Read the DOJ's indictment of the alleged Chinese spy

In what's been called "an exceptionally rare achievement" for the Justice Department, an officer with China's Ministry of State Security appeared in federal court in Cincinnati to face charges he sought to commit economic espionage and steal trade secrets from multiple U.S. aviation and aerospace companies.

Case: Doc 1 Filed: 04/04/18 Page: 1 of 16 PAGEID 1

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
DIVISION

UNITED STATES OF AMERICA, CASE NOPlaintiff, JUDGE
vs. INDICTMENT
YANJUN XU, 18 U.S.C. 2
a/k/a Xu Yanjun, 18 U.S.C. 1831
a/k/a Qu Hui, 18 U.S.C. 1832
a/k/a Zhang Hui, Forfeiture Allegation
Defendant.

THE GRAND JURY CHARGES:
BACKGROUND

l. The defendant, YANJUN XU, a/k/a Xu Yanjun, a/k/a Qu Hui, a/k/a Zhang Hui
is a citizen and resident of the Peeple?s Republic of China. XU is a Deputy Division
Director, Sixth Bureau ofJiangsu Province, Ministry of State Security, for the People?s Republic
of China M38 is the intelligence and security agency for China, and is responsible for
counter-intelligence, foreign intelligence and political security. MSS has broad powers in China
to conduct espionage both domestically and abroad.

2. China?s policies on intellectual property include a focus on the ?re-innovation? of
foreign technology. Technological advancement, including in the aerospace industry, is state
directed, and accomplished in part, by the acquisition of foreign technology through theft of
industrial information.

3. One of job duties on behalf of M88 is to obtain technical information,
including trade secrets, from aviation and aerospace companies in the United States and throughout

Europe. XU sometimes uses the aliases ?Qu Hui? and ?Zhang Hui? in connection with his duties.

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He has been known to attempt to conceal the true nature of his employment, by representing that
he is associated with .liangsu Science Technology Promotion Association

4. XU often communicates, travels, and exchanges information related to aviation
technology with individuals at the Nanjing University of Aeronautics and Astronomics
a public university located in Nanjing, China. NUAA is operated by the People?s
Republic of China?s Ministry of Industry and Information Technology. NUAA is regarded as one
of the top engineering universities in China and has signi?cant in?uence over China?s aerospace
industry. The Ministry of Industry and Information Technology of the Chinese government plays
a significant role in regulating major industries and approving new industrial investments and
projects in key areas including information technology, telecommunications, and national defense.
NUAA is a regular collaborator with Commercial Aircraft Corporation of China and
Aviation Industries of China hosting academic and commercial seminars and
symposium and sponsoring research published by academics from NUAA.

5. Unindicted co-conspirator is a citizen and resident of the People?s Republic
of China. CF is believed to be a Deputy Director at NUAA.

THE VICTIM COMPANY AND THE PROPRIETARY INFORMATION

6. Victim Company A has of?ces in the Southern District of Ohio. Victim Company
A is among the world?s top aircraft engine suppliers for both commercial and military aircraft, and
as a supplier engages in interstate and foreign commerce. Victim Company A has devoted
substantial resources to research and development in the field of using unique materials to
manufacture jet engine fan blades and fan containment structures. Victim Company A?s design
and use of certain types of composite materials in fan blades and fan blade encasements provide

greater engine durability, weight reduction. and lower costs. These fan blade and fan blade

to

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encasement designs provide Victim Company A with a significant competitive advantage over
others in the industry.

7. Victim Company A has spent several decades developing its fan blade and fan blade
encasement systems over several generations of engines. Victim Company A has engaged in

costly trial and error testing to advance its use of composite materials and ?ne-tuning, which lead

to the most accurate results at the lowest cost. Through billions of dollars of research and

development investment, Victim Company A developed a knowledge base of how to test jet engine
fan blades and containment structures manufactured from composite materials. This testing,
research, and development have led to a deep knowledge base that affords Victim Company A a
powerful competitive advantage. During the course of Victim Company A?s research and
development, the company created numerous diagrams and drawings representing the types of
tests it conducts and the results of such tests. These images and calculations are proprietary to
Victim Company A, and in many instances reveal details of the company?s research and
development process that would provide an economic value to a competitor or other entity
attempting to conduct research and development in the ?eld of composite material jet engines.
Release of some or all of this information to a competitor or any other entity attempting to conduct
its own research and development in this ?eld would provide a tremendous economic value,
because it would enable the other entity to bypass costly and time-consuming research and
development efforts and expend signi?cantly fewer resources.

