Chinese Government's E-Mail To American Journalist: Your Story Will Fan Up A 'China Cyber Threat'

CINCINNATI (TDB) -- BusinessWeek's cover story today is about China and cyber attacks, or as the magazine describes it in a newly coined word, "e-spionage." But the kicker, perhaps, is an e-mail from the Chinese government to my old reporting partner at The Cleveland Plain Dealer, Keith Epstein. China's government "strongly" suggested on April 9 that he should not have written the story as it "only would serve the purposes of some anti-China forces." The e-mail -- reprinted in full below -- also says China does not engage in cyber warfare and its national defense policy is "unswervingly" non-aggressive:

"From: Wang Baodong
Sent Cc: Tschang, Chi-Chu
Subject: RESPONSE ON CYBER SPACE
Dear Mr. Epstein,
As I told you over phone, I read your questionnaire carefully, and I'm very much concerned about the purpose of your story—if it targets China and is aimed at fanning up a "China cyber threat", I would strongly suggest that you do not do such stories as this would only serve the purpose of some anti-China forces, and is not conducive to increasing mutual understanding and friendship between the Chinese and American peoples.

After saying that, I should say that the Chinese government has on various occasions expounded its position on this global issue of cyber intrusion or hacking. The Chinese Government always opposes and forbids any cyber crimes including "hacking" that undermine the security of computer networks. Chinese laws and regulations are explicit in this regard.

As it is, China's cyber space and internet systems are frequently intruded and attacked by hackers from certain countries. As a victim of hacking attacks, China attaches great importance to cracking down on various cyber crimes including hacking activities.

China follows a path of peaceful development, and unswervingly adopts a national defense policy which is defensive in nature. China would never do anything to harm sovereignty or security of other countries. In conformity with such national policies, the Chinese government has never employed, nor will it employ so-called civilian hackers in collecting information or intelligence of other countries. Allegations against China in this respect are totally unwarranted, which only reflect the dark mentality of certain people who always regard China as a threat. Of course, there are some other people who are misled into believing that China is engaged in hacking activities, which is more than wrong.

China enjoys good cooperation with many countries in counter-cyber crimes, and is willing to enhance communication and collaboration in this field on the basis of mutual respect and objectivity. China hopes that, through joint international effort, cyber space will become more tranquil, harmonious and more effective in facilitating the welfare of the whole human being.

Thank you very much. Please drop me a line to confirm the receipt of this email.

Sincerely,
Wang Baodong Press Counselor & Spokesperson Of the Chinese Embassy to the United States"

The BusinessWeek story goes on to note that a conservative think tank in Washington, The American Enterprise Institute, was hacked from China. The White House and the Defense Department both had to sever access:

"A previously undisclosed breach in the autumn of 2005 at the American Enterprise Institute—a conservative think tank whose former officials and corporate executive board members are closely connected to the Bush Administration—proved so nettlesome that the White House shut off aides' access to the Web site for more than six months, says a cyber security specialist familiar with the incident. The Defense Dept. shut the door for even longer. Computer security investigators, one of whom spoke with BusinessWeek, identified the culprit: a few lines of Java script buried in AEI's home page, www.aei.org, that activated as soon as someone visited the site. The script secretly redirected the user's computer to another server that attempted to load malware. The malware, in turn, sent information from the visitor's hard drive to a server in China. But the security specialist says cyber sleuths couldn't get rid of the intruder. After each deletion, the furtive code would reappear. AEI says otherwise—except for a brief accidental recurrence caused by its own network personnel in August, 2007, the devious Java script did not return and was not difficult to eradicate. "

Politics Does Make Strange Bedfellows: OH-01 GOP Steve Chabot Is Praising Nancy Pelosi

CINCINNATI (TDB) -- Conservative Republican U.S. Rep. Steve Chabot says he's full of admiration for Democratic House Speaker Nancy Pelosi, who last week stood with the Dalai Lama and ripped the Chinese crackdown in Tibet. Chabot, OH-01, serves on the House Foreign Affairs Committee and issued a press release that says he "praised" Pelosi. He is not often prone to use language that speaks highly of Democrats, but Chabot says she was right to stand up for human rights.

"Freedom is a non-partisan matter. The Chinese government must respect the rights and human dignity of the Tibetan people."

