By ZACH DORFMAN
SAN FRANCISCO—In the autumn of 1989, during the Cold War’s wan in addition to washed-out lastly months, the Berlin Wall was crumbling—and therefore was San Francisco. The powerful Loma Prieta earthquake, the most destructive to striking the part inward to a greater extent than than eighty years, felled entire flush buildings. Freeway overpasses shuddered in addition to collapsed, swallowing cars similar a sandpit. Sixty-three people were killed in addition to thousands injured. And local Soviet spies, only similar many other denizens of the Bay Area, applied for their portion of the nearly $3.5 billion inward relief funds allocated yesteryear President George H.W. Bush. FBI counterintelligence saw an opening, recalled Rick Smith, who worked on the Bureau’s San Francisco-based Soviet squad from 1972 to 1992. When they discovered that a known Soviet spy, operating nether diplomatic cover, had filed a claim, Smith in addition to several other bureau officials posed equally federal employees disbursing relief funds to encounter alongside the spy. The destination was to compromise him alongside repeated payments, therefore to plow him. “We tin offering your total claim,” Smith told the man. “Come encounter us again.” He agreed.
But the 2nd time, the suspected intel officeholder wasn’t alone. FBI surveillance teams reported that he was beingness accompanied yesteryear a Russian diplomat known to the FBI equally the caput of Soviet counterintelligence inward San Francisco. The operation, Smith knew, was over—the presence of the Soviet spy boss meant that the FBI’s target had reported the coming together to his superiors—but they had to go through alongside the coming together anyway. The 2 Soviet news operatives walked into the role room. The undercover FBI agents, who knew the whole affair had turned farcical, greeted the Soviet counterintelligence chief.
“What,” he replied, “You didn’t hold back me to come?”
We tend to think of espionage inward the the States equally an East Coast phenomenon: shadowy unusual spies working out of embassies inward Washington, or at missions to the UN inward New York; dead drops inward suburban Virginia woodlands, in addition to surreptitious meetings on common benches inward Manhattan’s grayness dusk.
But unusual spies receive got been showing upwards uninvited to San Francisco in addition to Silicon Valley for a real long time. According to old U.S. news officials, that’s truthful today to a greater extent than than ever. In fact, they warn—especially because of increasing Russian in addition to Chinese aggressiveness, in addition to the local concentration of world-leading scientific discipline in addition to applied scientific discipline firms—there’s a full-on epidemic of espionage on the West Coast correct now. And fifty-fifty to a greater extent than worrisome, many of its targets are unprepared to bargain alongside the growing threat.
Fog overtakes the Golden Gate Bridge inward San Francisco. | Getty Images
Unlike on the East Coast, unusual intel operations hither aren’t equally focused on the hunt for diplomatic secrets, political news or state of war plans. The open, experimental, cosmopolitan go in addition to line organisation civilization of Silicon Valley inward detail has encouraged a newer, “softer,” “nontraditional” type of espionage, said old news officials—efforts that to a greater extent than ofttimes than non target merchandise secrets in addition to technology. “It’s a real subtle shape of news collection that is to a greater extent than line organisation connected in addition to oriented,” 1 told me. But this economical espionage is also ubiquitous. Spies “are real much component subdivision of the everyday environment” here, said this person. Another old news official told me that, at 1 betoken recently, a total xx pct of all the FBI’s active counterintelligence-related intellectual holding cases had originated inward the Bay Area. (The FBI declined to comment for this story.)
Political espionage happens here, too. China, for example, is sure as shooting out to bag U.S. applied scientific discipline secrets, noted old news officials, but it also is heavily invested inward traditional political news gathering, influence in addition to perception-management operations inward California. Former news officials told me that Chinese news in 1 lawsuit recruited a staff fellow member at a California role of U.S. Senator Dianne Feinstein, in addition to the source reported dorsum to PRC nearly local politics. (A spokesperson for Feinstein said the role doesn’t comment on personnel matters or investigations, but noted that no Feinstein staffer inward California has ever had a safety clearance.) At the Aspen Security Forum lastly week, FBI manager Chris Wray acknowledged the threat Chinese spying inward detail poses, saying, “China from a counterintelligence perspective represents the broadest, most pervasive, most threatening challenge nosotros confront equally a country.”
