SILICON VALLEY FENDS OFF 'CLOAK AND DATA'

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00965R000302330041-9
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 3
• Document Creation Date: December 22, 2016
• Document Release Date: November 8, 2012
• Sequence Number: 41
• Publication Date: September 30, 1985
• Content Type: OPEN SOURCE

J
Declassified in Part - Sanitized Copy Approved for Release 2012/11/08: CIA-RDP90-00965R000302330041-9
PTIOL.E. ART'EARED
ON PAGE
WASHINGTON TIMES
30 September 1985
I Silicon Valley fends
off 'cloak and data'
First of two parts.
By Bill Gertz
THE WASHINGTON TIMES
SUNNYVALE, Calif. ? A
research engineer, engaged in top
secret work for Ford Aerospace and
Communications Corp., was dining
alone at a restaurant during a recent
overseas business trip ,when a Euro-
pean approached the table and intro-
duced himself in flawless English.
"He just sat down, struck up a
conversation and very pointedly
didn't wake any time [describing'
the type business trip he was on and
the type of work he was involved in,"
said Jerry E. Guibord, security man-
ager at Ford Aerospace, a major Sili-
con Valley defense contractor.
The engineer, an experienced and
wary traveler with security
clearance, suspected that an intel-
ligence agent was attempting to
recruit him. He reported the inci-
dent to Mr. Guibord.
Later, Mr. Guibord said, it was
determined that the man was not the
salesman he had portrayed himself
to be, but a suspected spy for one of
the Soviet intelligence services, the
KGB or its military counterpart, the
GRU.
The case was one of six reported
attempts to recruit Ford Aerospace
employees within the last four years,
Mr. Guibord said. It highlights the
growing problem of espionage tar-
geted against Silicon Valley, the larg-
est concentration of high-tech
industry in the United States.
The Central Intelligence Agency, in a report issued
earlier this month, provides the most detailed picture to
date of how the Soviet Union targets high-tech compan-
ies, many in California, for everything from micro-
electronics production equipment to the technology
used in maneuvering missile warheads.
The Soviets scored a major success when they
"reverse-engineered" their own version of the powerful
8080A 8-bit computer microchip first developed by Sili-
con Valley's largest chip manufacturer, Intel Corp.,
according to the OA.
They even tried to buy a bank near the valley in order
to collect financial information on Silicon Valley resi-
dents that could be used to recruit high-tech workers,
according to Miles Costik, a private strategic-trade
expert. The deal fell through when Moscow's role in
providing $70 million in credit became public.
Silicon Valley is a string of suburban enclaves located
along a 30-mile strip from the south end of San Francisco
Bay to San Jose. Its more than 1,500 high-technology
companies represent the largest concentration of elec-
tronics and computer manufacturers in the United
States.
Ten of the top 100 U.S. defense contractors listed in
the CIA report as primary Soviet targets operate high-
tech plants in Silicon Valley, including Ford Aerospace,
Hewlett Packard Co., ITT Corp., Teledyne Inc. and
Gould Electronics Inc.
Fifteen more high-tech defense contractors on the
Soviet target list are located a few hundred miles south
in the Los Angeles area.
Soviet-backed military and industrial espionage con-
tinues to be a growing problem for the region, according
to federal officials and private security experts.
Thirty years ago, FBI agents had an easier time iden-
tifying Soviet bloc spies by their heavy Slavic accents
or ill-fitting suits. