Economic Espionage Essay Example

modern international business, economic espionage has expanded beyond monarchs and governments; large corporations worldwide employ agents to gather intelligence on their competitors and other nations. According to Perry (1996), economic espionage aims to obtain trade secrets, confidential procedures, or any information that would give a company or country a competitive advantage.

The areas of interest for industrial spies include radiation transfer technology, systems diagnostic and testing software, traveling wave tubes, aviation technologies, microwave monolithic integrated circuits inferred signature measures software radar technologies wet processing systems information management and processing simulation technologies physical security technologies ram-jet engine and ram-jet technologies (Special Security newsletter: 1995). Although this list is not exhaustive ,it illustrates the extent of the problem.In Peter Schweiser's book "Friendly Spies," it is suggested that modern industrial spies are primarily driven by greed for money. Historical cases show that most apprehended spies were motivated by financial gain. John Walker, for example, oversaw the infamous Walker spy ring and sold submarine secrets to the Soviets over 17 years in exchange for one million dollars. Larry Wu-Tai Chin passed secrets to China as a CIA analyst and received $180k over three years. Richard Miller, an FBI employee, was caught attempting to pass counter-intelligence secrets to the Soviets; he had been promised 2 million dollars but only received a quarter of that before his arrest.

The text emphasizes how lucrative spying can be when conducting operations with friendly countries, raising doubts about the severity of economic espionage as portrayed. The FBI has seen a significant increase in its caseload on industrial espionage since 1985, with over five hundred ongoing investigations at present. American companies suffer losses exceeding $100 billion annually

due to espionage, potentially reaching up to $260 billion. In Canada, this translates to $10 billion per year, while international companies face projected annual losses of $140 billion.

Determining precise loss figures poses challenges because companies are reluctant to admit being victims out of fear that it may undermine confidence from suppliers and shareholders (Lester:1996).Economic espionage has significant consequences, including the loss of contracts, jobs, markets, and a weakened competitive advantage. Small businesses with earnings under $11 million annually are especially vulnerable. Industrial spies utilize methods reminiscent of Cold War tactics to gather information, often employing a combination of techniques as part of comprehensive collection programs. The text highlights how countries and corporations exploit legitimate transactions or business relationships for covert information gathering purposes. These methods are commonly used for collecting information, typically for legitimate reasons. It is important to note that using these methods does not imply illegal activity; instead, they highlight potential elements of a broader intelligence effort (Security Online:1996:5). Classic agent recruitment is a reliable method employed by intelligence collectors in which a trusted member within a company or organization provides classified information. Intelligence collectors target not only high-ranking individuals but also researchers, key managers, corporate executives, as well as support staff such as secretaries, computer operators, technicians, and maintenance personnel. The latter group may have better access to competitive information and their lower pay makes them susceptible to manipulation by intelligence agencies (Security On-line: issue 1).The text discusses different techniques utilized by spies to gather sensitive information, including the method known as "us volunteers." These spies recruit agents in addition to employees who have easy access to company information. The motivations behind

stealing this information are similar for both employees and spies, such as illegal drug/alcohol use, financial problems, personal stress, and greed. Industrial spies employ various tactics ranging from simple surveillance and break-ins to persuading hotel operators to allow access to visitors' rooms and luggage, commonly referred to as "bag ops." Specialized technical operations like computer intrusion and telecommunications targeting also play a significant role in economic espionage. Intercepting telecommunications, especially international ones, is highly vulnerable and provides valuable trade secrets. Foreign intelligence collectors intercept facsimile transmissions through government-owned telephone companies, accounting for a substantial portion of overseas transmissions. Resourceful hackers connect with computers containing competitive information in order to bypass controls and gain access to company data.Many American companies have also started utilizing electronic data interchange to electronically transfer corporate bidding, invoice, and pricing data overseas - a kind of information that foreign government and corporate collectors are highly interested in. Economic misinformation is another commonly employed tactic in corporate espionage activities. Some governments employ misinformation campaigns to discourage domestic companies and potential clients from collaborating with US companies. The press and government agencies often discuss foreign economic and industrial intelligence activities using vague terms, aiming to portray foreign competitors or countries as aggressive and untrustworthy, even without evidence. Some countries publicly highlight their efforts to establish information security mechanisms against penetration attempts by competitors, specifically mentioning the United States as the primary threat. Additionally, governments orchestrate their students studying abroad, including those in the US, to gather economic and technical information on various subjects. The recruitment of students for different purposes varies depending on when they are approached or recruited and their motivations behind

