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Mallory, who had top secret security clearance, worked as a CIA officer, and was stationed in Iraq, China and Taiwan.
Mallory is a self-employed consultant with GlobalEx, LLC. and resides in Leesburg, Virginia. According to the criminal complaint, he graduated from Brigham Young University in 1981 with a bachelor’s degree in political science.
Shortly thereafter, Mallory worked full-time in a military position for five years. Once he left that job, he continued his military service as an Army reservist and worked as a special agent for the State Department Diplomatic Security Service for three years (1987-1990).
A single reference buried deep within hundreds of pages of court filings in the case of convicted CIA turncoat Kevin Mallory reveals the name of a Shanghai-based “executive search firm” that bears the hallmarks of a classic espionage front, former intelligence operatives from the U.S. and Russia tell The Daily Beast.
The U.S. government’s evidence against Mallory, who was found guilty Friday of espionage-related charges, included a photograph of a business card belonging to alleged Chinese Ministry of State Security (MSS) agent Richard Yang, who presented himself as a corporate headhunter. Prosecutors said he was one of Mallory’s handlers. According to court documents, the picture was taken at Darren & Associates, a supposed corporate recruiter with no listed phone number or executives and an address that traces back to a rent-by-the-hour space on Shanghai’s Hubin Road.
Darren & Associates’ connection to the Mallory case has not been previously reported. The firm has been in business for either “around 40 years,” as its website claims, or since 2014, as stated on its LinkedIn page. The job networking site lists no actual former or current employees, and the company has a near-zero web presence, which is highly unusual for an organization that describes itself as a successful global enterprise.
“Clearly this is phony,” said former KGB sleeper agent Jack Barsky. “The first thing you do to figure out how real [a company is] is look at their website, and this is just not the footprint of a solid company.”
“Clearly this is phony… The first thing you do to figure out how real [a company is] by looking at their website, and this is just not the footprint of a solid company.”
— former KGB sleeper agent Jack Barsky
It’s a “flimsy mechanism for them to use,” agreed former CIA officer Christopher Burgess. “To me, this is what someone would put up so that their business contact isn’t naked. But what it doesn’t do is talk about who they are, where they are, doesn’t give you names, and their mission is so general that it can cover anything.”
Richard Yang subsequently introduced Mallory to an associate, Michael Yang, who claimed to be affiliated with the Shanghai Academy of Social Sciences (SASS). It has a close relationship with the Shanghai State Security Bureau (SSSB), a sub-component of the Ministry of State Security, according to the FBI. The Shanghai security bureau “uses SASS employees as spotters and assessors,” says one court filing, and “FBI has further assessed that SSSB intelligence officers have also used SASS affiliation as cover identities.”
Chinese think tanks like the Shanghai academy “can be used to invite someone over who is either a person of interest or a source,” Peter Mattis of the Jamestown Foundation’s China Program told Bethany Allen-Ebrahimian and Elias Groll of Foreign Policy last year. “That person comes over and gives a talk, and they’ll be met and have meetings with the local state security element or the People’s Liberation Army.”
via Facebook
Others are based in the U.S., they pointed out. The China Institute of Contemporary International Relations describes itself as a “comprehensive research institution” but is also “an official numbered bureau of the Ministry of State Security, functioning rather like the CIA’s Open Source Center.”
Darren & Associates, the erstwhile headhunting firm, seems rather less sophisticated. Either the MSS was “too lazy” to create a more realistic front company, or they thought “no one would give a shit about this Mallory guy and no one would be checking it,” said a former Russian FSB officer now living in the U.S. under the pseudonym “Jan Neumann.”
But U.S. authorities did care, and Mallory’s scheme unraveled in 2017 when he was selected for secondary screening at Chicago’s O’Hare Airport after a trip to China. Although he said he had nothing to declare, customs officers found $16,500 in cash on him.
““An individual like Mallory, with 20-plus years of high-end intelligence community engagement should have known better than [to use] this weak cover story that the Chinese gave him.”
— former CIA officer Christopher Burgess
“An individual like Mallory, with 20-plus years of high-end intelligence community engagement should have known better than [to use] this weak cover story that the MSS gave him,” said Burgess. “He should have picked up the phone and called the FBI and said, ‘Hey, these people say they’re legitimate businesspeople, and I don’t think they are.’ And he should have done that years ago.”
The details of exactly what Mallory gave up have yet to be publicly revealed, and probably won’t ever be, said Burgess. But according to prosecutors, Mallory gave away the most precious secrets of all—the names of U.S. agents in China.
A CIA information review officer said in court last year that the documents Mallory gave to the Chinese contained sensitive intelligence, analysis, and the names of assets that “could reasonably be expected to cause the loss of critical intelligence and possibly result in the lengthy incarceration or death of clandestine human sources.”
”It’s a betrayal in the truest sense of the term,” former CIA Inspector General Frederick Hitz told The Daily Beast.
FBI analysts further determined that Mallory “had completed all of the steps necessary to securely transmit at least four documents…one of which contained unique identifiers for human sources who had helped the U.S. government.”
Some of these files were stored on a Toshiba SD card, which Mallory concealed in aluminum foil and hid in his bedroom closet.
“We overlooked it twice,” FBI Special Agent Melinda Capitano testified Thursday.
“What made you think to open it?” the prosecutor asked.
“Usually in my training, small bits of foil like this contain drugs,” Capitano replied.
via PACER
The foil-wrapped SD card found in Mallory’s home.
Mallory’s defense team claims that the documents were worthless and that he was actually operating as an independent, self-directed counterintelligence officer of sorts to reel in the Chinese agents so he could eventually turn them into U.S. authorities. Burgess calls that “hogwash.” Mallory wasn’t freelancing in counterintelligence, he “was all-in” as an asset, in Burgess’ opinion.
“He was responsive to tasking, he used covert communications to reduce face-to-face interactions with his PRC contact,” said Burgess. “If I was validating a source, those are all indications that I have a good one.”
“He’s throwing something at the wall to see if it sticks,” laughed former Defense Intelligence Agency officer Ray Semko. “Just as long as they get one fool [on the jury] to believe it.”