8. Victim Company A employs several layers of security to preserve and maintain
con?dentiality and to prevent unauthorized use or disclosure of its trade secrets. These steps were

enforced to maintain its competitive advantage and to maintain the integrity of years of research

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and development pertaining to Victim Company A?s use of unique materials to manufacture jet
engine fan blades and fan containment structures.
9. Some of the external physical security measures are:
Limiting physical access to restricted portions of Victim Company A?s
campus; including through the use of manned, gated entrances and requiring identi?cation and

access badges: and

Limiting visitor access to the Victim Company A?s campus by mandating

visitor sign-in and escorts.
10. Some ofthe internal security measures are:

Requiring employees to execute non?disclosure and other con?dentiality
agreements that extend beyond the length of employment at Victim Company
Recurrent training and instruction for employees regarding the processes in

place to safeguard restricted and confidential business information;

Notifying all employees that publication and/or disclosure of restricted or
con?dential company infonnation is prohibited without express company authorization;

Use of various data security policies: and

Compartmentalizing and/or limiting access to company proprietary

information to employees or contractors on a need-to-know basis.

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COUNT ONE
(Conspiracy to Commit Economic Espionage)
18 U.S.C. 1831(3)(5)
1 1. Paragraphs 1 through 10 are restated and re-alleged as if fully set forth herein.
12. From in or about 2013 and continuing to at least April 1, 2018, in the Southern

District of Ohio and elsewhere, the defendant,

YANJ UN XU,
21an Xu Yanjun,
a/k/a Qu Hui,
a/k/a Zhang Hui,
and co-conspirator CF, with others known and unknown to the Grand Jury, did knowingly
combine, conspire, confederate, and agree, intending and knowing that the offense will bene?t a

foreign govemment, foreign instrumentality, or foreign agent, namely XU, other MSS of?cers,

NUAA, and the People?s Republic of China, to:

steal, and without authorization appropriate. take. carry away, and conceal,

and by fraud, arti?ce, and deception obtain a trade secret, in violation of Title 18. United States

Code, Section 1831(a)(1

without authorization, copy, duplicate, sketch, draw, photograph.
download, upload, alter, destroy. photocopy, replicate, transmit, deliver, send, mail, communicate,
and convey a trade secret. in violation of Title 18, United States Code, Section 1831(a)(2); and

(C) receive, buy, and possess a trade secret, knowing the same to have been

stolen and appropriated, obtained, and converted without authorization. in violation of Title 18.

United States Code, Section 1831(a)(3).

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Manner and Means
The manner and means by which the defendant and his co?conspirators sought to

accomplish the objects of the conspiracy included, among others, the following:

it was part ofthe conspiracy that defendant XU and others, including other
MSS of?cers, worked together to identify certain aviation technology that was desired by the

Chinese government and associated aviation entities and universities.

It was part of the conspiracy that defendant XU and others actively selected
and targeted companies that are leaders in the ?eld of aviation technology in the United States,

including in the Southern District of Ohio, and around the world.

It was further part ofthe conspiracy that defendant XU and others, including
unindicted co~conspirator F, identi?ed engineers and experts (co-optees) who were employed by

non-Chinese aviation companies and who possessed technical expertise in the desired aviation

?elds.

It was further part ofthe conspiracy that defendant XU and others. including
other MSS officers, concealed their true identities and nature ofemployment. Defendant XU and
others used aliases and purported to be associated with various Chinese universities, organizations
and associations, in an effort to conceal their true identities and employment with the M88.

It was further part ofthe conspiracy that defendant XU and others, including
unindicted co-conspirator CF, would communicate with these co?optees, and with each other,

through various messaging applications often using their aliases and other types of false

identifying information while doing so.

It was further part ofthe conspiracy that defendant XU and others, including

other MSS of?cers, would communicate and exchange messages regarding the types of

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information that they wanted to obtain, and the methods they should use for obtaining the desired
information.

it was further part ofthe conspiracy that defendant XU and others, including
other MSS of?cers. would communicate about the best ways to protect and conceal the true nature
of the information they were seeking from aviation companies and employees, including the use

of codes and series of letters in place of the technology being discussed and the name of the

company being targeted.

it was further part of the conspiracy that defendant XU and others solicited,

recruited, and paid such experts to provide technical information regarding aviation technology,

including trade secret information. At times, XU and others, including other MSS officers,
accomplished this by targeting and recruiting co-optees to travel to China under the guise or false
belief that the expert was traveling to China merely for ?an exchange? of ideas and/or to give a

presentation at a university, such as NUAA. In reality, the presentations were for the benefit of

the Chinese government.

it was further part of the conspiracy that defendant XU, and others,
including unindicted co-conspirator CF, would pay the co-optees stipends and would arrange travel

for and pay expenses associated with the travel to China.

