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Sunday, January 21, 2018

Chinese National Sentenced for Economic Espionage and Theft of a Trade Secret From U.S. Company



Xu Jiaqiang, 31, formerly of Beijing, China, was sentenced yesterday to five years in prison, for economic espionage and theft of a trade secret in connection with Xu’s theft of proprietary source code from Xu’s former employer, with the intent to benefit the National Health and Family Planning Commission of the People’s Republic of China.  Xu previously pleaded guilty to all six counts with which he was charged.

Acting Assistant Attorney General for National Security Dana J. Boente and U.S. Attorney Geoffrey S. Berman for the Southern District of New York made the announcement.  The sentence was imposed by U.S. District Judge Kenneth M. Karas in White Plains, New York federal court.

“Xu, a Chinese national, is being held accountable for engaging in economic espionage against an American company,” said Acting Assistant Attorney General Boente. “Xu not only stole high tech trade secrets from his U.S. employer – a federal crime – he did so both for his own profit and intending to benefit the Chinese government.  Xu’s sentence clearly demonstrates that the National Security Division will not hesitate to pursue and prosecute those who steal from American businesses.  I thank the many people who worked hard to bring this result.”

“As he previously admitted in federal court, Xu Jiaqiang stole high-tech trade secrets from a U.S. employer, intending to benefit the Chinese government,” said U.S. Attorney Berman.  “The laws governing economic espionage and trade secrets exist, in part, to protect the sanctity of American ingenuity and property.  Xu’s prison sentence should be a red flag for anyone attempting to illegally peddle American expertize and intellectual property to foreign bidders.”

According to the allegations contained in the Complaint and the Superseding Indictment filed against Xu, as well as statements made in related court filings and proceedings:

From November 2010 to May 2014, Xu worked as a developer for a particular U.S. company (the Victim Company).  As a developer, Xu enjoyed access to certain proprietary software (the Proprietary Software), as well as that software’s underlying source code (the Proprietary Source Code).  The Proprietary Software is a clustered file system developed and marketed by the Victim Company in the United States and other countries.  A clustered file system facilitates faster computer performance by coordinating work among multiple servers.  The Victim Company takes significant precautions to protect the Proprietary Source Code as a trade secret.  Among other things, the Proprietary Source Code is stored behind a company firewall and can be accessed only by a small subset of the Victim Company’s employees.  Before receiving Proprietary Source Code access, Victim Company employees must first request and receive approval from a particular Victim Company official.  Victim Company employees must also agree in writing at both the outset and the conclusion of their employment that they will maintain the confidentiality of any proprietary information.  The Victim Company takes these and other precautions in part because the Proprietary Software and the Proprietary Source Code are economically valuable, which value depends in part on the Proprietary Source Code’s secrecy.

In May 2014, Xu voluntarily resigned from the Victim Company.  Xu subsequently communicated with one undercover law enforcement officer (UC-1), who posed as a financial investor aiming to start a large-data storage technology company, and another undercover law enforcement officer (UC-2), who posed as a project manager, working for UC-1.  In these communications, Xu discussed his past experience with the Victim Company and indicated that he had experience with the Proprietary Software and the Proprietary Source Code.  On March 6, 2015, Xu sent UC-1 and UC-2 a code, which Xu stated was a sample of Xu’s prior work with the Victim Company.  A Victim Company employee (Employee-1) later confirmed that the code sent by Xu included proprietary Victim Company material that related to the Proprietary Source Code.

Xu subsequently informed UC-2 that Xu was willing to consider providing UC-2’s company with the Proprietary Source Code as a platform for UC-2’s company to facilitate the development of its own data storage system.  Xu informed UC-2 that if UC-2 set up several computers as a small network, then Xu would remotely install the Proprietary Software so that UC-1 and UC-2 could test it and confirm its functionality.