Making it fifty-fifty to a greater extent than complicated, said multiple old U.S. intel officials, many unusual intel “collectors” inward the Bay Area are non spies inward the traditional sense of the term. They aren’t based out of embassies or consulates, in addition to may live associated alongside a state-owned line organisation or enquiry institute rather than an news agency. Chinese officials, inward particular, ofttimes cajole or outright threaten Chinese nationals (or U.S. citizens alongside household unit of measurement members inward China) working or studying locally to furnish them alongside valuable technological information.
“You instruct into situations where you lot receive got actually good, actually bright, conscientious people, twisted yesteryear their domicile government,” said a principal safety officeholder at a major cloud storage fellowship that maintains sensitive authorities contracts. U.S.-based Chinese employees of this fellowship receive got had Chinese authorities officials endeavour to “leverage” these individuals’ household unit of measurement members inward China, this soul told me. The fellowship at nowadays requires employees working on sure projects to live U.S. citizens.
As Silicon Valley continues to receive got over the world, the local spy state of war volition only instruct hotter—and the consequences volition resonate far beyond Northern California.
And yet, it’s non clear that the Bay Area—historically famous for its liberalism, in addition to at nowadays infamous for its madcap capitalism—is prepared to handgrip this escalation in addition to these novel tactics. Tech firms, peculiarly start-ups, lack incentives to written report potential espionage to U.S. officials; in addition to businesses in addition to universities are ofttimes ignorant nearly the espionage threat, or therefore attuned to local political sensitivities they may fright beingness defendant of stereotyping if they endeavour to institute to a greater extent than stringent defensive safety in addition to screening measures.
As Silicon Valley continues to receive got over the world, the local spy state of war volition only instruct hotter—and the consequences volition resonate far beyond Northern California. This story is based on extensive conversations alongside to a greater extent than than one-half a dozen old news community officials alongside direct noesis of, or sense with, U.S. counterintelligence activities inward the Bay Area. All requested anonymity to beak over sensitive matters to a greater extent than openly. Influenza A virus subtype H5N1 few other individuals, all of whom worked counterintelligence inward the Bay Area from the early on 1970s through the mid-2000s, agreed to live interviewed on the record.
As 1 old senior news official seat it: “San Francisco is a trailblazer—you reckon the changes in that location inward unusual counterintelligence first. Trends emerge there.” If nosotros desire to empathize a world where Russian Federation in addition to PRC are ramping upwards their spy games against the United States, therefore nosotros require to pay attending to what’s happening inward San Francisco.
Russian news has had an intensive involvement inward San Francisco stretching dorsum to the outset of the Cold War. In those days, the Russians were primarily gathering information on local military machine installations, said old officials, including the Presidio, the strategically located old military machine base of operations assault a wind-swept northern tip of the San Francisco peninsula, overlooking the Golden Gate Bridge.
Since then, Russian operations receive got go bolder, alongside 1 notable exception: the immediate post-Cold War period. “The only fourth dimension in that location was a collective sigh regarding Russia, similar possibly things receive got changed, was nether Gorbachev,” said LaRae Quy, who worked on Russian in addition to Chinese counterintelligence inward the Bay Area from 1985 to 2002. “We fifty-fifty seat inward a large ‘Going Out Of Business’ sign inward the Palo Alto squad room.”
But this optimism speedily faded when Putin was elected inward 2000, recalled Quy, who retired inward 2006. “Russia has been steadily escalating since then.”
As the Bay Area transformed itself into a tech hub, Russian Federation adapted its efforts accordingly, alongside Russian spies increasingly focused on obtaining information on valuable, sensitive or potentially dual-use technologies—those alongside both civilian in addition to military machine applications—being developed or financed yesteryear companies or venture-capital firms based inward the region. Russia’s espionage activities receive got traditionally been centered on its San Francisco Consulate, which was forcibly closed yesteryear the Trump direction inward early on September 2017.