It was further part of the conspiracy that defendant XU and others would

analyze the stolen technological information with experts and determine what additional

technology was needed.

was further part of the conspiracy that such stolen trade secret information
would be provided to the Chinese government, as well as to associated academic and commercial

aviation entities, to the detriment of the owner of the trade secrets.

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Overt Acts
14. In furtherance of the conspiracy and to achieve the objects and purposes thereof
defendant XU and others committed and caused to be committed the following oven acts, among
others, in the Southern District of Ohio and elsewhere:

On or about December 26, 2013, XU discussed an upcoming expert
?exchange? with 3 M88 colleague. Within the messages, XU stated that the ?customer doesn?t
know our identities. I approached him with the identity of Qu Hui. the Deputy Secretary-General
of Science and Technology Association." colleague acknowledged, stating, ?Got it. I will
make sure everybody here knows you are from Nanjing Science and Technology Association."

On or about April 22, 2014, XU sent a message to an M53 colleague
regarding another upcoming ?exchange? with an expert. XU reminded the colleague of two things:
The expert does not know my true identity, I approached him with the name under Jiangsu
Science and Technology Association; 2. Do not mention about the materials.?

Beginning in at least March 2017, unindicted co~c0nspirator CF began
corresponding via email with an individual (?Employee employed by Victim Company A as
an engineer since 2012. Unindicted co?conspirator CF solicited Employee 1 to come to NUAA in
China for an ?exchange? based on Employee 1?s engineering experience at Victim Company A.
NUAA, through unindicted co-conspirator offered to pay for Employee 1?s travel expenses.

On May 10, 2017, unindicted co-conspirator CF emailed Employee 1 that
the ?Institute of Energy and Power? had proposed that Employee 1 give a report on Victim
Company A ?s signature material design and manufacturing technology. Unindicted co-conspirator
CF wanted Employee 1 to focus on highly-technical topics, including the latest developments in
the application of Victim Company A's signature material used in aeroengincs. as well as engine

structure design analysis technology and manufacturing technology development.

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011 May 15.. 2017, in preparation for the trip to China to present at NUAA,
a message was sent to Employee 1 from one of email accounts, but the email was signed
using the name of unindicted co-conspirator CF.

While Employee 1 was in China, unindicted co-conspirator CF introduced
Employee 1 to XU. During this meeting, XU introduced himself using his alias, Qu Hui, and
claimed to be from JAST in China. XU gave a business card to Employee 1 that contained his
alias, ?Qu Hui,? and contact information associated with JAST, a cover af?liation for XU.

On June 2, 2017, at the invitation and direction of XU and unindicited co-
eonspirator CF, Employee 1 gave a presentation at NUAA in China, which included details
regarding engines that were designed and produced by Victim Company A.

XU had meals with Employee 1 both before and after the NUAA
presentation.

XU and others caused Employee 1 to be paid $3,500 in US. currency for

the presentation and as reimbursement for expenses incurred during Employee 1 ?5 visit to Nanjing

meals and hotel expenses).

After the trip to China, XU continued to communicate with Employee 1. in
fact, XU invited Employee 1 to return to NUAA the following year.

On November 21, 20] 7, unindicted co-conspirator CF expressed an interest
in having Employee 1 travel to China to exchange ideas and instruct again at NUAA. Unindicted
co-conspirator CF informed Employee 1 that he had spoken with Qu Hui (XU) from JAST. and
that Qu Hui would be able to help with travel expenses and handle the details ofthe ?exchange.?

(I) On or about January 8, 2018, XU wrote to Employee 1, ?1 will touch base
with the scientific research department here to see what technology is desired and i will let you

know what to prepare. For your end, please prepare the plane ticket and date as soon as possible."

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(in) On or about January 23, 2018, XU wrote to Employee 1, "Okay. Try your
best to collect and we can talk by then. Domesticallyi there is more focused [sic] on the
system code." XU later elaborated that the infonnation he wanted pertained to ?system
speci?cation, design process," which is the application of research data to engine production. XU
provided an email address for Employee 1 to use to send the requested information. When
Employee 1 informed XU that the email may be blocked if Employee 1 used the company
computer. XU responded, ?it might be inappropriate to send directly from the company. right??

(It) On or about February 3, 2018, XU caused Employee to send an excerpt
of presentation from Victim Company A, pertaining to ?containment analysis? for a fan blade
encasement. The document contained a label wanting that the presentation contained proprietary
information from Victim Company A.