Mallory’s attorney, Geremy Kamens, declined a request for comment.
Mallory, his wife, and one of his three kids lived in a four-bedroom, four-bathroom, 7,100-square foot house in Leesburg, Virginia, complete with a home theater and two fireplaces. He paid $1.15 million in 2005, a lot of money for a guy prosecutors said earned only $25,000 in the three years—all of it from his Chinese handlers.
He also has three adult children from a previous marriage. A court filing said Mallory had $50,000 in credit card debt, and about $2,500 in cash and investments. His wife, Mariah Nan-Hua Mallory, drives a school bus and earns roughly $9,000 a year.
In a motion previously filed with the court arguing against Mallory’s release pending trial, prosecutors said he had “demonstrated a pattern of dishonesty.”
“The defendant says and does anything he wishes to suit his particular needs, which seem largely to be finding an easy path out of his financial hardship, by betraying his government,” the motion stated.
A disguise kit found by FBI agents during a search of Mallory’s home.
However, Patsy Harrington, a real estate broker and close friend of Mallory’s who sold him his home, insists that Mallory is being totally mischaracterized.
“He is a loyal serviceman that was hurt in the line of duty in the Middle East, he’s a wonderful family man and a devoted Mormon with a wonderful wife and three highly accomplished grown children,” Harrington told The Daily Beast. “He’s a good man. I was a single mom and he was wonderful to me. He’s much better than 97 percent of the human beings I know.”
A LinkedIn recommendation from Min Xu, an associate professor at Central China Normal University describes Mallory as “a very faithful, honest, loyal, serious but kind, helpful, contagious person, very nice to everyone around, I will always remember his timely help and the warmth he gave to us when we were in trouble. He is really an amazing man.”
In fact, the Chinese agents who targeted Mallory initially reached out to him on LinkedIn. It’s a virtual goldmine for those looking to identify members of the “cleared community,” said Christopher Burgess, who has been contacted by people he assumed were foreign intelligence operatives more times than he can count.
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Yet Chinese intelligence isn’t only interested in people with active security clearances. Anyone with access or influence can potentially be of value, and everyone from professors to scientists to journalists have received overtures from foreign spy services.
National security reporter Garrett Graff was targeted on LinkedIn by Evgeny Buryakov, a Russian SVR operative posing as a New York City investment banker. And a Chinese agent used LinkedIn to reach out to journalist Nate Thayer last year.
“On the day I received my first message from Chinese intelligence agents from the Ministry of State Security, they, of course, didn’t say they were Chinese spies,” Thayer wrote on his blog. “The note was from ‘Frank Hu,’ a ‘project assistant’ from Shanghai Pacific & International Strategy Consulting Co, saying he had found me on the Internet and was writing to ‘seek potential cooperation opportunities.’”
Predictably, there is no “Shanghai Pacific & International Strategy Consulting Co,” which doesn’t even maintain a rudimentary Darren & Associates-style website. “Hu” told Thayer the company was “a consulting firm, specializing in independent policy analysis and advisory services. We strive to help our clients properly assess political dynamics, risks and opportunities in countries and regions they operate in.”
“In terms of human source operations, the PRC ‘services’ are not all that sophisticated,” an intelligence community source told Thayer, “until they get you on their turf. So don’t go there–to Shanghai, that is–for any reason.”
Of course, there is no such thing as a foolproof system in espionage, and breaches like Mallory’s will surely happen again.
As Joseph Wippl, a 30-year veteran of the CIA’s National Clandestine Service, told The Daily Beast, “It’s part of the business.”
Professionals at Los Alamos and Oak Ridge Laboratories estimate it would take up to ten years to dismantle all programs and operations in North Korea. Further, Tehran, Moscow and Beijing will work hard to delay what they can due to eliminating evidence of their respective involvement for decades in North Korea.
The Nine Steps Required to Really Disarm North Korea
NYT’s: The vast scope of North Korea’s atomic program means ending it would be the most challenging case of nuclear disarmament in history. Here’s what has to be done to achieve — and verify — the removal of the nuclear arms, the dismantlement of the atomic complex and the elimination of the North’s other weapons of mass destruction.
Nuclear Capabilities
Dismantle and remove nuclear weapons
Take apart every nuclear weapon in the North’s arsenal and ship the parts out of the country.
Halt uranium enrichment
Dismantle the plants where centrifuges make fuel for nuclear reactors and atom bombs.
Disable reactors
Shutter the nuclear reactors that turn uranium into plutonium, a second bomb fuel.
Close nuclear test sites
Confirm that the North’s recent, staged explosions actually destroyed the complex.
End H-bomb fuel production
Close exotic fuel plants that can make atom bombs hundreds of times more destructive.
Inspect anywhere, forever
Give international inspectors the freedom to roam and inspect anywhere.
Non-Nuclear Capabilities
Destroy germ weapons
Eliminate anthrax and other deadly biological arms, under constant inspection.
Destroy chemical weapons
Eliminate sarin, VX and other lethal agents the North has used on enemies.
Curb missile program
Eliminate missile threats to the U.S., Japan and South Korea.
President Trump says he is meeting Kim Jong-un in Singapore because the North Korean leader has signaled a willingness to “denuclearize.’’
But that word means very different things in Pyongyang and Washington, and in recent weeks Mr. Trump has appeared to back away from his earlier insistence on a rapid dismantlement of all things nuclear — weapons and production facilities — before the North receives any sanctions relief.
Whether it happens quickly or slowly, the task of “complete, verifiable, irreversible denuclearization’’ — the phrase that Secretary of State Mike Pompeo keeps repeating — will be enormous. Since 1992, the country has repeatedly vowed never to test, manufacture, produce, store or deploy nuclear arms. It has broken all those promises and built a sprawling nuclear complex.
North Korea has 141 sites devoted to the production and use of weapons of mass destruction, according to a 2014 Rand Corporation report. Just one of them — Yongbyon, the nation’s main atomic complex — covers more than three square miles. Recently, the Institute for Science and International Security, a private group in Washington, inspected satellite images of Yongbyon and counted 663 buildings.