it. Certain students are recruited pre-enrollment while others are approached after starting their studies; they may be recruited or coerced based on loyalty or fear for their country's government or intelligence service.Foreign graduate students are occasionally approached by intelligence collectors to assist professors in specific research areas, giving them access to the professor's work and opportunities to learn about technological applications. Some governments have established programs that send interns abroad as an alternative to mandatory military service, mainly aiming to gather foreign business and technological information (Security On-line: issue 1). In addition to targeting overseas students, these collectors also focus on foreign employees of North American companies and agencies. They may even recruit or assign a colleague within a North American company to discreetly obtain information without involving any intelligence service. The collected information is then directly shared with a foreign firm or government for use in their research and development projects (Security On-line: issue 1). Collectors employ another tactic by conducting debriefings of foreign visitors who have traveled to countries in North America. These nations interview their citizens upon their return, seeking the knowledge they acquired during their trips. Foreign scientists argue that some of these debriefings can be aggressive and offensive. However, in other countries, such interviews are considered standard procedure when traveling abroad.In addition, the collection of information is carried out by recruiting emigrants from specific ethnic groups. This strategy is particularly beneficial for intelligence collectors who target individuals from their own ethnic background, including those working in the US military and involved in classified technology research and development. Many countries consider repatriating emigrants and foreign scientists as the most effective means

of technology transfer. One country, in particular, claims to have successfully repatriated numerous ethnic scientists back to their home country from the United States. The process involves targeting naturalized US citizens and permanent resident aliens with the goal of obtaining classified information. Foreign intelligence collectors often exploit a person's patriotism and loyalty towards their ethnicity, sometimes resorting to threats against family members residing in their home country. Another tactic employed by information collectors is elicitation, which takes place during international conferences and trade fairs where foreign scientists and engineers specializing in high-tech subjects gather. These events provide an opportunity for foreign intelligence collectors to target them and gather any valuable information they possess. Depending on the circumstances and country involved, these efforts can be forceful at times.Intelligence collectors can entice scientists with all-expenses-paid trips abroad for conferences or sabbaticals, treating them generously and seeking their guidance in specific areas of interest. After these scientists return to their home country, the collectors reach out to them again and ask for information related to their research fields.

The text discusses various sources that collectors utilize to gather intelligence, which includes commercial databases, trade and scientific journals, computer bulletin boards, openly available US government data, as well as corporate publications. These collectors take advantage of the abundance of competitive information found within the United States. This encompasses personality profiles, research and development plans and products, manufacturing techniques, as well as strengths and weaknesses of competitors.

While most collectors use this information for their own business competition purposes, some employ a tactic where they leverage openly available information as leads to enhance their covert collection efforts. This enables them to identify

individuals and organizations possessing the desired information.

Additionally, private-sector organizations such as front companies and joint ventures serve as another method used by these collectors. Foreign governments also exploit non-government affiliated organizations or establish new ones like friendship societies or import/export companies discreetly gathering intelligence.They hide their involvement in these organizations by presenting them as private entities to conceal their intelligence operations (Security On-line: issue 1). These organizations also identify and evaluate potential recruits for foreign intelligence with whom they have established contact. Additionally, they engage in lobbying activities to persuade US government officials to change policies that are unfavorable to foreign governments (Security On-line: issue 1).

Furthermore, many countries use corporate mergers and acquisitions as a way of acquiring technology. While most of these transactions serve legitimate purposes, some are designed specifically for foreign companies to obtain North American technology without investing in research and development. According to the "Report on US critical technology Companies" from 1994, there were a total of 984 cases where foreign entities acquired US critical technology companies between January 1st, 1985 and October 1st, 1993. The majority of these mergers and acquisitions were friendly, with only a small number being hostile takeovers. Four countries accounted for approximately two-thirds (68 percent) of these deals.Approximately 60 percent of all transactions involve US companies in various fields such as advanced materials, computers (including software and peripherals), biotechnology, professional and scientific instrumentation, communications equipment, advanced manufacturing, and aircraft (including spare parts) (Security On-line: issue 1). Another method used to gather information is by headhunting or recruiting employees from rival firms within the United States. Foreign companies often hire experienced staff from competitors to perform similar

