computer intrusion, elecommunications targeting and intercept, and private-sector encryption weaknesses.

Corporate telecommunications especially international telecommunications provide a highly vulnerable and lucrative source for anyone interested in obtaining trade secrets or competitive measures because they are so easily accessed and intercepted. Due to the increased use these links for computer transmission and electronic amil, intelligence collectors find telecommunications interception cost-effective.

For example, foreign intelligence collectors intercept facsimile transmissions through government- wned telephone companies, and the stakes are large, approximately half of all overseas transmissions are facsimiles. nnovative hackers connected to computers containing competitive information evade the controls and access companies information. In addition many American companies have begun using electronic data interchange, a system of transferring corporate bidding, invoice, and pricing data electronically overseas. many foreign government and corporate information collectors find this information invaluable. (Security On-line: issue 1) Another tactic used in the world of corporate espionage is economic isinformation.

Some governments use misinformation campaigns to scare their domestic companies and potential clients away from dealing with US companies. The press and governments agencies often discuss foreign economic and industrial intelligence activities, often in vague non-specific terms. The issue has been to paint foreign competitors or countries as aggressive and untrustworthy, even if the accuser has no proof of any collection activity. Some countries have widely publicized their efforts to set up information security mechanisms to protect against their competitors penetration attempts, and frequently the

United States id mentioned as the primary threat. (Security On-line: issue 1) Tasking foreign students studying in the US and other countries. Some governments task their students studying in a different country to aquire information on a variety of economic and technical subjects. In some cases the students are recruited before they start their studies, others are approached after and are recruited or pressured based on loyalty, fear for their countries government or intelligence service. In some cases, at an intelligence collectors request, foreign graduate students serve as assistance at no cost to rofessors doing research in target areas.

These students then have access to the professors research and learns the applications of the technology. As an alternative to compulsory military service one government has an organized programs to send interns abroad, often with the specific task of collecting foreign business and technological information. (Security On-line: issue 1) As well as recruiting students studying abroad, information collectors will task foreign employees of North American firms and agencies. The information collector will recruit or task compatriot employee in A North American firm to steal information.

Although similar to the clandestine recruitment used by intelligence agencies, often no intelligence service is involved, only a competitive company or non-intelligence government agency. The collector then passes the information directly to a foreign firm or the government for the use in it research and development activities. (Security On- line: issue 1) Debriefing of foreign visitors to North American countries is another method collectors use. Some countries actively debrief their citizens after travel in North America, asking information acquired during their trips abroad.

Sometimes this debriefings are heavy handed, with foreign scientists describing them as offensive. In some countries, they are simply and accepted part of traveling abroad. (Security On-line: issue 1) Recruitment of emigres, ethnic targeting is another way information is collected. Frequently, intelligence collectors find it effective to target persons of their own ethic group. Persons working for the Us military and research and development who have access to classified technology. Several countries have found repatriation of emigre and foreign scientists to be the most beneficial technology transfer methodology.

One country, in particular, claims to have repatriated thousands of ethnic scientists back to their home country from the United States. Ethnic targeting includes attempts to recruit and task naturalized US citizens and permanent resident aliens to assist in acquiring secret information. Frequently, foreign intelligence collectors appeal to a persons patriotism and ethnic loyalty. Some countries collectors resort to threatening family members that continue to reside in their home country. (Security On-line: issue 1) Information collectors will also use what is refereed to as elicitation during international conferences and trade fairs.

Events such as international conferences on high-tech topics, trade fairs, and air shows-attract many foreign scientists and engineers, providing foreign intelligence collectors with concentrated group of specialists on a certain topic. Collector target these individuals while they are abroad to gather any information the scientists or engineers may posses. Sometimes depending on the country and the specific circumstances these elicitation efforts may be heavy handed. Intelligence collectors sometimes try to recruit scientists by inviting them on all expense paid trips abroad for conferences or sabbaticals.