North Korea is the size of Pennsylvania. The disarmament challenge is made worse by uncertainty about how many nuclear weapons the North possesses — estimates range from 20 to 60 — and whether tunnels deep inside the North’s mountains hide plants and mobile missiles.
The process of unwinding more than 50 years of North Korean open and covert developments, therefore, would need to start with the North’s declaration of all its facilities and weapons, which intelligence agencies would then compare with their own lists and information.
***
Nuclear experts like David A. Kay, who led the largely futile American hunt for weapons of mass destruction in Iraq, argue that the North Korean arms complex is too large for outsiders to dismantle. The best approach, he contends, is for Western inspectors to monitor North Korean disarmament. The time estimates range from a few years to a decade and a half — long after Mr. Trump leaves office.
The magnitude of the North Korean challenge becomes clearer when compared with past efforts to disarm other nations. For instance, Libya’s nuclear program was so undeveloped that the centrifuges it turned over had never been unpacked from their original shipping crates. Infrastructure in Syria, Iraq, Iran and South Africa was much smaller. Even so, Israel saw the stakes as so high that it bombed an Iraqi reactor in 1981, and a Syrian reactor in 2007.
Undoing weapons of mass destruction
Full elimination Partial elimination
Steps
North Korea
Libya
Syria
Iraq
Iran
South Africa
Dismantle nuclear arms
X
X
Halt uranium enrichment
X
X
X
/
X
Disable reactors
X
X
X
X
Close nuclear test sites
X
X
End H-bomb fuel production
X
Destroy germ arms
X
X
Destroy chemical arms
X
X
/
X
Curb missile program
X
X
Here’s what is involved in each of the major disarmament steps:
Dismantle and remove nuclear weapons
Under the eye of a declared nuclear state — like the United States, China or Russia — take apart every nuclear weapon in the North Korean arsenal and safely ship the components out of the country.
North Korea released a photograph of the country’s leader, Kim Jong-un, center, inspecting what it said was a hydrogen bomb that could be fitted atop a long-range missile.Korean Central News Agency
John R. Bolton, Mr. Trump’s hawkish national security adviser, has argued that before any sanctions are lifted, the North should deliver all its nuclear arms to the United States, shipping them to the Oak Ridge National Laboratory in Tennessee, where inspectors sent Libya’s uranium gear.
It’s almost unimaginable that the North would simply ship out its weapons — or that the rest of the world would be convinced that it had turned over all of them.
Siegfried S. Hecker, a Stanford professor who formerly headed the Los Alamos weapons laboratory in New Mexico, argues that the only safe way to dismantle the North’s nuclear arsenal is to put the job, under inspection, in the hands of the same North Korean engineers who built the weapons. Otherwise, he said, outsiders unfamiliar with the intricacies might accidently detonate the nuclear arms.
Halt uranium enrichment
Dismantle the plants where centrifuges spin at supersonic speeds to make fuel for nuclear reactors and atom bombs.
Factories holding hundreds of centrifuges spin gaseous uranium until it is enriched in a rare form of the element that can fuel reactors — or, with more enrichment, nuclear arms.
It’s easy to shut down such plants and dismantle them. The problem is that they’re relatively simple to hide underground. North Korea has shown off one such plant, at Yongbyon, but intelligence agencies say there must be others. The 2014 Rand report put the number of enrichment plants at five.
Because uranium can be used to fuel reactors that make electricity, North Korea is almost certain to argue it needs to keep some enrichment plants open for peaceful purposes. That poses a dilemma for the Trump administration.
In the case of Iran, it has insisted that all such plants be shut down permanently. After arguing that the Obama administration made a “terrible deal” by allowing modest enrichment to continue in Iran, it is hard to imagine how Mr. Trump could insist on less than a total shutdown in North Korea.
Disable reactors
Shutter nuclear reactors that turn uranium into plutonium, a second bomb fuel.
Inside a reactor, some of the uranium in the fuel rods is turned into plutonium, which makes a very attractive bomb fuel. Pound for pound, plutonium produces far more powerful nuclear blasts than does uranium. In 1986, at Yongbyon, North Korea began operating a five-megawatt reactor, which analysts say produced the plutonium fuel for the nation’s first atom bombs. Today, the North is commissioning a second reactor that is much larger.
Jan. 17, 2018 image from DigitalGlobe via Institute for Science and International Security
Reactors are hard to hide: They generate vast amounts of heat, making them extremely easy to identify by satellite.
But reactors that produce large amounts of electricity — such as the new one being readied in North Korea — pose a dilemma, because the North can legitimately argue it needs electric power. It seems likely that the Trump administration will come down hard on the North’s new reactor, but might ultimately permit its operation if the North agrees for the bomb-usable waste products to be shipped out of the country.
Close nuclear test sites
Confirm that the North’s recent, staged explosions actually destroyed the deep tunnels and infrastructure, or take additional steps to make the complex unusable.
Atom and hydrogen bombs need repeated testing to check their performance. Since 2006, the North has detonated nuclear devices at least six times in tunnels dug deep inside Mount Mantap, a mile-high peak in the North’s mountainous wilds.
Last month, the North blew up test-tunnel portals at Mount Mantap as a conciliatory gesture before the planned denuclearization talks. Experts say the thick clouds of rising smoke and debris, while impressive for television cameras, leave open the question of whether the damage is irreversible. Presumably, the North could also dig new test sites beneath other mountains. The Trump administration has called for an end to all explosive testing.
End H-bomb fuel production
Close exotic fuel plants that can make atom bombs hundreds of times more destructive.
At the heart of a missile warhead, an exploding atom bomb can act as a superhot match that ignites thermonuclear fuel, also known as hydrogen fuel. The resulting blast can be 1,000 times more powerful than the Hiroshima bomb. North Korea is suspected of having at least two sites for different aspects of H-bomb fuel production — one at Yongbyon, and one near Hamhung, on the country’s east coast.
