CORPORATE TARGETS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP97B00368R000100080007-3
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 3
• Document Creation Date: December 22, 2016
• Document Release Date: September 20, 2011
• Sequence Number: 7
• Publication Date: June 17, 1991
• Content Type: OPEN SOURCE

Approved For Release 2011/09/20 :CIA-RDP97B00368R000100080007-3
mice of Current Production and Analytic Support
CIA Operations Center
News Bulletin
Wall Street Journal pg. Al
Corporate Targets
As Cold War Fades,
Some Nations' Spies
Seek Industrial Secrets
---
TheyMay Intercept Messages,
Plant Moles to Get Data
Useful to Own Companies
Caterpillar Resorts to Codes
By WILLIAM M. CAELEY
irafj Reporte+ of Trrr. w'ALL SrwsrT Jovrt>+wr.
In Houston's posh River Oaks section, a
guard at an executive's home recently no-
ticed two men grabbing bags of trash and
throwing them into a van. As the van
roared oH, the guard scribbled down the li-
cense number, which was traced to the
French consulate in Houston.: Bernard
Guillet, French consul general, now says
6e and an assistant were only picking up
bags of grass cuttings to fill a hole dug for
a consulate swimming pool that couldn't be
completed because of a zoning dispute.
But going through trash is routine for
Intelligence operatives. Federal Bureau of
Investigation agents suspected that French
Mtelligence was after documents discarded
by corporate executives living nearby-
documents possibly containing information
useful to F7~ench companies.
Going through garbage isn't ilkgal. and
the FBI says only that it found no violation
of U.S. law. Mr. Guillet calls suspicions of
espionage "ridiculous." Nevertheless, the
episode i1ltLStrates why some U.S. compa?
hies increasingly suspect that foreign intel-
ligence agencies, working for nations tradi-
tionally friendly as well as those often un-
friendly. are seeking to scoop up sensitive.
potentialty valuable information.
Tempting Target
"The U.S. is ahead in many technolo-
gks," making it a tempting target, says
Stansfield Turner, director of the Central
Intelligence Agency under President Car
ter. The retired admiral says that while at
the CIA, he saw "a number of instances"
of foreign intelligence agencies getting
data from U.S. companies, "and I think
that's increasing as it's rapidly becoming
one big interactional market out there."
June 17 1991
U.S. corporations have bng battled for-
eign companies trying to get their trade se?
crets. of course. International Business
Machines Corp., for example, has been a
target of Japanese computer makers try-
ing to steal technical data. But compared
with companies, government intelligence
agencies have tar greater resources.
According to current and former U.S.
officials, several foreign intelligence serv-
ices are intercepting overseas communica?
lions of U.S. companies, including telexes,
facsimile messages and phone calls. either
by capturing satellite signals or picking up
transmissions passing through govero?
mentowned telephone exchanges.
Employees Recruited
lntelltgence services also recruit na-
tionals working for U.S. subsidiaries
abroad to act, in effect. as spies. Last
year, a French magazine reported that
French employees of IBM and Texas ln?
atrumenu Inc. handed over company docu?
menu to French intelligence agents, who
in turn passed them on to a French com-
puter maker.
And some foreign intelligence agencies
do "bag jobs," searching briefcases and
luggage that executives leave in hotels. A
former FBI agent based in Asia says intel?
ligence agents for China often go through
briefcases in Hong Kong hotels, photo-
graphing anything that looks interesting.
It's nearly impossible to measure how
much data U.S. companies are losing to
foreign iI-telligence services. "They may
be getting your most confidential market-
ing strategies by intercepting satellite
transmissions, and there's almost no way
you can find out," says Ncel Matchett, a
Silver Spring, Md., consultant formerly
with the National Security Agency. NSA is
the defense agency that intercepts foreign
and protects U.S. communications.
A 11~or (Mange
But many view the problem as serious.
Oliver Revell. until recently FBI associate
deputy director, says some foreign ~~r~~
kes "are gearing their whole apparatus to
collect our proprietary information." Mr.
Revell cites a recent item in the Soviet
press, in which a KGB official says the spy
agency will begin collecting "economic"
information for Soviet enterprises.
Approved For Release 201
At the behest of the Senate Intelligence
Committee, the CIA has been studying just
bovv serious the threat is. Meanwhile, the
FBI, says Deputy Assistant Director R.
Patrick Watson, is reorganizing its coun?
terinteliigence division to go after more
than Soviet spies stealing military secrets.
The new goal, he says, is to cover, "across
the board," foreign intelligence agencies
that might steal corporate technology that
fs unclassified but still critical. Later this
year, he adds, FBI agents will begin inter-
viewing scientists and engineers at U.S.
companies to try to determine how such
technology is bst and how to stop it.
