China Cyber Espionage Charges Tied to Solar Company With SoCal Office

How the alleged cyber hacking was discovered originally was not disclosed

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    NEWSLETTERS

    Federal officials announced espionage charges against five Chinese military officers on Monday, accusing them of spying on American companies. Among them is one solar energy firm located in Camarillo. Patrick Healy reports for the NBC4 News at 6 on Monday, May 19, 2014.

    When a federal indictment against five Chinese military officers was unsealed and announced Monday by U.S. Atty. Gen. Eric Holder, it did not come as a complete surprise to a solar panel company with a Camarillo office.

    SolarWorld is identified in the indictment as one of the victims targeted for cyber espionage by alleged conspirators in mainland China.

    Thousands of emails and attached documents with proprietary information were illegally accessed by hacking into computer systems in 2012, according to the indictment.

    That summer, SolarWorld Americas was notified by the FBI that a federal investigation
    was underway, said the company's director of strategic affairs, Ben Santarris.

    "The emails that were infiltrated were full of strategic information that would give any competitor a leg up," Santarris said during an interview in the company's Hillsboro, Oregon facility outside Portland.  

    The nuclear energy branch of Westinghouse Electric Company, three major U.S. metals producers and a labor union were also targeted by the Chinese conspirators, the indictment alleges.

    "We have a state sponsored entity, state sponsored individuals, using intelligence tools to gain commercial advantage," Holder said.

    SolarWorld  Americas is a U.S.-based subsidiary of the German company SolarWorld AG.  The cyber hacking allegedly targeted correspondence among executives located both at the U.S. headquarters in Hillsboro, and at the office in Camarillo where there was also manufacturing until 2011.

    SolarWorld was already at odds with the Chinese solar industry, accusing it of predatory trade practices.  

    "China has been seeking an unfair advantage," Santarris said, pointing to that
    as the reason SolarWorld was losing marketshare to Chinese manufacturers.

    In 2012, the U.S. Department of Commerce found that Chinese solar exporters had "dumped" solar products in U.S. markets at prices below production cost, hurting the sales of SolarWorld and driving some other American solar manufacturers out of business.

    As a result of its finding, the Commerce Department imposed import duties on Chinese solar products brought to the U.S.  In required filings with the Securities and Exchange Commission, some Chinese companies reported U.S. revenues declined after increases from 2009-11.

    How much further harm SolarWorld suffered from the alleged espionage, Santarris could
    not say.

    "I have no way of knowing what was done with that information," he said.

    The indictment offered this assessment: "Collectively, the data stolen from SolarWorld would have enabled a Chinese competitor to target SolarWorld's business operations aggressively from a
    variety of angles."

    Among the compromised information was correspondence dealing with the unfair trade cases, one of which is still open.  It deals with what SolarWorld calls a loophole in the import duty that Chinese Solar manufacturers have exploited by outsourcing a portion of the process to Taiwan. In so doing, the manufacturers assert they do not have to pay the duty tax.

    The first of a series of findings in that case is due next month.

    Customer databases were not compromised, according to SolarWorld.

    The Americas accounted for slightly more than a fourth of the parent company's total revenues during the first quarter of 2014.

    In recent years, SolarWorld has been forced to make a series of layoffs, Santarris said. From a peak of 1,100 U.S. workers, it is now down to 700.

    "This cyber hacking leads directly to the loss of jobs in the United States," said David Hickston, U.S. attorney for the western district of Pennsylvania, where the grand jury was seated.

    The five military men named in the indictment are described as officers in the same unit of the Third Department of the Chinese People's Liberation Army. 

    China scoffed at the charges as unfounded.

    How the alleged cyber hacking was discovered originally was not disclosed.