The exotic fuels also have civilian uses for the manufacture of glow-in-the-dark lighting, exit signs and runway lights. The Trump administration stance is unclear. Atomic experts say the military threat can be reduced by shuttering large plants, building smaller factories and carefully regulating their products.
Inspect anywhere, forever
In a mountainous country, give international inspectors the freedom to roam and inspect anywhere — with automated monitoring of key sites.
Under past nuclear agreements, inspectors from the International Atomic Energy Agency have lived in North Korea, but their movements were limited to small parts of the giant Yongbyon facility, where the nation’s nuclear reactors are located. For inspections to be effective, they must cover the whole country — including military facilities. (One of Mr. Trump’s complaints about the Iran agreement was that inspectors were inhibited from going anywhere.)
But inspecting all of North Korea — land of underground tunnels — would be an enormous job. American intelligence agencies have spent billions of dollars watching missiles move, mapping likely facilities, and using spy satellites and cyber reconnaissance to track the arms. But they have surely made mistakes, and missed some facilities. The problem gets larger if the inspectors are seeking out underground bunkers that hide missiles for quick strikes.
Destroy germ weapons
Eliminate anthrax and other deadly biological weapons, under constant inspection.
Biological weapons can be more destructive than nuclear arms. A single gallon of concentrated anthrax is said to have enough spores to kill every person on Earth. The challenge is how to deliver the living weapons. The anthrax attacks of 2001 relied on letters, killing five people, sickening 17 others and frightening the nation.
North Korea is suspected of having a large complex for making germ weapons. The problem is learning its true dimensions, and verifying its dismantlement. While nuclear and missile tests advertise their developmental strides openly, the production and testing of deadly pathogens can be done behind closed doors.
Moreover, experts argue that the gear for producing germ weapons is often identical or similar to that of medicine and agriculture, making it extremely hard if not impossible for outsiders to verify that germ-weapon work has ended. The Trump administration’s stance is unknown other than it wants the North to end all work on biological weapons.
Destroy chemical weapons
Eliminate sarin, VX and other lethal agents the North has used on enemies.
Last year, the deadly nerve agent VX was used to assassinate Kim Jong-nam, the estranged half brother of the North’s leader. The killing cast light on the North’s long pursuit of chemical weapons. Although the North denies having any, experts rank the nation as among the world’s top possessors, saying it harbors thousands of tons of the banned armaments.
The Trump administration’s negotiating list with the North includes chemical disarmament. Syria is a reminder of the difficulty. President Barack Obama cut a deal with Damascus to destroy its chemical arsenal. This year, the United States accused the Syrian government of using the banned weapons at least 50 times since the civil war began, topping previous official estimates. The attacks have maimed and killed hundreds of Syrians, including many children.
Curb missile program
Eliminate the long-range threat to the U.S. and mid-range missile threat to Japan and South Korea.
In November, the North tested a greatly improved intercontinental ballistic missile that flew farther than any other — far enough to threaten all of the United States. It was a remarkable achievement that brought the current, long-escalating crisis to a head. While experts say the North still needs to do more testing to ensure that the missile’s warheads can survive fiery re-entry, the test flight showed that Mr. Kim had come remarkably close to perfecting a weapon that could threaten American cities.
Curbing the North’s missile program is high on the Trump administration’s negotiation list. A simple precaution is to limit the range of test flights — a fairly easily thing to monitor. A key question is whether arms negotiators will also try to redirect the North’s large corps of rocket designers and engineers into peaceful activities, such as making and lofting civilian satellites.
It is long been a question of the point that a foreign hack for espionage and theft is an act of war with emphasis on our naval weapons programs or those of the Army or Air Force.
Cyber warfare is an issue few care about or have control over because data resides outside of our individual control but that is NOT the case when it comes to government. They are accountable for safeguarding networks and data.
Washington – After a hiatus of several years, Chinese state hackers are once again penetrating networks at a range of U.S. corporations in a campaign to steal secrets and leapfrog ahead in a race for global technology supremacy, cyber researchers say.
Companies in fields such as biomedicine, robotics, cloud computing and artificial intelligence have all been hit by cyber intrusions originating in China, the researchers say.
“It’s definitely accelerating. The trend is up,” said Dmitri Alperovitch, cofounder and chief technology officer at CrowdStrike, a threat intelligence firm based in Sunnyvale, Calif.,
Chinese state hacking teams linked to the People’s Liberation Army and the Ministry of State Security are becoming visible on U.S. networks again, although they are using new methods to remain undetected, researchers said.
“In the last few months, we’ve definitely seen … a reemergence of groups that had appeared to have gone dormant for a while,” said Cristiana Brafman Kittner, principal analyst at FireEye, a cybersecurity firm that has tracked China hacking extensively.
The activity comes after a sharp drop in Chinese hacking that began in September 2015, when former President Barack Obama and Chinese leader Xi Jinping reached an agreement to end the hacking theft of commercial secrets. The agreement quelled U.S. anger over its charge that China is the “world’s most active and persistent perpetrator of economic espionage.”
U.S. prosecutors in 2014 indicted five PLA officers for economic espionage for hacking into firms like Westinghouse, U.S. Steel and Alcoa. The 56-page indictment said the five men worked for Unit 61398 of the PLA’s Third Department in Shanghai. The highly detailed complaint entered into details that U.S. officials later said were meant to “name and shame” China for commercial hacking.
Why China’s hackers may be getting back into the game is not readily clear. Renewed trade tensions may be a reason. President Donald Trump has threatened to impose $50 billion of tariffs on China-made products to cut the U.S. trade deficit of $375 billion with China.
Another factor may be the conclusion of a massive reorganization of China’s military, which began in late 2015 and under which various signals intelligence and cyber hacking units “were dissolved and absorbed into this one mega organization, called the Strategic Support Force,” said Priscilla Moriuchi, an expert on East Asia at Recorded Future, a cyber-threat intelligence firm based in Somerville, Mass.
China’s Xi has laid out ambitious goal of catching up with the United States and Europe in 10 key sectors, including aerospace, semiconductors and robotics, under its “Made in China 2025” program.