In or around early August 2015, the FBI arranged for a computer network to be set up, consistent with Xu’s specifications.  Files were then remotely uploaded to the FBI-arranged computer network (the Xu Upload).  Thereafter, on or about Aug. 26, 2015, Xu and UC-2 confirmed that UC-2 had received the Xu Upload.  In September 2015, the FBI made the Xu Upload available to a Victim Company employee who has expertise regarding the Proprietary Software and the Proprietary Source Code (Employee-2).  Based on Employee-2’s analysis of technical features of the Xu Upload, it appeared to Employee-2 that the Xu Upload contained a functioning copy of the Proprietary Software.  It further appeared to Employee-2 that the Xu Upload had been built by someone with access to the Proprietary Source Code who was not working within the Victim Company or otherwise at the Victim Company’s direction.

On Dec. 7, 2015, Xu met with UC-2 at a hotel in White Plains, New York (the Hotel).  Xu stated, in sum and substance, that Xu had used the Proprietary Source Code to make software to sell to customers, that Xu knew the Proprietary Source Code to be the product of decades of work on the part of the Victim Company, and that Xu had used the Proprietary Source Code to build a copy of the Proprietary Software, which Xu had uploaded and installed on the UC Network (i.e., the Xu Upload).  Xu also indicated that Xu knew the copy of the Proprietary Software that Xu had installed on the UC Network contained information identifying the Proprietary Software as the Victim Company’s property, which could reveal the fact that the Proprietary Software had been built with the Proprietary Source Code without the Victim Company’s authorization.  Xu told UC-2 that Xu could take steps to prevent detection of the Proprietary Software’s origins – i.e., that it had been built with stolen Proprietary Source Code – including writing computer scripts that would modify the Proprietary Source Code to conceal its origins.

Later on Dec. 7, 2015, Xu met with UC-1 and UC-2 at the Hotel.  During that meeting, Xu showed UC-2 a copy of what Xu represented to be the Proprietary Source Code on Xu’s laptop.  Xu noted to UC-2 a portion of the code that indicated it originated with the Victim Company as well as the date on which it had been copyrighted.  Xu also stated that Xu had previously modified the Proprietary Source Code’s command interface to conceal the fact that the Proprietary Source Code originated with the Victim Company and identified multiple specific customers to whom Xu had previously provided the Proprietary Software using Xu’s stolen copy of the Proprietary Source Code.

 Mr. Boente and Mr. Berman praised the FBI’s outstanding investigative efforts.  Mr. Berman also thanked the U.S. Department of Justice’s National Security Division.

Assistant U.S. Attorneys Benjamin Allee and Ilan Graff of the Southern District of New York, with assistance from Trial Attorney David Aaron of the National Security Division’s Counterintelligence and Export Control Section, are in charge of the prosecution.

Friday, January 19, 2018

Deputy U.S. Marshal, Army Veteran Killed in the Line of Duty in Harrisburg, Pennsylvania While Protecting Community



Washington – Deputy U.S. Marshal Christopher David Hill, 45, died in the line of duty at approximately 6:30 a.m. today while serving a warrant on a fugitive in Harrisburg, Pennsylvania.

Deputy Hill was an 11-year veteran of the U.S. Marshals Service (USMS) assigned to the Middle District of Pennsylvania. He was part of a Marshals Service task force executing a warrant for the arrest of Shayla Lynette Towles Pierce, who was wanted by the Harrisburg Bureau of Police for terroristic threat offenses.

The team located Pierce in a residence in the 1800 block of Mulberry Street. While executing the warrant, the team was fired upon by a male subject in the residence with Pierce. Deputy Hill and two local task force officers were struck by gunfire during the assault.

Deputy Hill was transported immediately to the University of Pittsburgh Medical Center (UPMC) Pinnacle Harrisburg hospital where he died. The other officers were treated for non-life threatening injuries.

The male subject who fired upon the officers died when officers returned fire; Pierce is in custody. The shooting investigation is being handled by the Harrisburg Bureau of Police and the FBI.

