Tuesday, January 26, 2016

The smoke and mirrors of the wizards of Washington

This piece was first posted on Asia Times.

A recent CBS 60 Minutes installment called their segment the ‘Great Brain Robbery of America.’ Their website reads:
“The Justice Department says that the scale of China’s corporate espionage is so vast it constitutes a national security emergency, with China targeting virtually every sector of the U.S. economy, and costing American companies hundreds of billions of dollars in losses — and more than two million jobs.”
According to John Carlin, who is the assistant attorney general for National Security with responsibility for counter-terrorism, cyber attacks and increasingly economic espionage, “Thousands of companies are being victimized.”
Hmm. Hundreds of billions of dollars, millions of American jobs and thousands of companies victimized by theft of trade secrets. Really? If 60 Minutes had hard evidence to back up the extravagant claims by the government, they weren’t sharing with the public.
Thus it’s appropriate to take a tour behind the curtains and see what these wizards of Washington are using as smoke and mirrors to conjure up the unimaginable destruction being wreaked on America. Or maybe it’s not smoke and mirrors but all real.
Congress enacted the Economic Espionage Act (EEA) in 1996 to prosecute two kinds of related criminal offenses18 U.S.C. § 1831 applies to economic espionage with knowledge or intent to benefit a foreign power
  • 18 U.S.C. § 1832 applies to theft of trade secrets with knowledge or intent that will injure the owner of trade secret
The trade secrets and economic espionage statutes were further toughened in 2012. There were other federal statutes that regulate export and arms sales. Many of these statutes were in the books long before the EEA.
Altogether there are 17 federal agencies, among them FBI and Homeland Security, with jurisdiction over these statutes and making sure exports don’t end up in wrong countries and trade secrets are not illegally sold to unsavory bidders. How many criminals have they caught in the interim 19+ years since 1996?
Official government compilation of criminal activity is difficult to come by, especially any with some modicum of precision. Infractions on export regulations are especially challenging because the regulations kept changing depending where the export destination sit on the Cold War hostility meter. Export regulations also contains a “dual” use provision, whereby a product being shipped to a civilian destination is approved but becomes a violation if it was going to a military destination next door. One go-to source for a compendium of criminal export activity could not be found.
The Department of Justice (DOJ) with its vigorous public relations efforts would have us believe that this country is suffering from rampant economic crimes committed especially by agents from China. Fortunately, I did find compilations of EEA-related violations committed since the enactment of the statutes in 1996, and therefore it was possible to see if data on actual criminal activity match the intensity as suggested on the 60 Minutes webpage.
According to Thomas J. Nolan, Palo Alto-based defendant’s attorney, who wrote a review on ‘Trends in Trade Secret Prosecution[1],’ there were, up to July 1, 2015, a total of 137 EEA-related cases involving 197 individuals since 1997 after EEA were enacted. Of the total, 39 cases involved China in some way, by far the most among the foreign countries, but nonetheless amounted to less than 30% of the total recorded cases and well under 3 cases per year.
Nolan noted that the average length of jail sentence for those with Chinese surnames average more than twice as long as those with non-Chinese surnames (32 months vs. 15 months). And, they were much less likely to be given probation without any jail time than the general group. You can say we have prima facie evidence that the government has a bias against Chinese Americans.
Nolan pointed out that in 2012, the United States Department of Defense released a report asserting, “Chinese actors are the world’s most active and persistent perpetrators of economic espionage.” In February 2013, the White House issued a memorandum entitled “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets” which, although a broad description of the Administration’s strategy, repeatedly refers to cases involving allegations of theft by the Chinese government and Chinese companies. These government documents contributed to the demonizing bias against defendants with Chinese surnames.
According to his survey, the government dismissed charges against about 10% of the defendants before their cases came to trial. This estimate was likely on the low side since retroactive tracking of government cases will find convictions but may miss cases that were dismissed. The federal agencies not wanting their mistakes exposed publicly for too long were more likely to remove these from their website. Of course certain cases of wrongful arrests may have never reached the stage of being reported on the website and were not included in such tabulations.
My colleague and fellow member of the Committee of 100, Jeremy Wu, has been consolidating and maintaining an independent compilation of economic espionage cases[2].  He found other cases relate to China and Chinese nationals and Chinese Americans that were missed in Nolan’s compilation or having taken place since Nolan stopped monitoring.
By Wu’s count, there have been a total of 50 cases involving China or Chinese surnames, about three quarter of the cases involved trade secret charges (i.e., 18 U.S.C. § 1832) and did not rise to the level of actual economic espionage on behalf of China (18 U.S.C. § 1831).
What are we to take away from this?
Of the 50 cases in Wu’s tabulation, 35 are closed. Contrary to DOJ’s jubilant claims of over 90% conviction rate, 9 of the cases were dismissed or found not guilty and 3 other cases were settled with pleas to lesser misdemeanor charges. The latter resolution was most likely so that the government can claim victory and the defendant can go on with their lives. Altogether, more than one third of the cases did not lead to conviction by the government.
Even with Wu’s higher total, it’s still well under 3 cases of EEA violations every year with more than 25% chance that the charges were groundless. Even if the guilty spend twice as long in jail as the non-Chinese, the sentence of thirty some months does not seem consistent with the gravity of the government charges that these crimes are costing us “billions of dollars and millions of jobs.”
In short, the findings cannot support the hyperbole from DOJ aimed at demonizing the bilateral relations between the U.S. and China.
As we know from recent cases related to Sherry Chen and Professor Xi Xiaoxing, it’s relatively easy for an innocent Chinese American to become a victim of prosecutorial overreach. The predisposed bias against individuals with Chinese surnames is built in by our government’s attitude and method of operation[3].
The government magnified the seriousness of their charges while dispensing any need for due process by failing to conduct any investigation that would establish the findings beyond reasonable doubt. Having identified someone with a Chinese surname seems sufficient evidence to go ahead with prosecution.
Even if the government can successfully convict 3 cases of EEA violation every year, surely such a record cannot justify the human cost of the case where a mistake was made. Unfortunately there is no way to systematically compile cases of prosecution abuse so that we cannot measure the magnitude of damage being done to the Chinese Americans.
In the case of Sherry Chen, her legal defense bills amounted to hundreds of thousand dollars. Her reputation will take years to recover and she is still expected to battle to get her old job back. Let’s not forget that before her misfortune, she was a contributing American citizen punching above her weight for society.
Congress must quickly enact a new legislation to allow victims of wrongful prosecution to fully recover their legal fees and return to their original employment. Can an alleged world leading democracy do any less?
[1] This document not known to be published were shared by the author with Jeremy Wu and is posted in Wu’s website.
[2] I could not have written this commentary without Jeremy’s insight drawn for his careful and tireless collection of the data found in http://bit.ly/FedCasesLI.
[3] A national petition drive led by eminent scientists and Nobel Prize winners are demanding an open investigation on whether racial profiling was applied to Chen and Xi.

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