1st economic espionage trial set in Calif.

[June 01, 2009]  SANTA ANA, Calif. (AP) -- Dongfan "Greg" Chung developed a reputation as an innovator during his three decades as an engineer for Boeing Co. and Rockwell International.

Federal prosecutors say he was also a hardworking spy.

On Tuesday, Chung is scheduled to become the first person to stand trial under the Economic Espionage Act, which was passed more than a decade ago.

Prosecutors say the Chinese-born Chung, 73, stole hundreds of thousands of pages of highly sensitive documents on the U.S. space shuttle, Delta IV rockets and the C-17 military troop transport, then relayed the secrets to contacts in China.

He is free on $250,000 bail after pleading not guilty to eight counts of economic espionage, three counts of lying to a federal agent and one count each of conspiracy, acting as a foreign agent and obstruction of justice.

Prosecutors filed a motion late last week asking the judge to drop two economic espionage charges related to the C-17 transport plane and two counts of lying to a federal agent.

U.S. District Judge Cormac J. Carney, who will hear the case in a non-jury trial, has yet to rule on the request.

Prosecutors declined to comment about the upcoming trial. Chung's defense lawyers did not return calls or e-mails seeking comment.

Experts in trade secrets litigation and U.S.-China relations who have followed the case say the scope of the alleged spy work since the late 1970s likely led the government to prosecute Chung under the tougher statute to send a message to other spies and to China.

Richard Fisher, a senior fellow with the Virginia-based nonpartisan International Assessment and Strategy Center, said Chung's expertise and long tenure at Boeing would make him particularly dangerous.

"This man had a deep breadth of experience in some of the most classified, high-tech, cutting-edge American aerospace programs you can imagine," Fisher said.

Six other cases have been charged under the Economic Espionage Act since it passed in 1996, and all have settled before trial. Another case, involving the alleged export of sensitive computer chips to China, is scheduled for trial June 17 in U.S. District Court in San Jose.

The legislation was crafted to address what law enforcement believed were an increasing number of foreign countries trying to steal U.S. intellectual property, both military and commercial.

Edward J. Appel, a former FBI agent and former director of counterintelligence programs for the National Security Council, said the alleged activities by Chung could be terribly damaging for the U.S. and for Boeing.

"Since about 1990, we've been engaged in a huge economic war (with China). We've gotten hurt, we've really gotten beat up," said Appel, now chief executive of a private intelligence company called iNameCheck LLC.

"Not all countries play this intellectual economic game the same way ... and it's very easy to steal information from a company if you are a trusted insider," he added.

Appel worked to pass the counterespionage legislation in the 1990s.

Boeing spokesman Daniel Beck declined to comment on the case, except to say the company had cooperated with the investigation.

Court papers filed by Chung's defense lawyers suggest they might seek to prove the information he is accused of taking did not qualify as trade secrets or that he did not know it was secret.

The papers also indicate his attorneys might argue that Boeing did not do enough to protect the information.

Chung worked for Rockwell International until it was bought by Boeing in 1996 and remained with the aerospace giant until he was laid off in 2002. He was brought back as a consultant on stress analysis after the Columbia space shuttle disaster in 2003 and was fired when the FBI began its probe in 2006.

The government believes Chung began spying for the Chinese in the late 1970s, just a few years after he became a U.S. citizen and was hired by Rockwell.

In a letter cited in court documents, Chung allegedly explains to a Chinese contact that he sent three sets of volumes dealing with flight stress analysis to China via sea freight and discusses what prosecutors say is his motive.

"Having been a Chinese compatriot for over thirty years and being proud of the achievements by the people's efforts for the motherland, I am regretful for not contributing anything," according to the letter to the contact at the Harbin Institute of Technology in northern China. "I would like to make an effort to contribute to the Four Modernizations of China."

Prosecutors say they discovered Chung's activities while investigating the case of another suspected Chinese spy, Chi Mak. Searches of Mak's house turned up an address book and a letter containing Chung's name, authorities say.

Mak was convicted in 2007 of conspiracy to export U.S. defense technology to China and sentenced to more than 24 years in prison.

When agents searched Chung's house in the fall of 2006, they discovered more than 225,000 pages of documents on Boeing-developed aerospace and defense technologies, according to trial briefs.

The technologies dealt with a phased-array antenna being developed for radar and communications on the U.S. space shuttle and a $16 million fueling mechanism for the Delta IV booster rocket, used to launch manned space vehicles.

Agents also found documents on the C-17 Globemaster troop transport used by the U.S. Air Force as well as militaries in Britain, Australia and Canada, the documents state.

[Associated Press; By GILLIAN FLACCUS]

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