WASHINGTON -- The U.S. Justice Department said Monday that it had charged five men in China's People's Liberation Army in connection with stealing trade secrets from some of the largest U.S. companies, including Alcoa World Alumina, Westinghouse Electric Co. and U.S. Steel Corp.
The move marked a rare instance of the United States charging foreign-government employees with economic espionage, and it increased the tensions between U.S. and Chinese officials, who have accused each other in public and in private of using military assets to initiate hacking and cyberattacks.
The authorities said the five men had worked at a 12-story, white office tower on a Chinese army base on the outskirts of Shanghai that was identified in a report last year as a source for many attacks on the U.S. government and corporations.
According to the report, which was released by the U.S. security firm Mandiant, the attacks were coming from Chinese hacking groups, known to many of their victims in the United States as the "Comment Crew" or "Shanghai Group," that were based in that building.
Prosecutors say the hackers in some cases gained access to computer networks by sending emails to company employees that looked authentic but actually contained a link to malicious code.
At a news conference in Washington, senior Justice Department officials said that China should send the defendants -- Wang Dong, Sun Kailiang, Wen Xinyu, Huang Zhenyu and Gu Chunhui -- to the United States to face trial. Those demands, however, were largely symbolic, as the Chinese government, which said Monday that the facts behind the charges were made up, is unlikely to turn them over.
A company's success in the international marketplace should not be based "on a sponsor government's ability to spy and steal business secrets," Attorney General Eric Holder said at the news conference.
"This is a case alleging economic espionage by members of the Chinese military and represents the first-ever charges against a state actor for this type of hacking," Holder said. "The range of trade secrets and other sensitive business information stolen in this case is significant and demands an aggressive response."
John Carlin, an assistant attorney general for national security, said the men had "targeted the U.S. private sector for commercial advantage."
"We allege that members of Unit 61398 conspired to hack into computers of six U.S. victims to steal information that would provide an economic advantage to the victims' competitors, including Chinese state-owned enterprises," Carlin said.
The purported targets also included Allegheny Technologies, the United Steelworkers Union and U.S. subsidiaries of Germany-based SolarWorld.
The new indictment attempts to distinguish spying for national security purposes -- which the U.S. admits doing -- from economic espionage intended to gain commercial advantage for private companies or industries, which the U.S. denies it does.
Unlike in some countries, there are no nationalized U.S. industries. American officials have flatly denied that the government spies on foreign companies and then hands over commercially valuable information to U.S. companies. In China, though, many companies are state-owned, particularly those that supply the military.
In response to the charges, the Chinese government said that its military had never been involved in stealing trade secrets.
"The U.S., fabricating facts and using so-called stealing network secrets as an excuse, announced indictments against five Chinese military officers," the Chinese Foreign Ministry said in a statement. "This is a serious violation of basic norms of international relations and damages Sino-U.S. cooperation and mutual trust."
China has "lodged a protest" with the United States and "urges the U.S. to immediately correct its error and revoke its so-called indictment," it added.
According to the statement, China has also decided to suspend activities of a Chinese-American Internet working group "given the U.S. lack of sincerity in resolving Internet security issues through dialogue and cooperation." China "will make further responses" on the basis of developments, the statement said.
The Justice Department said the men were indicted May 1 by a federal grand jury in Pennsylvania and charged with conspiring to commit computer fraud and accessing a computer without authorization for the purpose of commercial advantage.
Carlin gave examples of the damage reportedly done by the hackers.
He said that while SolarWorld was rapidly losing its market share to Chinese competitors that were pricing exports well below costs, the hackers were stealing cost, pricing and strategy information from SolarWorld's computers. And while Westinghouse was negotiating with a Chinese state-owned enterprise over the construction of nuclear-power plants, he said, the hackers stole trade secret designs for components of those plants.
Monica Orbe, a spokesman for Alcoa, on Monday said: "To our knowledge, no material information was compromised during this incident which occurred several years ago. Safeguarding our data is a top priority for Alcoa, and we continue to invest resources to protect our systems."
In 2013, amid reports that detailed the extent of Chinese hacking of U.S. companies and corporations, U.S. officials tried to pressure the Chinese government to stop its military from compromising U.S. systems.
In September, President Barack Obama discussed cybersecurity issues on the sidelines of a summit in St. Petersburg, Russia, with Chinese President Xi Jinping.
In March, it was revealed that the National Security Agency had created a back door into the computer networks of Huawei, a Chinese telecommunications giant that is considered a threat by the United States. The agency has also tracked more than 20 Chinese hacking groups -- including some from the Chinese army and navy -- that have broken into U.S. government networks and companies. The companies included Google and makers of drones and nuclear-weapon parts.
Kathleen Walsh, an associate professor at the Naval War College, said the indictment announced Monday underscored key differences in the viewpoints of the two nations.
The U.S. has historically considered it a crime to spy on private firms in order to provide commercial advantage, she said. In contrast, China's technology-development strategy embraces all forms of technology transfer, including espionage and cyberespionage.
"Therefore, this indictment is unlikely to fundamentally change China's long-standing technology-development strategy and cyberespionage activities," said Walsh, who stressed that her analysis did not represent the official views of the U.S. government or the military. "It does, nonetheless, raise the costs somewhat, if mainly in diplomatic terms and as a loss of global face."
Information for this article was contributed by Michael S. Schmidt of The New York Times; by Eric Tucker, Matthew Pennington, Ted Bridis, Joe Mandak and Didi Tang of The Associated Press; by Timothy M. Phelps, Julie Makinen and Richard Serrano of the Tribune Washington Bureau; and by Del Quentin Wilber, Chris Strohm and Michael Riley of Bloomberg News.
A Section on 05/20/2014