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Much has been said and written about the theft of United States nuclear
technology at Los Alamos. However, as detailed in a recently obtained
document produced in a Judicial Watch case by the Defense Threat Reduction
Agency of the Department of Defense, an equally key aspect of the Chinagate
scandal involves the sale of U.S. high technology to the Chinese in exchange
for campaign contributions. A memorandum written on July 7, 1998 by Defense
Department official Michael Maloof reveals how U.S. national security has
been compromised, and how American companies knew or should have known they
were participating in Chinese intelligence operations.

In 1996, Judicial Watch sparked the Chinagate scandal with its continuing
case against the Clinton Commerce Department, uncovering John Huang and
exposing revelations about the compromise of U.S. national security
information. It was the Clinton Commerce Department, then run by Ron Brown,
later by Mickey Kantor, and now by the tainted Secretary Bill Daley (see
Judicial Watch Press Release of Jan. 14, 2000, at
JudicialWatch.org, that lowered barriers
to export of high technology — thanks in large part to campaign
contributions from American high-tech companies wishing to cash in on the
huge Chinese market. Most of these companies participated in and continue to
profit from Clinton Commerce Department overseas trade missions, where they
paid large campaign contributions to make the initial contact with foreign
officials.

The memorandum of Mr. Maloof details the severe damage done to the United
States brought about by the corrupt practices of the Clinton administration.
Judicial Watch is working hard to make sure that dishonest government
officials and their American high tech corporate co-conspirators are held
legally accountable. Congress has not and will not take any real enforcement
action against them, because these companies are in large part currently
funding the 2000 elections for both political parties.

Below is the text of the Maloof memorandum in its entirety. It speaks for
itself and details this treasonous national disgrace brought about by the
criminal conduct of the Clinton administration, and abetted by a
“do-nothing” Republican Congress.

 


The Maloof Memorandum:

After considerable research, you need to know that cumulative exports of
selected sophisticated U.S. technology to China since 1994 have provided the
Chinese military with a nationwide integrated command, control,
communications, computers, and intelligence (C4I) encrypted network that
will serve it well into the next century.

This sophisticated communications infrastructure stems from the
integrated combination of satellite sales, high performance computers and
Asynchronous Transfer Mode (ATM) and Synchronous Digital Hierarchy (SDH)
telecommunications switching technology.

Together, they provide the PLA with a communications infrastructure that
it could not have developed on its own. In addition to aiding China in
switching technology for fiber optic telecommunications nationwide, HPC’s
are also capable of being used to develop or perform encryption for secure
messages.

China also has obtained production equipment to manufacture fiber optic
cable and associated technologies as well as sophisticated microelectronics
manufacturing without U.S. licenses. These technologies are integral to the
implementation of a complete C4I nationwide system.

This network is expansive enough not only to insure the military a
command, control, and communications capability to quell domestic
instability. It also will allow for power projection throughout the region.

In addition to the military, evidence of the use of this C4I network by
Chinese border security forces could raise serious compliance issues
regarding its possible use contrary to munitions license prohibitions.

In addition to military use, the PLA also will be able to use this
telecommunications infrastructure to its economic advantage. With PLA
controlling access to U.S. origin satellites it has purchased (Asiasat and
various Apstars), for example, it also will be able to intercept business
transactions to bolster its own. This development could put the PLA at a
competitive advantage to entities throughout Asia whose telephones use those
satellites under China’s ownership to conduct business.

Based on available data, the array of exports of HPCs, ATMs, and SDH
technologies, satellites and fiber optic and microelectronic manufacturing
technologies provided that infrastructure on which the Chinese military
relies today. The systematic liberalization of U.S. export controls since
1993 and the subsequent lack of licensing data suggest the cumulative
strategic impact of these exports may be greater than first thought.

In addition, the intelligence community has not been privy to a good
portion of the available licensing data in order to make any detailed threat
assessment.

High Performance Computers (HPCs)
Prior to a change in U.S. law earlier
this year, no record was kept on HPC exports between 2000MTOPs and 7000
MTOPs to so-called benign end-users in such third tier countries as China.