The individuals are treated royally, and their advice sought on areas of interest. When they return to their country, collectors recontact them and ask them to provide information on their areas of research. (Security On-line: issue 1) Commercial data bases, trade and scientific journals, computer bulletin boards, openly available US government data, corporate publications are another source. Many collectors take advantage of the vast amount of competitive information that is legally and openly available in the United States.

Open source information can provide personality profile data, data on new research nd development and planned products, new manufacturing technics, and competitor strengths and weaknesses. Most collectors use this information for its own worth in their business competition. However, some use openly available information as leads to refine and focus their clandestine collection and to identify individuals and organization that posses desired information. (Security On-line: issue 1) Foreign government use of private-sector organizations, front companies, and joint ventures is the next way collectors use to gather intelligence.

Some foreign governments exploit existing non-government affiliation organizations or reate new ones-such as friendship societies, international exchange organizations, import and export companies, and other entities that have frequent contact with foreigners to gather intelligence and to place intelligence collectors. They conceal government involvement in these organizations and present them as merly private entities in order to cover their intelligence operations. These organizations spot and assess potential foreign intelligence recruits with whom they have contact.

Such organizations also lobby US government officials to chanfe policies the foreign governments consider unfavorable. Security On-line: issue 1) Corporate mergers and acquisitions. Several countries use corporate mergers and acquisitions to aquire technology. The vast majority of these transactions are made for legitimate purposes. Sometimes though they are made to specifically to allow a foreign company to aquire North American technology without spending their own resources on research and development.

According a 1994 US government document entitled Report on US critical technology Companies 984 foreign mergers and acquisitions of US critical technology companies occurred between January 1st 1985 and October 1st 1993. All but a andful of these mergers and acquisitions were friendly, and four countries accounted for 68 percent of them. Of the total 60 percent of them involved US companies involved in advanced materials, computers including software, peripherals, biotechnology, areas relative US professional and scientific instrumentation, communications equipment, advanced manufacturing, and aircraft and spare parts. Security On-line: issue 1)

The next way information is collected is refered to as headhunting or hiring competitors employees. Foreign companies typically hire knowledgeable employees of competing US firms to do corresponding work for the foreign firm. At times, they do this specifically to gain inside technical information from the employee and use it against the competing US firms. (Security On-line: issue 1) Corporate technology agreements is another way information collectors assemble technological information. Some foreign companies use potential technology sharing agreements as condiuts for receiving propriety information.

In such instances, foreign companies demand that, in order to negotiate an agreement, the North American company must divulge large amounts of information about its processes and products, sometime much more than is justified by the project be negotiated. Often the information requested is highly sensitive. In some of these cases, the foreign company either terminates the deal after receipt of the information or refuses to negotiate further if denied the information. (Security On-line: issue 1) Foreign companies will often use the favorable research climate in North America.

Foreign countries will sponsor research activities at the North American university and research centers. Generally everyone benefits from the finished research. At times, however, foreign governments or companies use the opportunity as a one sided attempt only to collect research results and roprietary information at the North American facility. Foreign intelligence services also use these efforts to insert intelligence officers who act solely as information collectors. (Security On-line: issue 1) Hiring information brokers, consultants. Information brokers scour the world for valuable information.

What they can not obtain legally or by guile some information brokers will purchase. The broker then verifies the data, puts it into a usable and easily accessible format, and delivers it to interested clients. The following example, that was printed in the Asian Wall Street Journal in 1991 and illustrates this type of activity. The ad was followed by a phone number in western Europe. “No you have advanced/privileged information on any type of project/contract that is going to be carried out in your country? We hold commission/agency agreements with many large European companies and could introduce them to your project/contract.

