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How Silicon Valley became the target of Chinese and Russian spies

As investigations into possible Russian interference in the 2016 elections continue, a new report by POLITICO reveals that Chinese and Russian spies have been targeting Silicon Valley for trade secrets and technology. But firms have sought to downplay or conceal the extent of espionage, complicating counterintelligence efforts. Zach Dorfman of POLITICO joins Hari Sreenivasan for more.

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  • HARI SREENIVASEN:

    Russia's interference in the 2016 election and the ongoing investigations, top new reports about spying and intelligence gathering… But state sponsored espionage threatens much more than the political system. This week, POLITICO magazine's cover story focuses on China and Russia's attempts to infiltrate Silicon Valley. Joining us now from San Francisco is the author of that article, Zach Dorfman, who is a senior fellow at the Carnegie Council for Ethics in International Affairs. So, tell us, how is this espionage, this spying, happening in Silicon Valley?

  • ZACH DORFMAN:

    According to conversations I had with multiple former U.S. intelligence community officials, the espionage scene in Silicon Valley in San Francisco is a little bit different than what you generally associate it with, in terms of Washington and New York in particular. In fact, in San Francisco it tends to be a little bit more informal or casual — probably befitting, given Silicon Valley's culture — and what you see is more theft of technologies both with military and simply civilian applications in major tech firms as well as startups. And part of this has to do with the larger story of economic competitiveness between especially the United States and China.

  • HARI SREENIVASEN:

    So is this about turning individual employees at a company? Or is this about pretending to be investors?

  • ZACH DORFMAN:

    It's actually both. So what you have, is you have intelligence officers who go to Silicon Valley or are based in Silicon Valley who speak to other people in venture capital firms or in technology companies. You also have employees who are either motivated by money or sometimes, particularly in the case of China, are being coerced at times to do this…Because China has been known to go to people with family in China and tell them, for instance, that if they don't provide certain technology or even just click on a link in an e-mail that allows for access to a computer system, that somebody's family will potentially lose their home, or be subject to other kinds of repressive measures.

  • HARI SREENIVASEN:

    Is there any way that we've quantified the costs on this? I mean, what do our intelligence agencies think, how significant of a threat is this?

  • ZACH DORFMAN:

    They consider it to be a very significant threat. In fact, FBI director Christopher Rea, in recent remarks at the Aspen Security Forum, said that Chinese espionage was the greatest security threat facing the United States in the medium and long term. In terms of quantification, I don't have exact figures for you, but if you look at past examples of Chinese economic espionage, take for instance the case of Walter Liu, a Bay-area local who in 2014 was convicted of violations of the Economic Espionage Act. And what Mr Liu did was he sold a proprietary formula owned by DuPont that makes the color white, white, to a Chinese state-owned conglomerate, therefore saving that company hundreds of millions of dollars in research and development costs. So yeah, it's ubiquitous. It's highly costly. And in many cases, as I say in my POLITICO article, sometimes companies don't want to report it because they are worried about shareholder value or the embarrassment of not being able to maintain security over their intellectual property.

  • HARI SREENIVASEN:

    Alright, Zach Dorfman, a senior fellow with the Carnegie Council for Ethics in International Affairs. Thanks for joining us.

  • ZACH DORFMAN:

    Thank you.

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