But fifty-fifty alongside the consulate shuttered, in that location are option vehicles for Russian intelligence-gathering inward Silicon Valley. One potential mechanism, said iii old news officials, is Rusnano USA, the sole U.S. subsidiary of Rusnano, a Russian government-owned venture uppercase line solid primarily focused on nanotechnology. Rusnano USA, which was founded inward 2011, is located inward Menlo Park, close Stanford University. “Some of the [potential intelligence-gathering] activities Rusnano USA was involved inward were non only related to the acquisition of technology, but also inserting people into venture uppercase groups, inward developing those relationships inward Silicon Valley that allowed them to instruct their tentacles into everything,” 1 old news official told me. “And Rusnano USA was sort of the machinery for that.”
A visitor at Rusnano’s exhibit at the 2017 Moscow International Open Innovations Forum. | AP
Rusnano’s interests, said this old official, receive got extended to applied scientific discipline alongside both civilian in addition to potential military machine applications. U.S. news officials were real concerned nearly contacts betwixt Rusnano USA employees in addition to suspected Russian news officers based at Russia’s San Francisco Consulate in addition to elsewhere, this soul said. “The Russians treated [Rusnano USA] equally an news platform, from which they launched operations,” said some other old U.S. news official. (Rusnano USA in addition to the Russian Embassy inward Washington, did non response to requests for comment.)
Russia also employs older, tried-and-true methods locally. Intel officials receive got suspected that Russian spies were enlisting local high-end Russian in addition to Eastern European prostitutes, inward a classic Russian “honeypot” maneuver, to get together information from (and on) Bay Area tech in addition to venture-capital executives. Sex workers targeting executives at high-end bars in addition to nightclubs such equally the Rosewood Sand Hill, an ultra-luxury hotel located close many of Silicon Valley’s top fiscal firms—infamous for its raucous, hook-up oriented Th nights—the Redwood Room, a tony bar located inward the Clift Hotel inward downtown San Francisco, in addition to other spots receive got been identified equally potentially reporting dorsum to Russian intel officers, said some other old official. “If I were a Russian news officer, in addition to I knew that these high-end girls were dragging CEOs of major companies dorsum to their rooms, I’d live paying them for information too,” said this person. “It’s that whole thought of concentric rings: You don’t require to live on the inside, you lot only require somebody on the within that you lot receive got access to.”
Russia’s interference inward the 2016 presidential election has given Putin’s regime an outsized role inward the national conversation on espionage. But beak to old intel officials, in addition to many volition say that PRC poses an equal, if non greater, long-term threat. “The Chinese only receive got vast resources,” said Kathleen Puckett, who worked counterintelligence inward the Bay Area from 1979 to 2007. “They receive got all the fourth dimension inward the world, in addition to all the patience inward the world. Which is what you lot require to a greater extent than than anything.” (China's Embassy inward Washington, did non response to requests for comment.)
Because of California’s economical in addition to political importance, equally good equally its large, well-established, in addition to influential émigré in addition to Chinese-American communities, the People’s Republic places smashing weight on its news activities here, said multiple old news officials. Indeed, 2 told me that California is the only U.S. province to which the Ministry of State Security—China’s main unusual news agency—has had a dedicated unit, focused on political news in addition to influence operations. (China has had a similar unit of measurement for Washington.)
And if California is elevated amidst Chinese interests, San Francisco is similar “nirvana” to the MSS, said 1 old official, because of the potential to target community leaders in addition to local politicians who may later on go mayors, governors or congressmen. Their efforts are becoming increasingly sophisticated.
Sometimes these recruitment efforts receive got been successful. According to iv old news officials, inward the 2000s, a staffer inward Senator Dianne Feinstein’s San Francisco plain role was reporting dorsum to the MSS. While this person, who was a liaison to the local Chinese community, was fired, charges were never filed against him. (One old official reasoned this was because the staffer was providing political news in addition to non classified information—making prosecution far to a greater extent than difficult.) The suspected informant was “run” yesteryear officials based at China’s San Francisco Consulate, said some other old news official. The spy’s handler “probably got an abide by dorsum inward China” for his work, noted this old official, dryly.
Or receive got the illustration of Rose Pak. Pak, who died inward September 2016, was for decades 1 of San Francisco’s preeminent political ability brokers. Though she never held elective office, she was famous for making in addition to unmaking mayors, metropolis councilmen (or “supervisors,” equally they’re known inward San Francisco), in addition to pushing metropolis contracts to her allies in addition to constituents inward Chinatown.