Chabot, who represents Cincinnati's West Side, chairs the Congressional Taiwan Caucus. He has been a critics of China for years. He says China's actions in Tibet are "one more example of why the U.S. State Department should not have removed China from its list of the world's worst human rights offenders."

Earlier this month, China seems to have gotten a break on the annual report of human rights abuses in nation's across the world. There is widespread speculation that the Bush Administration eased up on its criticism of China because it didn't want to embarrass that nation ahead of this summer's Beijing Olympics.

Note To Taxman: Chinese Flags Flew At Bush's White House

Taxman is upset that a Cuban flag was posted on the wall in an office staffed by Obama volunteers. The right-leaning Republican blogger says in a comment:

"You are not going to see a flag from some dictatorship in a GOP office."

Well, that's a Chinese flag at the executive mansion in April 2006. The scene was snapped for an official White House photo by Eric Draper, the official White House photographer. It was paid for by American taxpayers. China is a dictatorship. And the American president standing under the dictatorship's flag is a Republican.

OH-05 Dem Weirauch: Flawed Trade Policies Allowed Toxic Toys

TOLEDO (TDB) -- Democratic congressional candidate Robin Weirauch chose a crowded shopping area near a Toys R Store to denounce trade policies that have delivered "a lethal bill of goods" to U.S. stores and consumers. Weirauch spoke on Black Friday, the first day of the Christmas shopping season, and said too many imports -- including toys from cheap-labor Asian factories -- are shoddy, dangerous and have been made with toxic substances like lead. She said officials in Washington have either ignored the problem or looked the other way.

Weirauch wants consumer products safety to become a major issue and also urges families to shop for American-made goods whenever possible.

"Our manufacturing jobs have been shipped to places like China and India, and what do we get in return? Shoddy, unsafe toys that pose life-threatening consequences for our children. In fact, 80 percent of the toys bought in the United States are imported from China, and the vast majority of these toys are never being inspected."

Weirauch is trying to capture a traditional GOP seat in a conservative district. She faces Republican Bob Latta in a Dec. 11 special election to fill Ohio's vacant 5th Congressional District seat. It was held by Paul Gillmor, an entrenched and popular GOP veteran who died in a household accident last September. She pulled 43% of the vote against him in 2006. Weirauch has begun hammering on the trade issue across the NW Ohio district. The criticism plays well in Ohio, where more than 200,000 manufacturing jobs have been lost this decade. She contends trade agreements such as NAFTA have undercut the state's economic base while flooding U.S. markets with toxic goods.

"I know one thing for sure, when these products were made in America, we didn't have to worry about toxic toys. When our toys were made right here in Ohio, our kids were safe. Washington is broken, and the way this crisis has been handled is all the proof we need. Like Ohioans, I was absolutely stunned to learn that the Consumer Product Safety Commission has only one person testing toys being shipped to the U.S. Washington put a single person in charge of making sure that toxic toys never made it to the shelves . . ."

Kent State University: Plans To Open Recruiting Office In China

KENT, Ohio (TDB) -- KentNewsNet.com says Kent State University is "poised to establish a presence in China," including a recruiting office to bring new foreign students to the campus in Ohio. The move comes at a time when state officials from Gov. Ted Strickland on down have been pushing for more Ohioans to attend college. They have argued that a more educated population at home will help the state compete better in the global economy; and one of the major competitors is China.

KSU officials seem to be intent on aiding China. Steve Michael, vice provost for diversity, is in charge of the state school's initiative.

"It is one of the fasted growing economies in the world with over a billion people who are determined to speak English and determined to move their economy forward."

Chinese Polled About Made-In-China: Surprise!!! American Workers Make Better Products

CINCINNATI (TDB) -- A global business intelligence and market insight consulting company polled Chinese attitudes about products manufactured in China and discovered the Chinese say American, Japanese and German goods have far higher quality. The survey showed that Made In The USA -- a label growing increasingly difficult to find here at home -- still means excellence in China.

Taylor Nelson Solfres plc does consumer research worldwide and its online survey panel of Chinese between ages 18-44 seemed to say they have little confidence in their nation's own factories. China offers cheap labor, but the down side looks to be crummy quality.

"The U.S. had the second highest association with a county that makes 'excellent quality products' at 33 percent, coming in second behind Germany at 38 percent, and much higher than their own Chinese products coming in at only 15 percent."