Any commission received would be shared with yourselves. ” Some countries frequently hire well connected consultants to write reports on topics of interest and to lobby North American government officials on the countries behalf. Often, the consultants are often high ranking US overnment officials who maintain contacts with their former colleagues. They exploit these connections and contract relationships to acquire protected information and gain access to other high level officials who are currently holding positions of authority through whom they attempt to further aquire protected information. Security On-line: issue 1)

Fulfillment of classified US government contracts and exploitation of department of defense sponsored technology sharing agreements. At times, classified government contracts are awarded to companies that are partially or substantially controlled by foreign governments. Although the US governments security agencies closely monitor these contracts, they still provide foreign governments with unauthorized access to information.

Traditional allies of the US are most likely to use this method, since non-allies seldom are included in such contracts. Security On-line: issue 1) The last method of information collection we will look at tasking liaison officers at government to government projects. During joint research and development activities, foreign governments routinely request to have on- site liaison officers to monitor progress and provide guidance. Several allied ountries have taken advantage of these positions as cover for intelligence officers assigned with collecting as much information about the facility as possible.

Using their close access to their US counterparts conducting joint research and development, particularly in the defense arena, liaison officers have been caught removing documents clearly marked as restricted or classified. (Security On-line: issue 1) Now that we have looked at how foreign countries and companies go about collecting information from North American companies. The FBI investigations reflect that 23 countries are currently engaged in espionage against North American countries. France is one of the countries that we will look at. The French currently commit 200 full-time agents world wide.

These agents are known as the General de la Securite Exterieure and concentrate on the soft business targets. The other full-time group in the French intelligence service is the Service 7. This group of spies is also known as the action unit. They carry out all of the operations that require a deft hand,IE break-ins, buggings and covert operations. These full-time agents are only part of the story, France also has part-time information collectors called Honorary correspondents. This group of people includes a large number of corporate officials living overseas.

Some of these people work for money, but others see it as part of their jobs. An example of this type of information collectors a man by the name of Pierre Marion. Pierre was a Air France representative who lived in Japan. His job was to collect information about Japanese social circles particularly as it related to Japanese political officials. For its size no other country in the world has the intelligence capability of South Korea. The Korean intelligence service is called the National Security Planning Agency and is active around the world providing a ariety of intelligence and espionage services to Korean interests.

South Korean agents operate in North Korea, China and the Soviet Union, but the United States and Japan is were they are most active. US intelligence sources have bee heard to say that the NSP is more effective than Israelis Mossad. The NSP has a technically proficient agents, enormous financial resources, and a well- organized group of informers. An example of an operation the South Koreans carry out is called Operation Laughing Bird. This operation was conducted in Japan and was designed to gather technological information to support South Korean industry. It was put into action in 1981.

It included more than 200 agent. These agents engaged in electronic eavesdropping, the planting of moles and agents, the use of organized crime syndicates in Japan and the recruitment of Japanese and American workers to act as agents. Israel is the next country that we will look at. The Israeli economic espionage collection agency is called the LAKAM, and is one of Israel’s most effective intelligence organizations> LAKAM is an Hebrew acronym for Israeli Defense Minuister’s Scientific Liaison Bureau. Its agents operate in United States, Japan, France, Germany, Italy, Great Britain, Switzerland, and Sweden.

LAKAM’s biggest operation is in the US. Their agents operate out of the Israeli ambassy in Washington as well as two other shops, in Los Angeles and the other in New York. Theri operations in these cities are believed to include thirty five full-time agents with a several dozen informers. companies that benefit the most in Israel include aerospace, chemical producers, and electronics firms. In addition to regular agents the Israelis use dee cover agents posing as business people and scientists traveling to the United States.

Most of the time the agents are in direct contact with the Prime Minister through the telephone nd telex, but if it is something that is extremely sensitive diplomatic pouches are used to transport it. Next lets turn our attention toward Germany. Germany’s intelligence service is called the Bundesnachrichtendienst (BND). Since the 1960’s the Germans have been actively involved in spying on the US, France, Great Britain, and Italy. The BND regularly monitor telecommunications of foreign corporations bases in Germany. he BND is very active in the US.