According to iv old news officials, in that location were widespread concerns that Pak had been co-opted yesteryear Chinese intelligence, in addition to was wielding influence over San Francisco politics inward ways purposefully beneficial to the Chinese government. Another worry, U.S. officials said, was Pak’s role inward organizing numerous junkets to China, sometimes led yesteryear Pak inward soul in addition to attended (often multiple times) yesteryear many prominent Bay Area politicians, including old San Francisco Mayor Ed Lee, who died piece inward role inward 2017. Political junkets are used yesteryear Chinese news for surveillance (“every unmarried hotel room is bugged,” 1 old official told me) in addition to collection purposes, equally good equally for spotting in addition to assessing potential recruits, said old intel officials. (There is no indication that Pak herself participated in, or had noesis of, specific intelligence-gathering efforts.) Concerns nearly Pak’s links to the Chinese Communist Party occasionally percolated into local political debate, but the news community’s identification of Pak equally a probable agent of influence for Beijing is beingness reported hither for the foremost time.
Occasionally, Chinese news activities inward San Francisco outburst into evidently view. Consider the story—and it is an incredible one, also told hither for the foremost time—of the 2008 Olympic Torch Run. San Francisco was the only U.S. metropolis to host the Olympic torch equally it made its way, tortuously, to Beijing. And Chinese officials were real concerned nearly disruptions to the run yesteryear protesters, equally good equally inward managing the ikon PRC projected to the residual of the world inward the run-up to the games.
So they decided to exit goose egg to chance. According to iii old news officials, Chinese MSS in addition to Ministry of Public Security (MPS) officers flew inward to San Francisco from abroad for the occasion, joining suspected MSS officers based inward the Bay Area. (At the time, the diplomat responsible for Overseas Chinese Affairs at China’s San Francisco Consulate was a suspected MSS officer, said 2 of these old officials.) U.S. officials watched equally Chinese news officers filmed Tibetan monks on their march across the Golden Gate Bridge, in addition to known Chinese spies surveilled a pro-Tibet rally downtown featuring Desmond Tutu in addition to Richard Gere. Chinese spies also recorded participants inward a Falun Gong rally inward Union Square, in addition to shot footage of protestors at the torch run itself.
Most brazenly, said old news agents, Chinese officials bussed inward 6,000-8,000 J-Visa holding students—threatening them alongside the loss of Chinese authorities funding—from across California to disrupt Falun Gong, Tibetan, Uighur in addition to pro-democracy protesters. (They fifty-fifty provided these students alongside a box lunch.) “I’m non sure they would receive got pulled out these stops inward whatever other city, but San Francisco is special” to China, said a old senior U.S. official.
At an Apr 2008 rally for the Olympic torch, a immature supporter of PRC (right) yells at pro-Tibet demonstrators. | AP
Counterintelligence officers possessed advance noesis nearly some aspects of this functioning in addition to observed Chinese news officers, who ofttimes wore earpieces connected to a radio, managing the movements of counterprotesters, directing blocs of pro-PRC students to intimidate, disrupt in addition to overwhelm anti-Beijing protesters across the parade route. Chinese news officers would “communicate alongside each other, in addition to say, ‘We’ve got iii Tibetan monks nearly to practise a reading on Pier 39—I require you lot to displace bloc Influenza A virus subtype H5N1 in addition to bloc B to that location therefore nosotros tin drown them out,’” recalled some other old official. “So they’d displace these groups unopen to to foreclose whatever protests along the Embarcadero.”
“We got pissed off,” said the same old news official, because the Chinese “were interfering alongside the costless aspect of opinion” at the torch relay—their functioning was, inward essence, an sweat yesteryear a hostile unusual news service to forcibly suppress First Amendment activities inward a major American city.
Disagreements betwixt the FBI in addition to the State Department, which counseled a to a greater extent than restrained approach, prevented U.S. news personnel from interfering straight inward Chinese activities during the torch run itself, said this old intel official. (The State Department said it does non comment on news matters.) The same source noted that U.S. news officials did, however, top information nearly the torch run to their Australian counterparts—the torch was later on scheduled to top through Canberra—which denied visas to some of the Chinese news officers responsible for the melee inward San Francisco.