Some U.S. co1r-panies aren't sailing.
Caterpillar Inc. has begun putting nearly
all its overseas communications in code.
Du Pont Co. has hired James Geer, who as
chief of the FBI's counterintelligence di~i?
sion until 1989 was in charge of foiling
spies. Boeing Co.'s security department
has warned executives traveling abroad to
keep a tight grip on sensitive documents,
never leaping them in hotels.
The long history of industrial espionage
by French intelligence services illustrates
what U.S. companies are facing. Over 10
years ago, a sales team for a L'.S. high-
tech company traveled to Paris to offer Air
France a device to upgrade its planes' per?
formance. The innovation was considered
so secret that there were only five copies
of a document detailing the device, its
costs and the sales team's negotiating
strategy.
But at a meeting with the U.S. sales
team,. an Air France official asked ques?
lions that indicated he already knew what
was in the document. Asked about it, he
admitted he had read it.
The executive heading the U.S. sales
team was furious. But jottings on the copy
eventually returned by the airline official
indicated that it was the American execu?
five's own copy that had been reproduced
and turned over to Air France.
How? "It was the hotel maid," says the
U.S. company's security director. While
the U.S. executive was out for an evening
in Paris, the maid, working for French in?
telligence. removed, copied and replaced
the document. Then, French intelligence
gave the copy to government-owned Atr
France, the airline official said. Air
France didn't respond to repeated requests
for cbtrurtent.
 Approved For Release 2011/09/20 :CIA-RDP97B00368R000100080007-3
A Bug Is Found
Though caught in the act, the French
haven't dropped such tactics. At the head-
quarters of IBM-France in Paris several
years ago, a "bug"-a tiny transmitter-
was found in the president's office. At first.
IBM security men assumed that a competi?
for had planted it.
But then doubts developed about the
Frenchman on the IBM security staff who
had discovered the bug. "How often do you
walk into the president's office and within
15 minutes find a bug? Hardly ever." says
an American familiar with Ne case.
The F?enchman on the security staff
also turned out to have close connections
with the government. "He could get gov-
ernment permits in hours where it nor?
many took the company days," the Ameri-
can says. The Americans eventually con-
cluded that the Frenchman had been ei-
ther planted on the security staff or re-
cruited there by French intelligence and
that he had "discovered" Ne bug to estab?
lash his credibility within IBM.
Although an IBM spokesman declines to
comment, the American familiar with the
case says the French security official is no
longer with the company. But the official
quickly got another top security job-at a
French aerospace company linked to the
French government.
Whether or not IBM was right in this
case. French intelligence undoubtedly is
still collecting tnformation by recruiting
French citizens working for American
companies. "Our (French ]employees, es-
pecially those who have served in Ne
French military, tell us that they are vis-
ited regularly by French intelligence
agents," says the securi director of an
American company. The a~ents' "pitch is
patriotism, and their questions are, 'What
are your business plans, what are your re-
search projects?' "
Divided Loyalties
This technique raises touchy issues. If a
foreign employee is approached by his own
government, another security director of a
U.S. company says, "you have a man on
the horns of a dilemma. What is this man
going to do?"
Just one recruit can do a lot of damage,
as last year's disclosure involving Texas
Instruments and IBM illustrates. At TI's
facility near Nice, headquarters for its
semiconductor and computer operations N
Europe, one company official was giving
French intelligence unusually sensitive
technical information. It was passed on to
the French government-owned computer
firm Cie. des Machines Bull, said
L'Express, the French magazine. Two U.S.
government officials confirm this.
TI declines to comment. Bull says its
management doesn't know of any data
passed to it. It also has repeatedly denied
any involvement in espionage against IBM
and says such activity would contravene
company policy. The French Embassy in
Washington says neither intelligence nor
political officials will comment.
Similar information was siphoned out of
IBM and passed to Bull, a U.S. govern-
ment official says. According to ~ L'Ex-
press, FBI agents confronted French em-
ployees of Ne two companies during the
employees' visits to Ne U.S. When some
delved feeding information to French intel?
Iigence, the FBI specified the information
transmitted and locations where the em-
ployeeswould rendezvous with intelligence
agents. Faced with specifics, employees
admitted their actions. They were fired. As
in the TI case, the French Embassy won't
ootrtment.
As spying has begun shining to eco-
comic subjects, the targeted companies
have changed, too. Instead of a McDonnell
Douglas Corp. assembling a hot new
fighter plane, Ne targets now are more
Wcely to be in basic research and develop-
ment. the FBI's Mr. Revell says. Among
probable targets are companies_such 85
Corning Inc. and its fiber-optic technology;
Du Pont and its polymers, coatings and
lightweight but high-strength materials; or
IBM's electronics research. "We can't just
lock up defense plants; Ne problem gf pro-
feeling critical technology !s much broader
than that," Mr. Revell says.