Moriuchi, who spent 12 years in the U.S. intelligence community, eventually leading the National Security Agency’s East Asia and Pacific cyber threats office, said China’s hackers are broadening tactics, burrowing into telecommunications networks even as they steal secrets to help party leaders achieve “Made in China 2025” goals.
“The sectors that they are going after are things like cloud computing, (Internet of Things), artificial intelligence, biomedicines, civilian space, alternative energy, robotics, rail, agricultural machinery, high-end medical devices,” Moriuchi said.
“There are companies in all of these sectors that have experienced intrusions over the past year from actors who are believed to be China state-sponsored,” she said.
Since early in the past decade, U.S. officials have alleged that Chinese state hackers were tasked with obtaining commercial secrets from Western corporations to help Chinese firms, many of them state-owned, overtake competitors to the global forefront in technology.
In a renewed warning alert for China, a March 22 report from the Office of the U.S. Trade Representative on China’s trade actions said, “Beijing’s cyber espionage against U.S. companies persists and continues to evolve.
So as you read about the stolen data from the Navy by China consider this: Should the NSA get inside the Chinese networks now and infect and or re-steal our intelligence?
(Note: according to the Washington Post item below, the contractor is not named, however ‘Inside Defense’ in September of 2016 published an item that GD Electric Boat was awarded the $105.5 million contract modification moving it into the second phase.)
WaPo: Chinese government hackers have compromised the computers of a Navy contractor, stealing massive amounts of highly sensitive data related to undersea warfare — including secret plans to develop a supersonic anti-ship missile for use on U.S. submarines by 2020, according to American officials.
The breaches occurred in January and February, the officials said, speaking on the condition of anonymity to discuss an ongoing investigation. The hackers targeted a contractor who works for the Naval Undersea Warfare Center, a military organization headquartered in Newport, R.I., that conducts research and development for submarines and underwater weaponry.
The officials did not identify the contractor.
Taken were 614 gigabytes of material relating to a closely held project known as Sea Dragon, as well as signals and sensor data, submarine radio room information relating to cryptographic systems, and the Navy submarine development unit’s electronic warfare library.
The Washington Post agreed to withhold certain details about the compromised missile project at the request of the Navy, which argued that their release could harm national security.
The data stolen was of a highly sensitive nature despite being housed on the contractor’s unclassified network. The officials said the material, when aggregated, could be considered classified, a fact that raises concerns about the Navy’s ability to oversee contractors tasked with developing cutting-edge weapons.
The breach is part of China’s long-running effort to blunt the U.S. advantage in military technology and become the preeminent power in east Asia. The news comes as the Trump administration is seeking to secure Beijing’s support in persuading North Korea to give up nuclear weapons, even as tensions persist between the United States and China over trade and defense matters.
The Navy is leading the investigation into the breach with the assistance of the FBI, officials said. The FBI declined to comment.
On Friday, the Pentagon inspector general’s office said that Defense Secretary Jim Mattis had asked it to review contractor cybersecurity issues arising from The Post’s story.
Navy spokesman Cmdr. Bill Speaks said, “There are measures in place that require companies to notify the government when a ‘cyber incident’ has occurred that has actual or potential adverse effects on their networks that contain controlled unclassified information.”
Speaks said “it would be inappropriate to discuss further details at this time.”
Altogether, details on hundreds of mechanical and software systems were compromised — a significant breach in a critical area of warfare that China has identified as a priority, both for building its own capabilities and challenging those of the United States.
“It’s very disturbing,” said former Sen. Jim Talent (R-Mo.,) who is a member of the U.S. China Economic and Security Review Commission. “But it’s a of a piece with what the Chinese have been doing. They are completely focused on getting advanced weapons technology through all kinds of means. That includes stealing secrets from our defense contractors.” Talent had no independent knowledge of the breach.
Undersea priority
The Sea Dragon project is an initiative of a special Pentagon office stood up in 2012 to adapt existing U.S. military technologies to new applications. The Defense Department, citing classification levels, has released little information about Sea Dragon other than to say that it will introduce a “disruptive offensive capability” by “integrating an existing weapon system with an existing Navy platform.” The Pentagon has requested or used more than $300 million for the project since late 2015 and has said it plans to start underwater testing by September.
Military experts fear that China has developed capabilities that could complicate the Navy’s ability to defend U.S. allies in Asia in the event of a conflict with China.
The Chinese are investing in a range of platforms, including quieter submarines armed with increasingly sophisticated weapons and new sensors, Adm. Philip S. Davidson said during his April nomination hearing to lead U.S. Indo-Pacific Command. And what they cannot develop on their own, they steal — often through cyberspace, he said.
“One of the main concerns that we have,” he told the Senate Armed Services Committee, “is cyber and penetration of the dot-com networks, exploiting technology from our defense contractors, in some instances.”
In February, Director of National Intelligence Daniel Coats testified that most of the detected Chinese cyber-operations against U.S. industry focus on defense contractors or tech firms supporting government networks.
In recent years, the United States has been scrambling to develop new weapons or systems that can counter a Chinese naval buildup that has targeted perceived weaknesses in the U.S. fleet. Key to the American advantage in any faceoff with China on the high seas in Asia will be its submarine fleet.
“U.S. naval forces are going to have a really hard time operating in that area, except for submarines, because the Chinese don’t have a lot of anti-submarine warfare capability,” said Bryan Clark, a naval analyst at the Center for Strategic and Budgetary Assessments. “The idea is that we are going to rely heavily on submarines in the early effort of any conflict with the Chinese.”
China has made closing the gap in undersea warfare one of its three top military priorities, and although the United States still leads the field, China is making a concerted effort to diminish U.S. superiority.
“So anything that degrades our comparative advantage in undersea warfare is of extreme significance if we ever had to execute our war plans for dealing with China,” said James Stavridis, dean of the Fletcher School of Law and Diplomacy at Tufts University and a retired admiral who served as supreme allied commander at NATO.