American corporations have been shifting factory jobs to China, in part to take advantage of that nation's low labor costs. But they have been stung by shoddy work, and there have been several notable recalls, including toys that were painted with toxic lead paint. Ohio's manufacturing economy has been hit particularly hard by globalization, which has moved jobs to lower cost locations.

TNS said the survey shows American companies -- because their American-made products are respected and sought in China -- have an opportunity to export. In other words, they should consider firing up the factories here.

"The results of this survey showed that there appears to be solid consumer confidence among the Chinese in U.S. produced goods and popular culture, resulting in ample opportunity for American businesses. The TNS study looked at Chinese views on a number of American products and trade issues. Overall, more than half of respondents placed the U.S. as the clear economic powerhouse, world leader and influential country."

The survey said America made the best technology products, best health care products and second best cars, after Germany. The complete text of the consumer survey is here. Not everything made in America got a high rating. French, British and Italian men were considered more handsome.

New Harris Poll: Pakistan And China Seen As Unfriendly Nations, Probable U.S. Foes

CINCINNATI (TDB) -- Illinois U.S Sen. Barack Obama took a thumping from some Democratic rivals and the pundit-ocracy for saying he would launch military attacks on Pakistan. He said armed forces could be used to root out Al Qaeda terrorists hiding in the mountains of that nation. But now there is data showing Obama seems to have a lot of company in the American public, which increasingly views Pakistan as hostile territory rather than a bosom ally.

Harris Interactive released polling data -- ignored in the press and nearly everywhere else -- showing "some general trends" in public opinion over the past three years. Both Pakistan and China, a trading partner with growing economic and military might and a penchant for shipping shoddy products to the U.S., are considered the No. 1 and No. 2 bad guys on the world stage.

"The two most negative responses that could be given about a country in this survey are 'not friendly but not an enemy' and 'unfriendly and an enemy.' The countries which are most widely viewed as not friendly (i.e. countries for which either of these responses are given) are Pakistan (69%), China (63%), Colombia (56%) and Russia (54%).

"It is striking that Pakistan is the country most widely viewed as unfriendly to the United States since it is considered an ally in the fight against the Taliban and Islamic terrorists and we have provided billions of dollars in aid."

Harris added that a "notable finding" was Pakistan's unfavorable rating had risen 20 points, and China's 9 since 2004. The poll of 1,010 adults was conducted July 10-16. Harris said only about 500 were asked about each of the 25 countries on its list.

The survey may have escaped wide notice because it was made public under a headline about nations that were most admired by Americans. No surprise on the list: Canada, Great Britain, Israel, Australia and Japan were described as the nation's best friends.

Obama could have been mining some of the distrust when he went after Pakistan, distrust that probably resonated in some of his own polls. He said Aug. 2, 2007:

"But let me make this clear. There are terrorists holed up in those mountains who murdered 3,000 Americans. They are planning to strike again. If we have actionable intelligence about high-value terrorist targets and President Musharraf will not act, we will."

Obama spoke after reports in July that the U.S. cancelled a raid in 2005 over concerns it would damage relations with Pakistan. Obama called that decision a "terrible mistake." The Chicago Tribune report about his speech is available online. While the Illinois Democrat took criticism for the tough foreign policy statement, it looks like he could have been on solid ground with the public. They clearly don't trust Pakistan -- or China -- according to the Harris data.

Outsourcing Gives Chinese Sensitive Military Technology: ITT Corp. To Pay $100 Million Penalty

CINCINNATI (TDB) -- Federal prosecutors in Washington say ITT Corp. intentionally allowed classified night-vision technology used by American military forces to fall into the hands of China and other nations. The company outsourced work that should have been done in the United States by American workers.

A criminal case is scheduled to be filed in court tomorrow, March 28, according to U.S. Attorney John Brownlee. The government said the critical military technology was transferred to enhance the company's profits.

Full details are in the statement of facts (long pdf file) that will be presented in court when the company pleads guilty.

Bottom line: U.S. troops lost a tool that gave them a battlefield advantage because somebody wanted to make money. In this instance, outsourcing really is a dirty word.