“We are all extremely saddened by the tragic death of our brother, Deputy U.S. Marshal Christopher Hill, this morning in Harrisburg, Pennsylvania. He was a devoted public servant who dedicated his life to making his community and this nation safer. We will never forget his commitment and courage,” said David J. Anderson, Acting Deputy Director of the U.S. Marshals Service. “The nation lost a hero today.”

Deputy Hill joined the USMS in 2006 in Washington, D.C., and transferred to Harrisburg in 2009. He also served with the agency’s Special Operations Group. He was an Army veteran, having served from 1993-96. He is survived by his wife and two children.

Michael “The Situation” Sorrentino and His Brother, Marc Sorrentino, Plead Guilty to Tax Crimes



Reality television personality Michael “The Situation” Sorrentino and his brother, Marc Sorrentino, pleaded guilty today to violating federal tax laws, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division, U.S. Attorney Craig Carpenito for the District of New Jersey and Internal Revenue Service Criminal Investigation (IRS CI) Special Agent in Charge Jonathan D. Larsen.

According to documents and information provided to the court, Michael Sorrentino, 36, pleaded guilty to one count of tax evasion and Marc Sorrentino, 38, pleaded guilty to one count of aiding in the preparation of a fraudulent tax return.

“Today’s pleas are a reminder to all individuals to comply with the tax laws, file honest and accurate returns and pay their fair share,” said Principal Deputy Assistant Attorney General Zuckerman. “The Tax Division is committed to continuing to work with the IRS to prosecute those who seek to cheat the system, while honest hardworking taxpayers play by the rules.”

“What the defendants admitted to today, quite simply, is tantamount to stealing money from their fellow taxpayers,” said U.S. Attorney Carpenito. “All of us are required by law to pay our fair share of taxes. Celebrity status does not provide a free pass from this obligation.”

 “As we approach this year’s filing season, today’s guilty pleas should serve as a stark reminder to those who would attempt to defraud our nation’s tax system,” stated Jonathan D. Larsen, Special Agent in Charge, IRS-Criminal Investigation, Newark Field Office.  “No matter what your stature is in our society, everyone is expected to play by the rules, and those who do not will be held accountable and brought to justice.”

Michael Sorrentino was a reality television personality who gained fame on “The Jersey Shore,” which first appeared on the MTV network.  According to documents and information provided to the court, he and his brother, Marc, created businesses, such as MPS Entertainment LLC and Situation Nation Inc., to take advantage of Michael’s celebrity status.

Michael Sorrentino admitted that in tax year 2011, he earned taxable income, including some that was paid in cash, and that he concealed a portion of his income to evade paying the full amount of taxes he owed.  He also made cash deposits into bank accounts in amounts less than $10,000, in an effort to ensure that these deposits would not come to the attention of the IRS.

Marc Sorrentino admitted that for tax year 2010, he earned taxable income and that he assisted his accountants in preparing his personal tax return by willfully providing them with false information and fraudulently underreporting his income.

U.S. District Judge Susan D. Wigenton scheduled sentencing for April 25.  Michael Sorrentino faces a statutory maximum sentence of five years in prison for tax evasion. Marc Sorrentino faces a statutory maximum sentence of three years in prison for aiding in the preparation of a fraudulent tax return. Both also face a period of supervised release, restitution and monetary penalties.  Gregg Mark, the accountant for the Sorrentino brothers, previously pleaded guilty in 2015 to conspiring to defraud the United States with respect to their tax liabilities. 

Principal Deputy Assistant Attorney General Zuckerman and U.S. Attorney Carpenito praised special agents of IRS CI, who conducted the investigation, and Trial Attorneys Yael T. Epstein and Jeffrey B. Bender of the Tax Division of the U.S. Department of Justice and Assistant U.S. Attorney Jonathan W. Romankow, who are prosecuting the case.