On February 4, 2018, XU wrote to Employee 1 and acknowledged receiving
the document from Victim Company A pertaining to the ?containment analysis.? XU stated that
he wanted Employee 1 to spend time talking with the experts in China for a ?more precise
connection" and proposed a meeting date.

In the same message, XU sent Employee 1 a list of technical topics
pertaining to composite materials in the manufacture of fan blades and fan blade encasements that
organization was interested in, after being sent information that contained Victim Company
A?s proprietary wanting label. Speci?cally, XU wrote, the ?attached file is some domestic

requirements that I know of, can you take a look and let me know if you are familiar with those??

The attached list stated the following:
Regarding the? carrier?! development situation and fixture det-?elopmem
direction of'foretgn countries" structural materials for/mt rotor Hades
composite ?tutorials:

questionfol/owed]

10

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Regarding the design t'i'iteri'a?n' titer/brei'gn countries composite material
mror?m Made, s'tatorfim blade, and?m casing:

list of Questions followed.

When Employee I directly advised XU that some of the posed questions
involved Victim Company A?s commercial secrets, XU replied they would discuss it when they
met in person.

in February 2018, XU also began discussing with Employee 1 the
possibility ofmeeting in Europe during one of Employee 1?s business trips.

(5) On or about February 5, 2018. XU asked Employee 1 to create and sort a
directory ofthc ?les on Employee 1 ?3 computer relating to the files of Victim Company A.

XU asked Employee 1 to send a copy of the file directory for Employee l?s company-issued
computer. XU sent speci?c directions for how Employee 1 should sort and save such a directory.

On or about February 14. 20l 8, XU caused Employee 1 to send a computer
?le directory from Employee 1?s company?issued computer to XU.

(it) On February 28. 20l 8, XU requested to speak with Employee 1 by
telephone. During the phone call, XU referred to the ?le directory that Employee I sent at
request. XU told Employee 1 that ?they? had looked at it and it is "pretty good stuff.? XU asked
ifEmployee I would be able to bring it with Employee 1 when Employee 1 traveled to Europe for
their meeting. XU further stated, ?the computer you will bring along is the company computer,
right?? XU also asked ifthe material Employee 1 intended to bring could be exported out ofthe
computer. When Employee 1 infonned XU that it could be exported onto a portable hard drive,
XU replied. ?Good, good, good.? XU asked, ?So, ifpossible, we will look over the stuff. Can we

do that?? After Employee I agreed to request, XU stated, ?Do you understand? Carry the

stuffalong."

Case: DOC #2 1 Filed: 04/04/18 Page: 12 Of 16 12

Later in the conversation on February 28. 2018. XU told Employee 1 that
what Employee 1 had sent so far was ?good enough." XU continued: ?if we need something new
later, we about that in person when we meet. . . What do you think? . . . All right, we
really, we really don?t need to rush to do everything in one time, because. if we are going to do
business together. this won?t be the last time, right??

On March 4, 2018, Employee 1 informed XU that some ofthe documents
identi?ed on the company directory were generated from a speci?c software and, as a result, some
documents could only be viewed and backed up when connected to Victim Company A ?5 network.
In response. XU asked, ?Does that mean i will not be able to View these documents after I bring
them back?? Employee 1 replied that Employee 1 did not know, because Employee had never
tried to open the ?les while in China.

(it) On March 5, 2018, XU sent Employee 1 a message asking, ?Regarding the
document directory you sent last time. is it possible to dump it to a portable hard drive or USB
drive from work computer in advance??

On March 10, 2018, XU sent Employee a message stating. ?Since there?s
still time, download more data and bring them back. Anything design related would work.?

(2) On or about April 1, 2018, XU traveled to the Kingdom of Belgium to meet

Employee 1 for the purpose of discussing and receiving the sensitive information he had requested.

All in violation of Title 18, United States Code, Section 1831(a)(5).

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COUNT TWO
(Conspiracy to Commit Trade Secret Theft)
18 U.S.C. 1832(a)(5)
15. The allegations set forth in paragraphs 1 through 10 of this Indictment are

incorporated herein as if set forth in full.