tasks for them with the aim of obtaining confidential technical information and using it against their rivals (Security On-line: issue 1). Furthermore, corporate technology agreements are utilized as a means for information gatherers to obtain technological data. Some foreign companies exploit potential technology sharing agreements as channels to acquire proprietary information. To negotiate an agreement, foreign companies frequently require North American companies to disclose extensive details about their procedures and products. This information may exceed what is necessary for the project at hand and can be highly sensitive. Failure to provide this information may result in termination of the deal or refusal of further negotiations by the foreign company.Foreign companies exploit the research environment in North America by sponsoring research activities at universities and research centers, benefiting all parties involved. However, there are cases where foreign governments or companies take advantage of this opportunity solely for their own gain by collecting research findings and proprietary knowledge. Additionally, foreign intelligence services sometimes infiltrate intelligence officers into these efforts to gather information. In order to obtain valuable information, certain organizations employ information brokers or consultants who search globally for relevant data. These brokers may resort to buying information that they cannot legally obtain or acquire through deceitful means. They then validate and organize the data in a user-friendly format before delivering it to interested clients. A published example from 1991 by the Asian Wall Street Journal illustrates this activity: an advertisement with a phone number based in Western Europe offered advanced insights into various projects or contracts within your country. The advertisers claimed agreements with prominent European companies and proposed introducing them to "your" project or contract."Any

commission received would be shared with readers. Certain countries often employ well-connected consultants to create reports on intriguing topics and advocate for their interests with North American government officials. Typically, these consultants are former high-ranking US government officials who still maintain relationships with their former colleagues. They leverage these connections and contractual agreements to gain classified information and establish contact with current authoritative figures. Through these connections, they strive to acquire additional protected information.

The text explores two ways in which foreign governments obtain unauthorized access to classified information in the United States. One method involves companies controlled by foreign governments fulfilling classified government contracts through technology sharing agreements sponsored by the Department of Defense. Despite close monitoring by US security agencies, these contracts enable foreign governments to gain unauthorized access to information. This method is more commonly used by traditional US allies rather than non-allies.

The second method entails assigning liaison officers to government-to-government projects. These officers are stationed on-site during joint research and development activities and regularly oversee progress while providing guidance.However, there are some allied countries that have taken advantage of these positions and used them to hide intelligence officers whose main objective is to gather as much information as possible about the facility they are stationed in. Specifically, liaison officers in the defense sector have been caught removing documents that are restricted or classified. According to investigations conducted by the FBI, 23 countries are currently involved in espionage against North American countries. France is one of these nations and has deployed 200 full-time agents around the world. The French intelligence service includes groups like "General de la Securite Exterieure" that focus on soft

business targets and a group known as "Service 7". This text discusses various intelligence and espionage activities carried out by different countries. One team, called the action unit, specializes in sensitive operations such as break-ins and undercover activities. France also has part-time information collectors referred to as "Honorary correspondents", who include corporate officials living abroad. Some of these individuals collect information for personal financial gain while others consider it part of their job responsibilities. An example is Pierre Marion, an Air France representative who gathered information on Japanese social circles with a specific emphasis on Japanese political officials. Despite its size, South Korea stands out for its exceptional intelligence capabilities.
The National Security Planning Agency (NSP) of South Korea operates globally, providing intelligence and espionage services to Korean interests. Their agents are active in various countries including North Korea, China, the Soviet Union, the United States, and Japan. In fact, some US intelligence sources believe that the NSP is more effective than Israel's Mossad due to their skilled agents, abundant financial resources, and well-organized informant network.

One operation conducted by South Korean agents in Japan was called "Operation Laughing Bird" which started in 1981. It involved over 200 agents with a goal to gather technological information for supporting South Korean industry. The agents carried out different activities such as electronic eavesdropping and infiltrating moles and other agents. They also collaborated with organized crime groups in Japan and recruited workers from both Japan and America as operatives.