Adobe Founder's Concern: Asians Spending Big On Research

CINCINNATI (TDB) -- Abobe Systems founder Charles Geschke stopped by Xavier University -- the Jesuit school where he picked up his masters in mathematics 44 years ago -- and warned that China and India are greatly expanding their capabilities to conduct scientific research. Geshke is a Silicon Valley giant and Internet pioneer. His company invented Acrobat Reader and Photoshop, and he openly worried the U.S. could lose its technological edge to aggressive foreign competitors because corporate and government spending on basic research is dragging.

"What keeps me up at night is where our country is in terms of spending and investment in basic research," Geschke said. "China and South Korea have increased government spending on research and development for the last seven years. There recognize that having a large share of researchers and scientists is critical for their future."

Geschke co-founded Adobe Systems in 1982. He questioned why companies are abandoning research and government has cut scientific budgets. "It's very scary. Wouldn't we better off if he had such government funded research projects as alternative energy or stem cell research? Government isn't doing it anymore."

Geschke gave a keynote address at the Xaiver business school in Cincinnati, and recalled how he was studying for a computer science Ph.D. when he heard the Pentagon wanted to switch computers from purely calculating machines to communications tools as well. He said Silicon Valley was swept up in the new research.

"That's what educated the major players in the Silicon Valley, including me," Geschke said.

He told the business school that China and Indian will account for 31% of the world's scientists by the end of this year. For now, the U.S. leads in spending on basic research, but as a total share of the economy science gets less than it does in Japan, Iceland, Sweden and Switzerland. Take out defense research and the U.S. falls to 22nd place. Xavier covered the story, too, and its version of Geschke's talk is HERE.

Ohio: Another Asylum Plea Over China's 'One-Child' Law

CINCINNATI (TDB) -- A federal appeals court rebuffed the Bush Administration's attempt to deport a male illegal immigrant from China who says he has fathered two children in Ohio and faces sterilization if sent home. The 6th U.S. Circuit Court of Appeals in Cincinnati instructed the Justice Department's bureau of immigration appeals (BIA) to reopen Xin Mao Wu's petition for political asylum.

A three-judge panel ruled unanimously the agency did not legally explain its decision to reject the asylum plea. (Case No. 05-3939.)

In November, a different 6th Circuit panel said the government could deport Xue Ying Lin, a mother whose two children were born in Ohio. She argued she faces prosecution by the People's Republic of China because she violated that nation's policy of limiting families to one child. (Case No. 05-4505.)

The panel on the mother's case was comprised of three male judges. The latest ruling came from a panel that included two women, former Ohio Supreme Court Justice Deborah Cook and Cornelia G. Kennedy of Detroit.

The U.S. State Department's most recent Human Rights Report about China criticizes the country's coercive birth control policies. It confirms that forced sterilizations and abortions occur. The Daily Bellwether's story about the mother's asylum case mentions the annual human rights reports prepared by American diplomats.

Wu slipped into the U.S. in August 1995 and worked in a Cleveland restaurant, where he was arrested in February 1996. He did not show up for a deportation hearing and never left. In 2003 he applied for asylum, saying he had two children. He claimed if he returned to China either he or his wife would be forcibly sterilized.

"The BIA has been charged with providing expert interpretations of the immigration laws, and this court must give the BIA deference in making such decisions," the appeals court said. "Accordingly, where, as here, a reviewing court cannot sustain an agency decision because the agency has failed to consider a legal issue central to resolution of the petitioner's claim, the appropriate remedy is to remand to the agency for further consideration." A link to the full text of the decision is HERE.

Ohio Feds: Arrest Warrant Names Accused G.E. Hacker

DAYTON (TDB) -- A federal magistrate issued a criminal arrest warrant for James Wan Shing Kong, a former General Electric Co. program manager suspected of accessing corporate computer systems and wiring $930,000 to bank accounts in Hong Kong and Hainan Province, China. Kong is believed to have relatives in China, G.E. officials have told the U.S. Secret Service.

A previous post is on The Daily Bellwether about the federal computer hacking investigation.

An affidavit filed with the warrant says Wong engaged in identity theft and posed as a Texas dentist who was born on Oct. 10, 1974 and lived outside Houston. However, the Texas resident whose I.D. was used to carry out the scam has told U.S. Secret Service agents that personal information listed on a bogus bank account was incorrect -- except for his name and tax identification number. The G.E. funds were routed through Union Federal Bank in Indianapolis under the Texan's name and and wired to China.