With the recent change in law, however, export license applications were
mandated by Congress for HPCs from 2000 MTOPs to 7000MTOPs to China and
other third tier countries.

Prior to the change in Law, congressional testimony revealed that at
least 47 and possibly more HPCs were exported to China. A review by
Commerce, however, only covered certain U.S. HPC manufacturers known to have
exported directly to PRC.

It did not include U.S. companies to which those known U.S. manufacturers
first sold HPC but then may have exported to China. Estimates by at least
one Office of Export Enforcement agent at the Department of Commerce
estimates that the number of HPCs exported to China without a license could
number more than 100.

Nevertheless, in looking at the reported 47, many went to Chinese Post,
Telephone and Telegraph (PTT) facilities.

The type of HPCs exported to China is capable of adding on some 32
processors to each HPC.

The reason given for exporting HPCs to Chinese PTTs was for billing of
telephone services. While this end-use on its face seems reasonable in the
larger cities, information available to us reveals that PTTs are part of the
Ministry of Post and Telegraph, which works closely with COSTIND.

While our databases reveal no information about individual PTTs —
derogatory or otherwise — they do acknowledge the COSTIND-MPT relationship.

Nevertheless, the PTTs for which we have received notification of an HPC
are all located in Chinese military districts. Some of these PTTs may be
some of those which received HPCs prior to the change in law last year. This
would suggest that the Chinese are seeking upgrades in some cases.

Preliminary research conducted by TSO also reveals that there is
considerable military research and development in the vicinity of these
PTTs. This puts PTTs in the position of being convenient gateways for a
number of military users to plug into the HPCs at the PTTs.

Because of a lack of U.S. Government information on Chinese PTTs and
certain other entities in China, I have requested that we obtain license
applications on them in an effort to begin keeping a record.

As you are aware, DIA has been attempting since enactment of the law to
obtain what information it could from Commerce on what HPCs already had been
exported and on the end users. At this writing, that information has not
been forthcoming.

Because we lack a record of these exports, I suggested that we seek a
license application on those HPCs exported to entities, including PTTs on
which we have no information.

To date, that request has been turned down. The argument I have received
is to the effect that because license requests need to be signed off by the
Under Secretary for Policy, he doesn’t want to look at a request unless
there is a “smoking gun” on the ultimate consignee.

As you also are aware, China has refused numerous requests for either
pre-license or post-delivery shipment checks to Chinese entities.
Consequently, our ability to acquire any information on an end-user in China
without separate data can only be done through an export license
application.

ATM and SDH Switching Technology

Acting as gateways for Chinese military communications and R&D, the PTTs
also serve as the location for ATM and SDH switching and transmission
equipment. HPCs are needed to operate the ATM and SDH switching technology.

In 1994, ATM and SDH switching technology was declared GLX. This means
that an exporter does not have to obtain a license application to export
this state-of-the-art switching equipment software and test equipment to
Chinese “civil end-users.” Under GLX, an exporter only has to keep a record
of ultimate consignees, subject to call from Commerce. The Defense
Department has no review role, since a license application is never sought.
Nor does DoD have the legal basis to seek that information from the U.S.
company.

The 1994 decision to allow SDH and ATM switching technology in 1994
occurred over the objections of DoD technical experts. Despite initial NSA
concerns, it was silent when the decision finally occurred.

To date, there is no way to know how much ATM or SDH equipment China has
acquired. From recent published reports, however, it appears that sufficient
technology for ATM and SDH switching has been exported to allow the Chinese
to begin production themselves.

Given the increasing number of HPCs being sought by Chinese PTTs,
however, it would seem reasonable to expect that China has acquired a
considerable number of the ATM switches and SDH transmission terminals for
its fiber optic land lines and microwave links. In many cases, they parallel
Chinese military command, control and communications links. Separate
research is under way to look into this.

Use of U.S. Satellites for Encrypted Communications

With the demise of their satellites in 1996, the Chinese were desperate
to find a substitute for military communications. They had no choice but to
resort to the use of previously purchased U.S. satellites for their
encrypted communications. They were the Asiasat and Apstar 1, Apstar 1A and
Apstar 2r, all made by Hughes.

