Owner security

Former GE engineer convicted of economic espionage

On April 1, 2022, the Department of Justice (DoJ) announced the conviction of Xiaoqing Zheng for conspiracy to commit economic espionage following a four-week jury trial. Zheng will be sentenced on August 2, 2022 and faces up to 15 years in prison and a fine of up to $5 million.

Zheng, a naturalized US citizen from Nanjing, China, was first arrested and charged in August 2018 with stealing intellectual property from General Electric (GE). In April 2019, the DoJ unsealed a replacement indictment, charging Zheng with economic espionage when it was determined that the information Zheng had stolen benefited China and Chinese government-controlled entities, and not simply to private entities that Zheng was engaged with. These entities included the two entities Zheng owned – Liaong Tianyi Aviation Technology, or LTAT, and Nanjing Tianya Avi Tech (NTAT) – as well as the Shenyang Aeroengine Research Institute and the Huaihai Institute of technology.

Interestingly, Zheng’s Chinese foray with NTAT began in 2015, when Zheng declared his ownership in a family partnership (along with his brothers) to GE and sought corporate approval, which raised eyebrows. GE internals and, following a review of the company, determined that there were areas of concern. Still, the company did not ask Zheng to make any adjustments. The arrest in 2018 was clearly a case of Zheng Moonlighting in China as GE’s intellectual property got out of hand. Indeed, the criminal investigation into Zheng’s plunder of GE’s intellectual property showed that he copied 19,020 GE files to a USB drive and encrypted 400 files (which are unidentified) on his GE computer at the time. help from Axcrypt.

GE’s infosec team detected the Axcrypt application and began monitoring Zheng. They discovered him encrypting 40 files and were able to capture the encryption key (they were watching him, after all). With this information in hand, they then discovered that the 400 encrypted files contained Excel spreadsheets and MatLab files, mathematical calculations related to his work.

The indictment alleging economic espionage was unsealed in April 2019 and it was clear that the GE scam was motivated by more than just greed; it was backed by China. Zheng worked at GE Power & Water in Schenectady, New York, from 2008 to 2018 and knowingly targeted trade secrets surrounding GE’s steam and gas turbine technology.

“Dr. Zheng used his status as a trusted engineer with GE to conspire to commit economic espionage on behalf of the People’s Republic of China. This conviction should send a strong message that the FBI will continue to vigorously investigate economic espionage cases and to prosecute,” said Janeen DiGuiseppi, FBI Special Agent in Charge.

For those keeping track, this is the second conviction of an individual accused of economic espionage targeting GE technology on behalf of China in the past six months. In November 2021, Chinese Ministry of State Security intelligence officer Yanjun Xu was found guilty of the same activity. His target was GE aviation and his contact within GE was David Zheng (no relation to Xiaoqing Zheng), a person with whom he believed his relationship had progressed to the point where Zheng would provide GE secrets. Instead, when Xu arrived to meet Zheng in Belgium, he was arrested, eventually extradited, and convicted.

As GE protects its intellectual property with eyes wide open, all companies should take note of the modus operandi used by Zheng in his successful multi-year exfiltration of information, sufficient to create a competing entity in China and satisfy the technology thirst of the People of the Republic of China.