"Part of the funds were sent from Union Fedeal Bank in wire transfers to various accouts. $100,00) was wired to Hang Seng Bank in Hong Kong to account #********5882 in the name of Li Chow Chin on 03/09/2006/ On 03/20/2006 $250,000 was wired to account #***********8606 at the Bank of China in the Hainan Province in the name of Du Ten Xin. On 03/28/2006 an additional $275,000 was wired to the Li Chow Chin account at the Hang Seng Bank, Hong Kong, and the last $305,000 was also wired to Li Chow Chin, account at the Hang Seng Bank, Hong Kong," the affidavit used to obtain the arrest warrant says.

Charles Matthew J. Wilkerson, the Secret Service agent who filed the affidavit, met with G.E. officials in Kettering, Ohio and was filled in about about Kong's background with the company.

"I learned that James Kong was a Program Manager who was heavily involved in the installation of new software applications. Kong was also involved in training and problem resolution issues within the company's various facilities and third party vendors. According to Kong's manager, he was hired in December 2000 and resigned unexpectedly in March 2006. Kong also claimed to have sold six of his seven houses in southern California for large sums of money immediately prior to his resignation. It was also thought that KOng had purpotedly left to work for his father in Hong Kong managing investments in China."

Wilkerson added that Kong's supervisor stated "he had access, as a system administrator, to all the information contained in various applications, including employees' logon and security codes." He said Kong made a call to a G.E.'s operations/fraud department in Costa, Mesa, Cal., ''from a phone that was tracked back to Malaysia shortly after the first account manipulations."

Federal court records show that U.S. Magistrate Sharon L. Ovington signed the arrest warrant on April 14, 2006. Kong, who also has used the name George Liu, remains at large.

G.E. Hit By Hacker: $$$$ Headed to Vegas, China

CINCINNATI (TDB) -- A General Electric Co. program manager with a taste for gambling in Las Vegas is under federal investigation for hacking into the company's Ohio computer system with an elaborate scheme that transferred huge sums of money from doctors' offices in Dallas into bogus bank accounts created to make investments in China.

The G.E. insider attempted to make overseas wire transfers last year from the accounts, which were flush with cash after he adopted the identity of a dentist in Houston, Tex., the Daily Bellwether has learned.

The G.E. unit hit was the computer system in Kettering, Ohio for GE Money Bank, which is a financial subsidiary of the giant conglomerate based in Fairfield, Conn. Federal Secret Service agents have been investigating the hacking incident since April 6, 2006 and say their case involves fraud in connection with access devices, wire fraud and bank fraud. About $1.7 million has been seized so far from a bank in Indianapolis. Federal officials say there is some evidence the hacker, whom they described as ''very intelligent" went to Malaysia in 2006 to execute the scheme.

According to an affidavit obtained by The Daily Bellwether, U.S. Secret Service Agent Charles J. Wilkerson said the G.E. worker was deeply involved in a software installation project. As a program administrator, the suspect had employees' logon passwords and security codes. Matthews said the hacker "was very intelligent, but gambled frequently in the Las Vegas, Nevada area. My investigation has revealed that ***** was able to gain access into the merchant accounts of several GE customers, and ***** and went into GE's computer system in Kettering, Ohio., and changed the account information for several of the merchant accounts, so that instead of GE paying the amount due to the merchants, the funds were actually paid into an account owned by ***** but which was held under a false name."

[Ed. Note: The Bellwether has the hacker's name but is not identifying him because he is not charged. Officials identified him in paperwork tracking down his bank accounts.]

The Secret Service agent said the worker quit GE last March right before the account manipulations began. He said someone ''who worked at a GE facility in Tempe, Arizona
accessed and downloaded 1,000 legitimate credit card numbers" that were linked to accounts associated with medical practices in the Dallas, Texas area. He said ''it appeared as though a patients credit card was being 'swiped' at a point-of-sale terminal at a doctor's office."

The G.E. worker attempted to authorize wire transfers to the Hang Seng Bank for property purchases and the Bank of China for investments.

U.S. District Judge Thomas M. Rose of Dayton has issued an order allowing the Justice Department to seize $1,685,813.49 that has been traced to an account at the Union Federal Bank in Indianapolis. Last week, Rose signed an order allowed the Treasury Department's asset forfeiture and money laundering section in Washington to sort out how G.E. can recover the money. (Southern District of Ohio, 3:06-cv-176)