Other Likely TarSets
In addition to high-tech companies,
-other likely targets are companies such as
Bechtel Group Inc. that bid on big over-
seas engineering projects. If a foreign in-
telligence service intercepted a phone call
or fax containing the U.S. company's bid
information in advance o[ the final bidding
date, a competitor could use the data to
underbid the U.S. company. Or the bidding
strategy could be passed to a customer,
perhaps allowing it to wangle a lower price
from the U.S. company. Bechtel. says one
U.S. security consultant, is "extremely
concerned"; a Bechtel spokesman says
only that "it's a genuine issue."
Often companies aren't sure they're tar-
gets. Though lacking hard evidence, Cater-
plllar officials became convinced their
messages were being intercepted aver ex-
amining the pattern of overseas bidding,
an industry official says. "It's amazing
how close the competitors' bids were." he
says. A Caterpillar spokesman declines to
comment on this but says the company has
been using code since switching to sateWte
communications vulnerable to interception
in late 1988.
U.S. companies are trying various de?
Tense tactics. When executives of one U.S.
concern travel to certain countries, Ney
now seek anonymity. the security director
says. They fly on commercial carriers
rather than Ne corporate jet and make
plane and hotel reservations at the last
minute so foreign agents can't easily ar-
range to put them under surveillance.
At American Telephone & Telegraph
Co., a manager about to make an initial
business trip abroad is put through ahalf-
day seminar by the security department.
Among tips: Don't use a laptop computer
on the plane Il a seatmate might read sen?
chive material.
Some companies also are Increasing use
of secure phones, which scramble conver-
sations. In late 1969, TRW Inc.'s electronic-
products subsidiary began producing a de?
vice that encodes fax messages. It has sold
several thousand, including nearly ti0 to
one U.S. multinational, says Paul Graham,
an official at the TRW unit.
Increasing security of information, how?
ever, isn't always easy. Many scientists
and engineers believe in Ne free flow of
ideas to further scientific progress. Secu?
city directors say top managers, asked for
bigger security staffs or expensive encod-
ing devices, oven don't want to spend the
money, and worry that foreign govern-
ments with sophisticated intelligence serv-
ices can crack corporate codes anyway.
And other considerations can intervene.
The security director of one U.S. elec?
tronics company says he recently sug-
gested that a new device be developed fn
Europe rather than Japan, for fear the in-
vention might be stolen by Japanese intel-
ligence agents or competitors. But his U.S.
bosses rejected the idea because they think
the best research N that area of elec-
tronics is being done in Japan and because
developing the product there would help
penetrate the big Japanese market.
Once a company feels threatened, how-
ever, nothing is too trivial to protect. Gen-
eral Electric Co.'s jet-engine division,
based in Cincinnati, is installing fax-encod?
ing devices in its offices around the world;
units are already operating in Israel, Ja-
pan, Britain and Turkey. When queried for
this newspaper article, GE's Cincinnati of-
ficials fired off messages about the article
to company executives abroad. Even these
messages were sent N code.
Approved For Release 2011/09/20 :CIA-RDP97B00368R000100080007-3
 Approved For Release 2011/09/20 :CIA-RDP97B00368R000100080007-3
Should U.S. Agencies Spy
O~'n Foreign Corporations?
~+vQ WALL, STREET .~OVRNALSLCJJ 1t~portK
Since some foreign governments spy
on U.S. corporations, why shouldn't U.S.
agencies spy on foreign companies?
Some in the U.S. intelligence commu-
nity advocate that. They want to level
the playing field in world markets.
the Defense Department. Gen. Odom,
now with a Washington think tank, says
that even ii U.S. spy agencies got data
from foreign firms, which U.S. company
would be given the data? Moreover. U.S.
spying would anger friendly nations.
M executive at one Dig U.S. com?
Pant says he was recently approached
by a Central Intelligence Agency official
seeking support for the idea. In return,
the CIA man suggested, the company
might be fed data gleaned from foreign
companies. The executive says his com-
pany rejected the idea. A CIA spokes-
man says, "We're not in the business of
industrial espionage, and we're not out
soliciting support for that."
The idea, in any case, is controver-
sial. "It's the dumbest idea I ever heard
of." says retired I.t. Gen. William
Odom, former director of the National
Security Agency, which eavesdrops for
Approved For Release 2011/09/20 :CIA-RDP97B00368R000100080007-3