The U.S. Justice Department released the below information:
Federal authorities arrested Yi-Chi Shih, 62, and Kiet Ahn
Mai, 63, on Jan. 19, on federal charges that allege a scheme to illegally
obtain technology and integrated circuits with military applications that were
exported to a Chinese company without the required export license.
The announcement was made by Acting Assistant Attorney
General for National Security Dana J. Boente; U.S. Attorney Nicola T. Hanna for
the Northern District of California; Assistant Director in Charge Paul
Delacourt of the FBI’s Los Angeles Field Office; Special Agent in Charge R.
Damon Rowe of IRS Criminal Investigation; Special Agent in Charge Richard Weir
of the U.S. Department of Commerce, Bureau of Industry and Security, Office of
Export Enforcement, Los Angeles Field Office.
“According to the complaint, the defendants allegedly
schemed to illegally export semiconductors having military and civilian
applications to a Chinese company,” said Acting Assistant Attorney General
Boente. “Protecting this type of technology
and preventing its illegal acquisition by our adversaries remains a key
priority in preserving our national security.”
“This case outlines a scheme to secure proprietary
technology, some of which was allegedly sent to China, where it could be used
to provide companies there with significant advantages that would compromise
U.S. business interests,” said U.S. Attorney Hanna. “The very sensitive information would also
benefit foreign adversaries who could use the technology to further or develop military
applications that would be detrimental to our national security.”
“The FBI, working jointly with our law enforcement partners,
remains committed to bringing to justice those who seek to illegally export
some of our nation’s most sensitive technologies to the detriment of our
national security and hard-working United States companies,” said Assistant
Director in Charge Delacourt. “Rest
assured, the FBI will continue to diligently pursue any and all leads that
involve the illegal exportation of U.S. technology which will cause harm to our
long-term national security interests.”
”Today’s actions serve as a reminder that the government
will hold individuals accountable who fraudulently procure and export
unlawfully protected United States technology and attempt to conceal their
criminal activity through international money laundering,” said Special Agent
in Charge Rowe. “The IRS plays an
important role in tracing illicit funds through both domestic and international
financial intuitions. The IRS is proud to partner with the FBI and Department
of Commerce and share its world-renowned financial investigative expertise in
this investigation.”
“Today’s arrests demonstrate the Office of Export
Enforcement’s strong commitment to enforcing our nation’s export control and
public safety laws,” said Special Agent in Charge Weir. “We will continue to work with our law
enforcement partners to identify, deter, and keep the most sensitive U.S.
origin goods and technology out of the most dangerous hands.”
Shih, an electrical engineer who is a part-time Los Angeles
resident and a naturalized U.S. citizen originally from Taiwan, and Mai who
resides in Pasadena, California and is a naturalized U.S. citizen originally
from Vietnam, were arrested on Jan. 19, without incident by federal agents.
Shih and Mai, who previously worked together at two
different companies, are named in a criminal complaint unsealed on Jan. 19,
that charges them with conspiracy. Shih
is also charged with violating the International Emergency Economic Powers Act
(IEEPA), a federal law that makes illegal, among other things, certain
unauthorized exports.
The complaint alleges that Shih and Mai conspired to
illegally provide Shih with unauthorized access to a protected computer of a
U.S. company that manufactured specialized, high-speed computer chips known as
monolithic microwave integrated circuits (MMICs). The conspiracy count also alleges that the
two men engaged in mail fraud, wire fraud and international money laundering to
further the scheme.
According to the affidavit in support of the criminal
complaint, Shih and Mai executed a scheme to defraud the U.S. company out of
its proprietary, export-controlled items, including technology associated with
its design services for MMICs. As part
of the scheme, Shih and Mai accessed the victim company’s computer systems via
its web portal after Mai obtained that access by posing as a domestic customer
seeking to obtain custom-designed MMICs that would be used solely in the United
States. Shih and Mail allegedly
concealed Shih’s true intent to transfer the U.S. company’s technology and
products to the People’s Republic of China.
The victim company’s proprietary semiconductor technology
has a number of commercial and military applications, and its customers include
the Air Force, Navy and the Defense Advanced Research Projects Agency. MMICs are used in electronic warfare,
electronic warfare countermeasures and radar applications.
The computer chips at the heart of this case allegedly were
shipped to Chengdu GaStone Technology Company (CGTC), a Chinese company that
established a MMIC manufacturing facility in Chengdu. Shih was the president of CGTC, which in 2014
was placed on the Commerce Department’s Entity List, according to the
affidavit, “due to its involvement in activities contrary to the national
security and foreign policy interest of the United States – specifically, that
it had been involved in the illicit procurement of commodities and technologies
for unauthorized military end use in China.”
Because it was on the Entity List, a license from the Commerce
Department was required to export U.S.-origin MMICs to CGTC, and there was a
“presumption of denial” of a license.
The complaint outlines a scheme in which Shih used a Los
Angeles-based company he controlled – Pullman Lane Productions, LLC – to funnel
funds provided by Chinese entities to finance the manufacturing of MMICs by the
victim company. The complaint affidavit
alleges that Pullman Lane received financing from a Beijing-based company that
was placed on the Entity List the same day as CGTC “on the basis of its
involvement in activities contrary to the national security and foreign policy
interests of the United States.”
Mai acted as the middleman by using his Los Angeles company
– MicroEx Engineering – to pose as a legitimate domestic customer that ordered
and paid for the manufacturing of MMICs that Shih illegally exported to CGTC in
China, according to the complaint. It is
the export of the MMICs that forms the basis of the IEEPA violation alleged
against Shih. The specific exported
MMICs also required a license from the Commerce Department before being
exported to China, and a license was never sought or obtained for this export.
Shih and Mai are expected to made their first court
appearances on Jan. 19, in U.S. District Court in downtown Los Angeles.
The charges contained in the Complaint are merely
accusations, and the defendants are presumed innocent unless and until proven guilty. If convicted, Mai faces a maximum sentence of
five years in prison, and Shih faces a maximum sentence of 25 years in
prison. The maximum statutory sentences
are prescribed by Congress and are provided here for informational purposes. If
convicted of any offense, the sentencing of the defendants will be determined
by the court based on the advisory Sentencing Guidelines and other statutory
factors.
This case is being investigated by the FBI; the U.S.
Department of Commerce, Bureau of Industry and Security, Office of Export
Enforcement; and IRS Criminal Investigation.
This case is being prosecuted by Assistant U.S. Attorneys
Judith A. Heinz, Melanie Sartoris and Khaldoun Shobaki of the Northern District
of California, and Trial Attorney Matthew Walczewski of the National Security
Division Counterintelligence and Export Control Section.
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