Israel also has its own successful economic espionage collection agency known as "LAKAM". Operating across multiple countries including the United States, Japan, France, Germany, Italy Great Britain Switzerland ,and Sweden; LAKAM is

particularly active in the United States where they have agents based at the Israeli embassy in Washington along with branches located in Los Angeles and New York.There are approximately 35 full-time agents and numerous informers operating in various cities. LAKAM's activities greatly benefit the aerospace, chemical, and electronics industries within Israel. Both Israel and Germany actively engage in espionage using different methods to gather sensitive information. In Israel, undercover agents pretend to be businesspeople or scientists traveling to the US while maintaining direct communication with the Prime Minister through telephone or telex. Diplomatic pouches are used for transporting highly sensitive matters between parties involved. Germany's intelligence service, called Bundesnachrichtendienst (BND), has been spying on countries like the US, France, Great Britain, and Italy since the 1960s. The BND closely monitors telecommunications of foreign corporations in Germany and has placed spies within high-tech firms in the US to gather extensive information on economy, technology, and industry. Conversely, after the Cold War ended, CIA officials in the US shifted their focus towards collecting economic data to justify their agency's inflated budget. They receive secret assistance from various Fortune 500 companies and small high-tech firms in the US.
CIA officers use "nonofficial cover" (NOC) to assume the identities of American businessmen worldwide. This allows them to recruit agents, steal secrets, engage in special operations, and participate in parliamentary activities. In 1995, the French government expelled four business officials who were caught gathering French economic and political secrets. Three of them were posing as American diplomats, while one was operating under a business cover. It is clear that not only governments but also some corporations have intelligence organizations similar to

those of small countries. Companies without their own intelligence organizations often hire private investigators when they need espionage services. An example of utilizing company spies occurred at a Du Pont chemical plant in July 1989. During a visit from representatives of a German chemical company, one of them accidentally dipped the tip of his tie into a vat of chemicals while inspecting a table. At first, the company apologized and offered to replace the tie, but the visitor insisted on keeping it due to its sentimental value as a family heirloom. Only after an experienced company security official protested did the company decide to keep possession of the tie because they suspected it was part of a scheme to obtain a chemical sample (Scheizer:1993:253).Kevin D. Murray, a certified protection professional, explores ways for companies to protect themselves from economic espionage in his paper "10 Spy-Busting Secrets." He emphasizes the importance of identifying vulnerabilities and implementing appropriate precautions to prevent espionage. Trash trawling is one strategy he discusses, which involves sifting through garbage for information. Murray highlights that this practice is legal but suggests minimizing access to sensitive information and using secure disposal methods such as purchasing shredders suitable for specific needs. For added security, crosscut destruction and central bulk shredders are recommended for high-level security, computer paperwork, and large volume waste. To maintain confidentiality, it is crucial not to leave confidential papers in boxes under desks with the intention of shredding them later; instead, they should be shredded immediately. Additionally, relying solely on paper recycling vendors for waste paper destruction should be avoided; companies should take responsibility for destroying it themselves before recycling. Lastly, Murray

advises against purchasing a single shredder for everyone's use as some individuals may not consistently utilize it due to their busy schedules.According to Murray, it is advisable to choose desk-side shredders for easy document disposal instead of other options. He has also extensively studied bugs and wire tapping, which he believes are the most harmful forms of electronic spying. Dismissing suspicions of electronic surveillance as mere paranoia is a common mistake that should be avoided. Murray advises discussing these suspicions with others only when necessary and avoiding such conversations in areas where surveillance is suspected. It is better not to attempt DIY solutions or waste money on ineffective spybuster toys; seeking professional guidance promptly is highly recommended. Contrary to popular portrayals in media and catalogs, effective detection of bugs and wiretaps requires specialized equipment and extensive knowledge. To find professional sweep teams, who invest around $100,000 in their equipment and have expertise in security, investigations telecommunications, and electronics, it is best to contact a corporate security professional rather than relying on the yellow pages. Murray highlights the importance of thoroughly checking the credentials and work orders of individuals performing technical tasks near or within an office to ensure their legitimacy and necessity by photocopying them.It is important to prevent unauthorized access by spies who may try to blend in with individuals such as telecommunications technicians, office equipment repair personnel, paper recyclers, cleaning crews, electricians, etc. To address this security risk, it is crucial to prohibit such behavior and ensure that a designated representative from your company accompanies these individuals while they are on your property. This will help enforce safety protocols and protect your company's

interests.