German agents have cultivated mole or spies in Us high-tech firms. The BND is gathering extensive information in the fields of economy, technology and industry. These United States is not completely innocent in the world of espionage. Now that the cold war is over the CIA officials have latched onto the idea of collecting economic data to justify the inflated budget of the agency. Dozens of US corporations from fortune 500 companies to small, high tech firms, are secretly assisting the CIA, allowing the agency to place full-time officers from its operations division into corporate offices abroad.

Serving under what is refereed as nonofficial cover (NOC), CIA officers pose as American businessmen in friendly countries, from Asia to Central America to Western Europe. Once here, they recruit agents from the ranks of foreign officials and business leaders, pilfer secrets, and even conduct speacial operations and parliamentary activity (Dreyfus:95:1). Proof that the United States is engaged in this type of espionage happened in 1995 when the French government demanded that four business officials leave the country because they were allegedly caught gathering French economic and political secrets.

Three businessmen were posing as American diplomats and the fourth was operating under a business cover( Time: March 6:1995). As stated above Espionage is not the exclusive domain of governments nymore. Some corporations have intelligence organizations that rival that of a small country. other companies that do not have intelligence organization of their own retain or hire private investigators when espionage is required. An example of the use of company spies happened in July 1989. A du pont chemical plant was the site of an well planned espionage scheme. Visitors from a German chemical company were visiting the plant.

One of the visitors, while looking over a table accidentally dip the tip of his tie into a vat of chemicals. Company officials at first were very apologetic and offered to replace the tie. The visitor insisted o keeping the tie because it was from his family. Only after an experienced company security official protested to company leaders that the accident was probably a scheme to obtain a chemical sample did the company insist on keeping the tie(Scheizer:1993:253). Lastly we will look at some of the ways that companies can protect themselves against economic espionage.

The following was taken from a paper written by Kevin d. Murray A certified protection professional called 10 Spy- Busting Secrets. According to Murray, espionage is preventable if you know the vulnerabilities, you can take the proper precautions. Murray presents a list of the top ten ways to fight back against economic espionage. The first thing Murray examines is what is called trash trawling. this is simply digging through garbage.

This activity is legal. The simple counter- espionage tactic for this is to reduce that availability of what he refers to as puzzle parts. ompanies must encourage destruction of waste paper by purchasing shredders appropriate to the needs of the company, Use crosscut destruction for high level security, computer paperwork and large volume waste require a central bulk shredder. do not leave confidential papers in a box under desks or later shredding shred it now, Do not entrust wastepaper destruction to paper recycling vendors destroy it before recycling. The big shredder purchasing mistake is buying just one shredder for everyone to use. Some people are to busy to be bothered.

Murray recommends the use of several convenient desk-side shredders. Bugs and wire tapping is the next area examined by Murray. Electronic spying is the most devastating spy trick there is. A common mistake is saying Oh I’m just being paranoid when you suspect electronic surveillance. Murray recommends not discussing your suspicions with others unless they have a real eed to know, do not discuss your suspicions in the suspect areas, don’t attempt a do-it yourself solution, don’t waste money buying spybuster toys, seek professional guidance without delay.

Contrary to what is seen on television and in catalogs, detection of bugs and wiretaps is equipment and knowledge intensive work. Expect a professional sweep team to have about $100,000 dollars invested in their equipment as well as an extensive background in security, investigations, telecommunications and electronics. These types of professionals will not be found in the yellow pages, you must contact a orporate security professional for a recommendation. The drop by spies is the next area of interest.

Check and photocopy credentials and work orders of anyone performing technical work in or around your offices. Verify the work was actually requested and most of all necessary. This included telecommunications technicians, office equipment repair persons, paper recycles, cleaning crews, electricians etc. Have someone that represents the interests of your company accompany these individuals while on your property. Outsider contractors and unauthorized company employees should never br allowed to roam free unescorted.

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