Former GE Engineer Convicted of Economic Espionage
On April 1, 2022, the Department of Justice (DoJ) announced the conviction of Xiaoqing Zheng of 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 U.S. citizen originally from Nanjing, China, was first arrested and charged in August 2018 with intellectual property theft from General Electric (GE). In April 2019, the DoJ unsealed a superseding indictment, charging Zheng with economic espionage when it was determined the information which Zheng had purloined was benefiting China and Chinese government-controlled entities, and not simply private entities with which Zheng was engaged. These entities included the two entities in which Zheng had ownership—Liaong Tianyi Aviation Technology, or LTAT, and Nanjing Tianya Avi Tech (NTAT)—as well as Shenyang Aeroengine Research Institute and 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 requested corporate approval, which raised internal GE eyebrows and, following a corporate review, determined there were areas of concern. Yet, the company did not ask Zheng to make any adjustments. The arrest in 2018 was clearly a case of Zheng Moonlighting in China with GE’s Intellectual Property gone sideways. Indeed, the criminal investigation into Zheng’s pilfering of GE’s intellectual property showed he had copied 19,020 GE files to a USB drive and encrypted 400 files (which are unidentified) to his GE desktop using Axcrypt.
GE’s infosec team detected the Axcrypt app and began monitoring Zheng. They discovered him encrypting 40 files and were able to capture the encryption key (they were, after all, monitoring him). With that information in hand, they then discovered the 400 encrypted files contained Excel spreadsheets and MatLab files—math computations related to his work.
The indictment alleging economic espionage was unsealed in April 2019 and it was clear that the fleecing of GE was motivated by more than just greed; it was backed by China. Zheng worked within 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 pursue prosecution,” stated FBI Special Agent in Charge Janeen DiGuiseppi.
For those keeping score, this is the second conviction of an individual on charges of economic espionage targeting GE’s technology on behalf of China within the past six months. In November 2021, Chinese Ministry 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) an individual with whom he believed his relationship had advanced to the point where Zheng would provide GE’s secrets. Instead, when Xu arrived to meet with Zheng in Belgium, he was arrested, eventually extradited and found guilty.
While GE is protecting its intellectual property with its eyes wide open, all companies should take note of the modus operandi used by Zheng in his multiyear successful exfiltration of information, sufficient to create a competing entity in China and to satisfy the thirst for technology from the People’s Republic of China.
