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 Case 1 18tcr-00043-TSB DOC 1 Filed 04 04 18 Page 2 01 15 PAGEID #3 2 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 Case' DOC 1 Filed 04 04 18 Page 3 Of 16 #3 3 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 Case DOC #2 1 Filed 04 04 18 Page 4 0f 16 PAGEID 4 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 Case DOC #2 1 Filed 04 04 18 Page 5 Of 16 PAGEID 5 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 Case Doc 1 Filed 04 04 18 Page 6 of 16 PAGEID 6 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 Case Doc #1 1 Filed 04 04 18 Page 7 of 16 PAGEID a 7 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 Case Doc 1 Filed 04 04 18 Page 8 of 16 PAGEID 8 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 Case DOC #2 1 Filed 04 04 18 Page 9 0f 16 PAGEID #2 9 011 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 Case Doc 1 Filed 04 04 18 Page 10 of 16 PAGEID 10 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 Case Doc 1 Filed 04 04 18 Page 11 of 16 PAGEID 11 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 Case Doc 1 Filed 04 04 18 Page 13 of 16 PAGEID ii 13 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 13 Case DOC #1 1 Filed 04 04 18 Page 14 of 16 PAGEID #1 14 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 Case DOC 1 Filed 04 04 18 Page 15 Of 16 PAGEID 15 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 15 Case Doc #2 1 Filed 04 04 18 Page 16 of 16 PAGEID 16 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 16