This decision was just a step in the continuing process to integrate
Hughes equipment for its military — a decision which goes back to at least
1992. Various munitions license applications during 1995 and 1996 reveal an
export pattern of Hughes satellite-related equipment through PLA front
companies. They include SCL, CESEC, and Huaying.

Ironically, many of these exports did not identify these front companies
as being associated with the PLA. From what we now know, Hughes employees in
China were knowledgeable that they were PLA-associated entities. None of
those license applications was referred either to TSO or DIA for proper end
use checks.

The VSAT ground station terminal equipment for use with the Apstar and
Asiasat satellites was supplied and wittingly installed by Hughes for
Chinese ground and rocket forces and the PLAAF. This equipment also was
available to the Ministry of State Security which, among other things,
oversees VIP protection, border security and the rounding up of political
opponents. The VSAT terminals are supplied with an additional port for
encryption equipment which the Chinese can produce. A great boost for the
Chinese to develop encryption also has come from the U.S. high performance
computers it has received and the training in software development.

TSO also had objected to Hughes’ Asia-Pacific Mobile Telecommunications
satellite export applications because of an anonymous tip it received in
late May 1998 that the son of the deputy director of COSTIND was project
manager of APMT at Hughes’ U.S. facility (A 02 Jul 98 news story reveals
that State has suspended that license in view of previous published reports
and Pentagon information which we supplied to State). The son’s name is Shen
Jun. His father, the deputy director of COSTIND, is Shen Rongjun. The APMT
satellite would service some 20 countries in Asia as well as provide mobile
telecommunications throughout China. It would supplement where fiber optic
lines are few, if non-existent. And because it is COSTIND, which controls
APMT/China, the APMT satellite would give the Chinese military access to
telephone intercepts in those 20 Asian countries.

Here, Hughes knowingly provided only partial information in seeking
approval in 1996 for Shen Jun to work at Hughes, even though he had been at
the Hughes facility since 1994. The application stated that he would only be
a translator, although as it turned out he was an APMT project director. In
addition, Hughes reportedly was knowledgeable of who the son’s father was
prior to seeking approval of the license. In fact, the father, in his
capacity as COSTIND deputy director, internally had been pressing for
approval of APMT over competitive systems. And there is every reason to
believe that father and son corroborated on the APMT project.

In seeking approval of APMT, Hughes provided only the Singapore address
of the APMT joint venture between China and Singapore. This had the
deceptive effect of attempting to disassociate the APMT project from the
Chinese military and make it look benign, even though the Chinese sought
configurations on the APMT satellite that would allow for eavesdropping.
However, in April 1998, it was Feng Ruming, a major general at COSTIND, who
publicly announced the APMT project.

In case after case, Hughes has not fully disclosed information which
would have had a bearing on the outcome of a number of its license
applications. Judging from this pattern of behavior, it is my opinion that
Hughes purposely has sought to mislead Defense Department licensing
officials.

In addition, it had come to TSO’s attention that those Chinese who
receive training at the Hughes satellite facility are members of PLA.
Separately, we have found no visas for their coming and going to Hughes. One
disturbing aspect of this is that DIA hasn’t seen visa applications for
Chinese visiting U.S. businesses since March 1998. The reason is unclear,
although I am in the process of checking it out.

And there have been further indications of Chinese military involvement
in high technology exports, particularly with U.S. aerospace entities,
including Hughes.

Liu Chouying, a Lieutenant Colonel in the PLA, had visited the United
States in July 1996 ostensibly to attend a fundraiser for President Clinton
in California. It reportedly was a $10,000-a-person function where she also
had her picture taken with President Clinton. Her father, Liu Huaqing, until
last year was the vice chairman of the Chinese Central Military Commission,
which oversees such Chinese military entities as CLTC (China Launch and
Tracking Control), CASIL (China Aerospace International Holdings, Ltd),
CPMIEC (China Machine Import Export Company), and Great Wall. All these
entities come under COSTIND, the Commission of Science, Technology and
Industry for National Defense, of which Shen Rongjun is deputy director.