The U.S. military let its anti-ship weaponry languish after the Cold War ended because with the Soviet Union’s collapse, the Navy no longer faced a peer competitor on the seas. But the rapid modernization and buildup of the Chinese navy in recent years, as well as Russia’s resurgent forces at sea, have prompted the Pentagon to renew heavy investment in technologies to sink enemy warships.
The introduction of a supersonic anti-ship missile on U.S. Navy submarines would make it more difficult for Chinese warships to maneuver. It would also augment a suite of other anti-ship weapons that the U.S. military has been developing in recent years.
Ongoing breaches
For years, Chinese government hackers have siphoned information on the U.S. military, underscoring the challenge the Pentagon faces in safeguarding details of its technological advances. Over the years, the Chinese have snatched designs for the F-35 Joint Strike Fighter; the advanced Patriot PAC-3 missile system; the Army system for shooting down ballistic missiles known as Terminal High Altitude Area Defense; and the Navy’s new Littoral Combat Ship, a small surface vessel designed for near-shore operations, according to previous reports prepared for the Pentagon.
In some cases, suspected Chinese breaches appear to have resulted in copycat technologies, such as the drones China has produced that mimic U.S. unmanned aircraft.
[Chinese cyberspies stole a long list of U.S. weapons designs]
Speaks, the Navy spokesman, said: “We treat the broader issue of cyber intrusion against our contractors very seriously. If such an intrusion were to occur, the appropriate parties would be looking at the specific incident, taking measures to protect current information, and mitigating the impacts that might result from any information that might have been compromised.”
The Pentagon’s Damage Assessment Management Office has conducted an assessment of the damage, according to the U.S. officials. The Office of the Secretary of Defense declined to comment.
Theft of an electronic warfare library, Stavridis said, could give the Chinese “a reasonable idea of what level of knowledge we have about their specific [radar] platforms, electronically and potentially acoustically, and that deeply reduces our level of comfort if we were in a close undersea combat situation with China.”
Signals and sensor data is also valuable in that it presents China with the opportunity to “know when we would know at what distance we would be able to detect their submarines” — again a key factor in undersea battles.
Investigators say the hack was carried out by the Chinese Ministry of State Security, a civilian spy agency responsible for counterintelligence, foreign intelligence and domestic political security. The hackers operated out of an MSS division in the province of Guangdong, which houses a major foreign hacking department.
Although the Chinese People’s Liberation Army is far better-known than the MSS when it comes to hacking, the latter’s personnel are more skilled and much better at hiding their tracks, said Peter Mattis, a former analyst in the CIA counterintelligence center. The MSS, he said, hack for all forms of intelligence: foreign, military and commercial.
In September 2015, in a bid to avert economic sanctions, Chinese President Xi Jinping pledged to President Barack Obama that China would refrain from conducting commercial cyberespionage against the United States. Following the pact, China appeared to have curtailed much, although not all, of its hacking activity against U.S. firms, including by the People’s Liberation Army.
Both China and the United States consider spying on military technology to fall outside the pact. “The distinction we’ve always made is there’s a difference between conducting espionage in order to protect national security and conduct military operations, and the theft of intellectual property for the benefit of companies inside your country,” said Michael Daniel, the White House cybersecurity coordinator under Obama.
Primer: The U.S. holds an enviable lead in pushing artificial-intelligence technology out of labs and into real-world applications. Thank companies like Alphabet (GOOGL), Facebook (FB) and Apple (AAPL) for that.
But China’s government and technology elites aim to overtake the U.S. in AI by 2030 — or so they proclaimed in July at a Beijing political gathering.
Good luck with that.
Yes, China has many strengths as it sets out for worldwide dominance in AI technology. Its internet giants Baidu (BIDU), Alibaba Group Holdings (BABA) and Tencent Holdings (TCEHY) are also pouring money into AI research and hiring top scientists.
China’s huge population will generate massive raw data to train AI systems in how to make predictions. So there’s good reason to think China will make breakthroughs in developing computer algorithms — the software programs that aim to replicate the human ability to learn, reason and make decisions.
China also has a major weakness: a semiconductor industry that still lags the U.S. in making high-end electronic processors. Chinese companies buy AI chips mainly from Nvidia (NVDA), based in Santa Clara, Calif. Intel (INTC), the dominant supplier of brainy chips for personal computers, is pushing fast into AI. More here.
Due to Google employees signing a petition for the Pentagon’s Project Maven, the AI project which is a drone contract. Project Maven is known as Algorithmic Warfare Cross-Functional Team. Google at the time of the contract beat out other bidders including Microsoft, Amazon and IBM. More here on Google.
WASHINGTON (Reuters) – The U.S. military is increasing spending on a secret research effort to use artificial intelligence to help anticipate the launch of a nuclear-capable missile, as well as track and target mobile launchers in North Korea and elsewhere.
The effort has gone largely unreported, and the few publicly available details about it are buried under a layer of near impenetrable jargon in the latest Pentagon budget. But U.S. officials familiar with the research told Reuters there are multiple classified programs now under way to explore how to develop AI-driven systems to better protect the United States against a potential nuclear missile strike.
If the research is successful, such computer systems would be able to think for themselves, scouring huge amounts of data, including satellite imagery, with a speed and accuracy beyond the capability of humans, to look for signs of preparations for a missile launch, according to more than half a dozen sources. The sources included U.S. officials, who spoke on condition of anonymity because the research is classified.
Forewarned, the U.S. government would be able to pursue diplomatic options or, in the case of an imminent attack, the military would have more time to try to destroy the missiles before they were launched, or try to intercept them.
“We should be doing everything in our power to find that missile before they launch it and make it increasingly harder to get it off (the ground),” one of the officials said.
The Trump administration has proposed more than tripling funding in next year’s budget to $83 million for just one of the AI-driven missile programs, according to several U.S. officials and budget documents. The boost in funding has not been previously reported.
While the amount is still relatively small, it is one indicator of the growing importance of the research on AI-powered anti-missile systems at a time when the United States faces a more militarily assertive Russia and a significant nuclear weapons threat from long-time foe North Korea.
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“What AI and machine learning allows you to do is find the needle in the haystack,” said Bob Work, a champion of AI technology who was deputy defense secretary until last July, without referring to any individual projects.
