Sinovel charged with shocking cyber espionage in US
Staff Reporter 2013-08-08 14:51
A Sinovel stand at a technology fair. (Photo/CFP)
Sinovel Wind Group Company, China's largest wind turbine manufacturer, has been accused of cheating US company American Superconductor out of more than US$800 million in a sordid tale of cyber espionage.
According to US federal prosecutors, in 2011 the Chinese company used money and women to entice Dejan Karabasevic, then a chief engineer for American Superconductor, to download the US company's encrypted source codes onto a USB drive and then send them via email to Sinovel executives in China.
The stolen advanced codes were developed by American Superconductor to regulate the flow of electricity from wind turbines. Sinovel had been the US company's biggest customer but once it illegally obtained the codes it suddenly cut off all business ties and refused to pay for contracted shipments, prosecutors said. The stolen software was later found operating in a Sinovel wind turbine that had been sold to the Massachusetts Water Resources Authority for US$4.7 million.
Skype messaging records show that Sinovel offered Karabasevic a US$1.7 million contract, an apartment in Beijing and access to women, plus payments into the account of his Vietnamese flight attendant girlfriend.
"All girls need money. I need girls. Sinovel needs me," records show Karabasevic as having written to Sinovel executives. The former American Semiconductor employee pleaded guilty to stealing the trade secrets in an Austrian court and was sentenced in 2011 to a year in jail.
Karabasevic, Sinovel and two company executives were indicted in late June this year by a US federal grand jury on charges of trade theft and wire fraud
The alleged theft and the loss of Sinovel's business robbed American Superconductor of three quarters of its revenue and wiped more than US$1 billion off its market value, forcing the company to lay off half its workforce of 900 employees.
"They were out to kill my company," said American Semiconductor CEO Daniel McGahn. "We thought we were playing by the Chinese rules. We didn't anticipate outright theft as part of their business model."
In filing the charges, US prosecutor John Vandreuil called Sinovel's actions against American Semiconductor "nothing short of attempted corporate homicide."
According to a report from the Commission on the Theft of American Intellectual Property published in May, Chinese looting of US technology is costing the US economy up to US$300 billion a year and millions of jobs. The national industrial policy goals in China "encourage IP theft, and an extraordinary number of Chinese in business and government entities are engaged in this practice," the report concluded.
Former US ambassador to China and co-chairman of the commission Jon Huntsman said the Sinovel case shows that American companies have "had enough" of China's technology theft, while Michigan congressman Mike Rogers said the US is "no longer going to play nice about what we know is as basic as highway robbery."
"There ought to be a consequence for it," Rogers said. "We can't continue to let them believe that they can steal this property and then go ahead and compete against US companies at a price point that our companies can't compete with."
FBI executive assistant director Richard McFeely added, "The Sinovel case is a classic example of the growing insider threat facing our nation's corporations and their intellectual property. The FBI will not stand by and watch the hemorrhage of US intellectual property to foreign countries who seek to gain an unfair advantage for their military and their industries."
Sinovel's main shareholder is the New Horizon Capital equity fund, of which Winston Wen, son of former Chinese premier Wen Jiabao, was a principal.