16. From in or about 20l3 and continuing to at least April I, 2018, in the Southern

District of Ohio and elsewhere, the defendant,

YANJ UN XU,
a/kfa Xu Yanjun,
a/k/a Qu Hui,
a/kfa Zhang Hui,
and co?conspirator CF, with others known and unknown to the Grand Jury, did knowingly
combine, conspire, confederate and agree, with intent to convert a trade secret to the economic
bene?t of anyone other than the owner of the trade secret, and intending and knowing that the
offense will injure any owner ofthat trade secret, to:
steal, and without authorization appropriate, take, carry away, and conceal,

and by fraud. arti?ce. and deception obtain such information, that is related to a product and service

used in and intended for use in interstate and foreign commerce. in violation of Title 18, United

States Code, Section

without authorization, copy, duplicate, sketch, draw, photograph.
download, upload, alter, destroy, replicate, transmit, deliver, send, mail, communicate,
and convey such information, that is related to a product and service used in and intended for use

in interstate and foreign commerce in violation ofTitle 18, United States Code, Section 1832(a)(2):

and

receive, buy, and possess such information. that is related to a product and

service used in and intended for use in interstate and foreign commerce, knowing the same to have

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been stolen and appropriated, obtained, and convened without authorization, in violation ofTitle
United States Code, Section 1832(a)(3).
Manner and Means
17. The objects ofthe conspiracy were carried out, in part, as alleged in paragraph 13.
Overt Acts
18. In furtherance of the conspiracy and to achieve the objects and purposes thereof.
defendant XU and others committed and caused to be committed the overt acts alleged in
paragraph 14, among others, in the Southern District of Ohio and elsewhere.
All in violation of Title 18, United States Code, Section 1832(a)(5).
COUNT THREE
(Attempted Economic Espionage by Theft or Fraud (Victim Company
18 U.S.C. 1831(a)(4) 2
19. The allegations set forth in paragraphs 1 through 10, I3. and 14 ofthis Indictment
are incorporated herein as if set forth in full.
20. From in or about May 2017 and continuing to at least April 1, 20l 8, in the Southern
District of Ohio and elsewhere. the defendant,
YANJUN XU,
a/k/a Xu Yanjun,
a/k/a Qu Hui,
a/k/a Zhang Hui,
intending and knowing that the offense would benefit a foreign government, foreign
instrumentality, or foreign agent, namely, XU, other MSS of?cers, NUAA, and the People?s
Republic of China, did knowingly attempt to steal, and without authorization attempt to
appropriate, take, carry away, and conceal, and by fraud, arti?ce and deception attempt to obtain
trade secret information owned by Victim Company A.

All in violation ofTitle 18, United States Code, Sections and 2.

l4

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COUNT FOUR
(Attempted Theft of Trade Secrets by Taking or Deception (Victim Company
18 U.S.C. 183201)?), 1832(a)(4) 2

The allegations set forth in paragraphs 1 through 10, 13, and 14 ofthis Indictment

are incorporated herein as ifset forth in full.
22. From in or about May 2017 and continuing to at least April I, 2018, in the Southern
District of Ohio and elsewhere, the defendant,
YANJUN XU,
a/k/a Xu Yanjun,
a/k/a Qu Hui,
a/k/a Zhang Hui,
with the intent to convert a trade secret to the economic benefit of someone other than Victim
Company A, and intending and knowing that the offense would injure Victim Company A, did
knowingly attempt to steal, and without authorization attempt to appropriate, take, carry away and
conceal, and by fraud, arti?ce and deception attempt to obtain such information owned by Victim
Company A, which was related to and included in a product and service used in and intended for
use in interstate and foreign commerce.

All in violation of Title 18, United States Code, Sections 1832(a)(l), and 2.

FORFEITURE ALLEGATION
Upon conviction of any of the offenses set forth in Counts One through Four of this
Indictment, the defendant, YANJUN XU, a/k/a Xu Yanjun, a/k/a Qu Hui, a/k/a Zhang Hui,
shall forfeit to the United States, pursuant to 18 U.S.C. 1834 and 2323, any property used,
or intended to be used, in any manner or part to commit or to facilitate the commission of such
offenses and (2) any property constituting or derived from any proceeds obtained directly or

indirectly as a result ofthe commission ofsuch offenses.

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SUBSTITUTE ASSETS
If any ofthe property described above, as a result of any act or omission ofthe defendant:

cannot be located upon the exercise ofdue diligence:

a.
b. has been transferred or sold to. or deposited with, a third party:

c. has been placed beyond thejurisdiction Oftlie court:

d. has been substantially diminished in value: or

c. has been with other property which cannot be divided without

dif?culty,
it is the intent ofthe United States, pursuant to 2] U.S.C. 853(p), as incorporated by 18 U.S.C.

2323(b)(2)(A), to seek forfeiture of any other property of the defendant, up to the value of the

property described above.
A TRUE BILL

GRAND F0 PERSON

BENJAMIN GLASSMAN
UNITED STATES ATTORNEY

TIMOTHY SMANGANW
ASSISTANT UNITED STATES ATTORNEY

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