One person familiar with the programs said it includes a pilot project focused on North Korea. Washington is increasingly concerned about Pyongyang’s development of mobile missiles that can be hidden in tunnels, forests and caves. The existence of a North Korea-focused project has not been previously reported.
While that project has been kept secret, the military has been clear about its interest in AI. The Pentagon, for example, has disclosed it is using AI to identify objects from video gathered in its drone program, as part of a publicly touted effort launched last year called “Project Maven.”
Still, some U.S. officials say AI spending overall on military programs remains woefully inadequate.
AI ARMS RACE
The Pentagon is in a race against China and Russia to infuse more AI into its war machine, to create more sophisticated autonomous systems that are able to learn by themselves to carry out specific tasks. The Pentagon research on using AI to identify potential missile threats and track mobile launchers is in its infancy and is just one part of that overall effort.
There are scant details on the AI missile research, but one U.S. official told Reuters that an early prototype of a system to track mobile missile launchers was already being tested within the U.S. military.
This project involves military and private researchers in the Washington D.C. area. It is pivoting off technological advances developed by commercial firms financed by In-Q-Tel, the intelligence community’s venture capital fund, officials said.
In order to carry out the research, the project is tapping into the intelligence community’s commercial cloud service, searching for patterns and anomalies in data, including from sophisticated radar that can see through storms and penetrate foliage.
Budget documents reviewed by Reuters noted plans to expand the focus of the mobile missile launcher program to “the remainder of the (Pentagon) 4+1 problem sets.” The Pentagon typically uses the 4+1 terminology to refer to China, Russia, Iran, North Korea and terrorist groups.
TURNING TURTLES INTO RIFLES
Both supporters and critics of using AI to hunt missiles agree that it carries major risks. It could accelerate decision-making in a nuclear crisis. It could increase the chances of computer-generated errors. It might also provoke an AI arms race with Russia and China that could upset the global nuclear balance.
U.S. Air Force General John Hyten, the top commander of U.S. nuclear forces, said once AI-driven systems become fully operational, the Pentagon will need to think about creating safeguards to ensure humans – not machines – control the pace of nuclear decision-making, the “escalation ladder” in Pentagon speak.
“(Artificial intelligence) could force you onto that ladder if you don’t put the safeguards in,” Hyten, head of the U.S. Strategic Command, said in an interview. “Once you’re on it, then everything starts moving.”
Experts at the Rand Corporation, a public policy research body, and elsewhere say there is a high probability that countries like China and Russia could try to trick an AI missile-hunting system, learning to hide their missiles from identification.
There is some evidence to suggest they could be successful.
An experiment by M.I.T. students showed how easy it was to dupe an advanced Google image classifier, in which a computer identifies objects. In that case, students fooled the system into concluding a plastic turtle was actually a rifle. here
Dr. Steven Walker, director of the Defense Advanced Research Projects Agency (DARPA), a pioneer in AI that initially funded what became the Internet, said the Pentagon still needs humans to review AI systems’ conclusions.
“Because these systems can be fooled,” Walker said in an interview.
DARPA is working on a project to make AI-driven systems capable of better explaining themselves to human analysts, something the agency believes will be critical for high stakes national security programs.
‘WE CAN’T BE WRONG’
Among those working to improve the effectiveness of AI is William “Buzz” Roberts, director for automation, AI and augmentation at the National Geospatial Agency. Roberts works on the front lines of the U.S. government’s efforts to develop AI to help analyze satellite imagery, a crucial source of data for missile hunters.
Last year, NGA said it used AI to scan and analyze 12 million images. So far, Roberts said, NGA researchers have made progress in getting AI to help identify the presence or absence of a target of interest, although he declined to discuss individual programs.
In trying to assess potential national security threats, the NGA researchers work under a different kind of pressure from their counterparts in the private sector.
“We can’t be wrong … A lot of the commercial advancements in AI, machine learning, computer vision – If they’re half right, they’re good,” said Roberts.
Although some officials believe elements of the AI missile program could become viable in the early 2020s, others in the U.S. government and the U.S. Congress fear research efforts are too limited.
“The Russians and the Chinese are definitely pursuing these sorts of things,” Representative Mac Thornberry, the House Armed Services Committee’s chairman, told Reuters. “Probably with greater effort in some ways than we have.”
It is an epidemic, only no one will admit that. Mr. Hansen’s charges are found here.
WASHINGTON (Reuters) – A former officer with the U.S. Defense Intelligence Agency was arrested over the weekend for allegedly trying to spy on the United States for China, the Justice Department said on Monday.
The Federal Bureau of Investigation took Ron Rockwell Hansen, 58, into custody on Saturday while he was on his way to the Seattle-Tacoma International Airport to get a connecting flight to China.
The department said he has been accused of trying to transmit national defense information to China and with receiving “hundreds of thousands of dollars” while acting illegally as an agent for the Chinese government.
Reuters could not immediately learn who may be representing Hansen in the case.
Hansen is the latest person in a string of former U.S. intelligence officers to be swept up in criminal probes related to spying for the Chinese.
Earlier this year, former CIA case officer Jerry Chun Shing Lee was indicted for conspiring to gather or deliver national defense information to China.
Another former U.S. intelligence employee named Kevin Mallory is on trial in Virginia, also in connection with selling secrets to China.
In the new case announced Monday, prosecutors said that Hansen speaks fluent Mandarin-Chinese and Russian.
He served as a case officer for the Defense Intelligence Agency while on active military duty from 2000-2006, and later continued that line of work as a civilian employee and a contractor.
He also held a top secret clearance for years.
The government said that between 2013 and 2017, he traveled between the two countries attending conferences and provided the information he learned to China’s intelligence service.
He was paid via wire transfers, cash and credit cards. He also allegedly improperly sold export-controlled technology.
“His alleged actions are a betrayal of our nation’s security and the American people and are an affront to his former intelligence community colleagues,” said John Demers, the head of the Justice Department’s National Security Division.
According to court records, the FBI started investigating his activities in 2014. He was unaware of the probe, and participated in nine voluntary meetings with federal agents in Salt Lake City. Utah.
Prosecutors say that during his meetings, he told the FBI that Chinese intelligence had tried to recruit him, offered to cooperate as a source and even provided thumb drives to the FBI that contained classified materials he was not authorized to have.
Hansen appeared before a magistrate judge in Seattle on Monday, and is charged in a 15-count complaint.
Mr Hansen, who lives in Syracuse, Utah, was charged with attempting to gather or deliver national defense information to aid a foreign government.
Other charges – there are 15 in total – include acting as an unregistered foreign agent for China, bulk cash smuggling, structuring monetary transactions and smuggling goods from the US.
The phone the Chinese intelligence operatives gave Kevin Mallory was a specialized spy gadget. If it had worked like it was supposed to, he might be a free man today.
The former CIA officer, on trial in Alexandria federal court on espionage charges, freely told his old colleagues that he had been approached by those spies on social media in February of 2017. He said he had been invited on two trips to China and given a Samsung Galaxy phone with special encryption capabilities.
What he didn’t tell his U.S. intelligence contacts, and, according to prosecutors, what he thought they would never learn, was that he also traded classified documents to the Chinese agents in exchange for $25,000.
Mallory, a 61-year-old from Leesburg, Va., who also served in the Defense Intelligence Agency, State Department and U.S. Army, was arrested last spring. While prosecutors say he was selling secrets, he contends he was trying to expose the Chinese spies. Whatever jurors decide, the veteran intelligence operative’s trial is offering a glimpse into some of the inner workings of both Chinese espionage and American attempts to counter it.
It’s “very rare” for a foreign intelligence service’s device “to be revealed like that,” FBI agent Paul Lee testified on Thursday. The phone would have cost the Chinese government a lot of money to develop, he had told Mallory last year.
Mallory explained in meetings with the CIA and FBI, which were recorded and played for the jury, that the phone contained an app designed to facilitate steganography, or the hiding of information inside of an image. Documents were merged into a file that appeared as an image — in this case, the Chinese chose horses grazing in front of a mountain range.
To send the files through the secure version of the app, which was a customized version of the Chinese messaging service WeChat, both parties had to be online and type in a password. (The one built into the application, Mallory told the officials, was the word “password,” in English.)
Mallory told the FBI that the Chinese spies told him they had found a “special way” to make the app safer.
But their system was flawed. James Hamrock, an engineer who analyzed the phone for the FBI, said he believes the encrypted application crashed at one point, creating an unintentional log of Mallory’s communications with one of the Chinese spies.
If the app had not crashed, Hamrock testified, he likely would not have been able to see Mallory’s communications. Instead, as Mallory and FBI agents met in a hotel room in Ashburn, Va., last May to look at the phone, they saw conversations in which Mallory had discussed delivering “more documents,” including something related to a foreign intelligence service. (The name of that service was redacted from exhibits shown in court).
“I’m — I’m surprised it kept this much,” Mallory told the agents as they examined the phone.
But defense attorneys stressed that U.S. law enforcement would never have known about the phone — let alone have been able to examine it — had Mallory not brought it to them.
Mallory maintains that as soon as he realized the Chinese recruiters who had approached him on LinkedIn were spies, he decided to deliver them to American hands.
“Kevin Mallory has worn a white hat throughout his career, and he did not take it off for a relatively small amount of money,” public defender Geremy Kamens said in his opening statement. “If he was motivated by money, he would have kept his mouth shut.”
Instead, Mallory caught the attention of authorities because he repeatedly contacted a CIA employee from his church and a CIA contractor he worked with from 2010 to 2012 to say he believed he was in touch with Chinese intelligence.
In a text to the contractor, a covert operative who testified from behind a screen under the pseudonym John Doe, Mallory said the operatives “asked me a few questions that could have only come from our side of the house.”
Doe testified that he took that to mean that the Chinese had penetrated the CIA.
Doe said Mallory’s request to be put in touch with someone in the agency’s East Asia Division “seemed odd.”
Ralph Stevenson, a CIA resources officer, agreed. When Mallory contacted him in a similar manner, Stevenson said, he deleted the texts and responded with a terse email.
At the Montgomery Chinese Branch of the Mormon Church that weekend, Stevenson upbraided Mallory. Read more here.
The report, entitled China and the Age of Strategic Rivalry, was authored by experts at the Canadian Security Intelligence Service (CSIS). It contains a summary of views expressed by participants at an academic outreach workshop that was organized in Canada by the CSIS. In a section focusing on Chinese “interference in democratic systems”, the report suggests that, despite its small size, New Zealand is “valuable to China […] as a soft underbelly through which to access Five Eyes intelligence”. In recent years, claims the report, Beijing has adopted “an aggressive strategy” that has sought to co-opt political and economic elites in New Zealand as a means of influencing political decision making in the country. As part of that process, China seeks to gain advantages in trade and business negotiations, suppress negative views of China, facilitate espionage and control the views of the Chinese expatriate community in New Zealand, according to the report. Ultimately, Beijing seeks to “extricate New Zealand from […] its traditional [military and intelligence] partners]” as a means of asserting its regional and —eventually— global influence, the report concludes.
In a separate but connected development, it emerged this week that China expert Peter Mattis told an American Congressional committee last month that New Zealand’s position in the Five Eyes alliance was tenuous due to China’s influence. Mattis, a former China analyst for the United States Central Intelligence Agency, was speaking before the US-China Economic and Security Review Commission, a group of experts that advise the US Congress. He told the Commission that the influence of the Chinese Communist Party in New Zealand is so deep that it raises questions about whether the Pacific Ocean country can continue to share intelligence with the other members of the Five Eyes alliance.
On Wednesday, New Zealand’s Prime Minister Jacinda Ardern emphatically dismissed questions about her country’s role in the Five Eyes alliance. She told reporters in Wellington that the issue of New Zealand’s Five Eyes membership had “never been raised” with her “or anyone else” by Five Eyes partners. Ardern added that her government received its information “from official channels, not opinions expressed at a workshop”.
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