Chinese news has long focused on surveilling, in addition to attempting to control, Chinese nationals studying abroad. One well-documented mechanism for this sweat has been the usage of Chinese Students in addition to Scholars Associations groups on academy campuses. The connectivity betwixt private campus CSSAs in addition to local Chinese diplomatic facilities varies. Some groups are unreceptive to the intercession or influence of Chinese authorities officials, but many consider themselves to live under the direct “guidance” of their local consulate or embassy, receiving funds from these institutions. “Intelligence officers inward diplomatic facilities are the primary betoken of contact for students inward CSSAs,” said 1 old official.
But some of these links betwixt these educatee groups in addition to Chinese officials are covert, in addition to fifty-fifty coercive. In 1 illustration inward the mid-2000s inward the Midwest, a educatee affiliated alongside a CSSA reported some other Chinese student’s contact alongside the FBI to an MSS officeholder operating nether diplomatic encompass inward Chicago, said a old news official. The educatee was speedily flown out of the country. And, roughly one-half a decade agone inward the Bay Area, counterintelligence officials believed that a graduate educatee affiliated alongside the Berkeley CSSA was working for the MSS, in addition to reporting on the activities of other Chinese students on campus, said some other old official.
When it comes to economical espionage inward particular, Chinese news employs a to a greater extent than decentralized strategy than Russian Federation does, old news officials told me. PRC draws from a much larger population puddle to make its objectives—using opportunistic businessmen, ardent nationalists, students, travelers in addition to others alike. One old news official likened China’s approach to an “Oklahoma ground rush”—an endeavour to pick out remove hold of equally much targeted proprietary applied scientific discipline or IP equally possible, equally speedily equally possible, through equally many channels equally possible.
Chinese news also undertakes real intentional efforts to recruit insiders placed within organizations whose technologies they are interested in, said the same old news official. “They are real adept at softly recruiting people, in addition to taking wages of vulnerabilities”—including via threats—“and they are real patient inward putting dissimilar parts of it together. We’ve seen them repeatedly salve coin in addition to fourth dimension that the U.S. spends on enquiry in addition to development.”
The July 2018 arrest of Silicon Valley-based Apple employee Xiaolang Zhang, who allegedly stole proprietary information nearly Apple’s self-driving machine programme to practise goodness his novel employer, a China-based competitor, appears to gibe this pattern. (Zhang was charged alongside theft of merchandise secrets in addition to has non been defendant of whatever espionage-related crimes. He maintains his innocence.)
China “[puts] all their efforts into espionage, in addition to instruct everything for free,” said Kathleen Puckett, a old longtime counterintelligence officeholder inward the Bay Area.
The illustration of Walter Liew, a Bay Area local who was found guilty inward 2014 of selling a highly valuable proprietary pigmentation formula owned yesteryear DuPont to a state-owned Chinese conglomerate, is a clearer example.
Liew was found guilty of violating the Economic Espionage Act, a landmark 1996 federal police force that strengthened penalties for merchandise theft benefiting a unusual government. San Francisco has played an outsized role inward cases involving this law. In fact, the foremost conviction nether the deed occurred inward San Francisco, inward 2006; equally did the foremost sentencing nether the law, inward 2008; equally did the foremost jury conviction—of Liew himself—in 2014. All iii cases involved China.
The Chinese receive got pursued this strategy “brilliantly” for years, said Puckett. “They seat all their efforts into espionage, in addition to instruct everything for free.”
Chinese cyberespionage operations receive got also targeted a number of Silicon Valley-based applied scientific discipline giants. During a number of attacks, 2 old news officials told me, Chinese news straight off sought the files of U.S. companies’ legal counsel or other legal documentation, to access Foreign Intelligence Surveillance Act warrants or National Security Letters previously issued to these institutions. In other words, the paramount Chinese involvement was finding out the extent of the U.S. officials’ noesis nearly China’s ain news operatives—and inward adjusting their demeanour accordingly. “If inward fact the soul inward enquiry was Chinese intelligence,” said this old official, “they could therefore alter their approach.” This strategy began beingness observed during a hack of Google, said 2 old officials, that occurred nearly a decade ago.