Liu Chaoying is vice president of CASIL, which is subordinate to COSTIND.
CASIL is involved in launching satellites. It is Johnny Chung, under
investigation for laundering Chinese money to the Clinton presidential
campaign in 1996, who sponsored her July 1996 visit. Her visit came one
month after President Clinton granted a waiver for the Asia-Pacific Mobile
Telecommunications (APMT) project. This approval followed considerable
pressure from Hughes to the White House to grant it.

Liu Chaoying’s July 1996 U.S. visit also followed technical data
assistance. Hughes-Loral had provided to Great Wall on behalf of the APT
Satellite Company earlier that year on identifying the China Long March-3B’s
failed attempt to launch a Loral satellite. Her visit then gave me pause,
for it told me that there in fact may be other things that the Chinese
military was targeting now that their rocket problem had been resolved.

The tip-off on the APMT that I received helped put the puzzle together.
The Chinese needed help with their satellite communications, since their own
telecommunications satellites weren’t functioning any longer. Indeed, open
source data reveal that they basically stopped functioning or no longer were
reliable by the end of 1996. In addition to the fundraiser for President
Clinton, Liu Chaoying reportedly also was to visit with U.S. aerospace
representatives, appointments set up by Chung.

In addition, Liu Chaoying,a Lieutenant Colonel in the PLA, had set up a
company in 1996 in Torrence, Ca., called Marswell. It was co-located with
Johnny Chung’s fax company in Torrence. Marswell mirrored the company she
created a year earlier called Marswell Investment, Ltd, in Hong Kong.

According to Hong Kong incorporation documents, Marswell Investment Ltd
was created in 1995 with two subscribers, Timeway Ltd and Cheerfit, both of
which are located at the same address as Silver Faith Holdings on Hong Kong
Island. Cheerfit and Timeway are the same two companies which were parent
subscribers of Carrie Enterprises (HK) Ltd. and Carrie Enterprises Overseas
Ltd. Carrie Enterprises is a known PLA front for the PLA’s General Political
Department (GPD), a PLA intelligence unit. The subscriber’s list for
Marswell Investment Ltd in Hong Kong reveals a direct link to the PLA’s GPD
and thereby links Liu to GPD intelligence business operations in Hong Kong.

Liu’s involvement also suggests a direct Chinese intelligence link to
acquire U.S. satellite technology in addition to revealing possible PLA
financial contributions to President Clinton’s’s 1996 reelection.

A further link of China’s telecommunications satellites to the PLA is
through the company which was set up to provide high quality satellite
transponder services for international and Asia-Pacific broadcasting and
telecommunication sectors, APT Satellite Holdings Ltd. APT Satellite
Holdings and APT Satellite Co. own and operate the Hughes Apstar I and
Apstar IA satellites. APT Satellite Co. also had sought Hughes-Loral
assistance in identifying the LM-3B rocket failure. Some of the principal
APT shareholders include China Satellite Launch and Tracking (CLTC) and
China Aerospace Corporation (CASC). It is CASC which owns Liu Chaoying’s
CASIL (China Aerospace International Holdings Ltd). Both entities are
subordinate to COSTIND. In addition, the vice-chairman and President of APT
Satellite Holdings Ltd is He Ke Rang, who similarly is associated with
COSTIND.

Before the Gulf War, China didn’t have an adequate C4I system. Since
1991, China has sought to form a national integrated C4I system, thereby
giving it a highly advanced national telecommunications infrastructure.
Since 1992, PLA communications network reportedly has increased 10 fold. In
addition, the PLA is working hard to integrate its telecommunications
network into civilian communications networks. In addition to serving the
civilian sector, such a C4I network is essential in warfare to link
targeting data with strike assets. The ingredients for this system include
high capacity fiber optics, switching systems, satellite communications
systems and systems integration.

The combination of Hughes satellites and terminals, along with the
pending Hughes APMT satellite export, combined with other U.S. exports of
fiber optic and sophisticated telephone switching technologies and high
performance computers give China such an integrated telecommunications
infrastructure. This development raises the further question of whether the
ultimate return for U.S. national security is worth this policy approach
toward China.

Michael Maloof
07 Jul 1998

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