While PRC in addition to Russian Federation need the lion’s portion of counterintelligence resources inward the Bay Area, a number of friendly news services are also active inward Silicon Valley, said old news officials. South Korea, according to one, has go “formidable” inward the realm of economical espionage, alongside detail sophistication inward cyberespionage. U.S. officials receive got had to number “stern warnings” to Republic of Korea to “stop hacking” within the United States, said this person. (The South Korean Embassy inward Washington, D.C., did non response to requests for comment.)
Israel is also active inward the Bay Area—but it’s complicated. According to 1 old news official, State of Israel has “a civilization that facilitates in addition to encourages acquisition of targeted companies”—in other words, it volition usage information it has gathered locally to cajole or incentivize private Israeli firms to buy specific start-ups or other Silicon Valley-based tech companies. Throughout the 2000s, said old officials, French news employed a similar strategy.
In an electronic mail response, a spokesperson for the Israeli Embassy inward Washington, D.C., wrote that “the allegations are totally untrue in addition to downright ridiculous. State of Israel does non deport espionage inward the United States.” Influenza A virus subtype H5N1 spokesperson for the French Embassy declined to comment.
There is disagreement, however, within the U.S. news community nearly the amount of resources that should live devoted to what is, inward essence, a “soft” shape of spying yesteryear U.S. allies. “I instruct they essay to instruct advantages from economical espionage,” said some other old senior news official, “but is French espionage worth that much emotional discharge, given what the Russians are upwards to?”
There’s some other large challenge to doing counterintelligence go inward the Bay Area, say these officials: getting the cooperation of local private-sector actors, peculiarly inward tech. Indeed, said old news officials, non only practise many cases of economical espionage non make the prosecution phase here, they ofttimes go unreported entirely.
This has been a longstanding source of friction inward the Valley. “The biggest occupation nosotros had—really, seriously—with a lot of these companies is that they wouldn’t prosecute,” said Larae Quy, the old Palo Alto-based FBI counterintelligence agent who retired inward 2006. “They would receive got an employee sell applied scientific discipline to, say, the Russians or the Chinese, in addition to rather than allow their stockholders or investors know nearly it, they only allow it walk. So, we’ve caught the guy, or nosotros receive got information in addition to we’d similar to receive got it to the side yesteryear side level, in addition to they don’t desire to force it because of the bad press that gets out. It’s the most frustrating thing inward the world.”
Silicon Valley firms go on to downplay, or outright conceal, the extent to which the theft of merchandise secrets in addition to other acts of economical espionage occur, said multiple old officials. “Coming forrad in addition to maxim you lot didn’t receive got controls inward place—that totally impacts shareholder or investor value,” noted 1 old news official. “Especially when you’re dealing alongside startups or mid-level companies that are looking for funding, that’s a large deal. You’re basically announcing to the world, peculiarly if you’re potentially going forrad alongside a populace trial, that you lot were non able to protect your information.”
The open, start-up civilization inward the Bay Area has also complicated U.S. counterintelligence efforts, said old officials, because Russian in addition to Chinese operatives receive got an easier fourth dimension infiltrating organizations without whatever safety systems or hierarchies inward place. These services similar penetrating immature companies in addition to start-ups, noted 1 old official, because “it’s e'er amend to brand it at the basis floor” when seeking to pilfer valuable information or technology.
The exorbitant damage of living inward Silicon Valley, however, agency that opportunities for tech employees—and potential spies or co-optees—to “get inward at the basis floor” are becoming increasingly uncommon. The tech industry, chasing talent in addition to lower overhead, is at nowadays spread to a greater extent than widely across the province than ever before. And this diffusion volition practise novel vulnerabilities. Consequently, places similar Chapel Hill, North Carolina in addition to Boulder, Colorado—both midsized cities alongside thriving tech industries—will probable reckon an uptick inward counterintelligence cases. (One old news official noted that the FBI’s role inward Austin, Texas, has built upwards its counterintelligence capacities.)
But spies volition never exit Silicon Valley. As the region’s global clout grows, therefore volition its magnet-like attraction for the world’s spooks. As 1 old U.S. news official seat it, spies are pulled toward the Bay Area “like moths to the light.” And the part volition aid define the combat for global preeminence—especially betwixt the the States in addition to China—for decades to come.
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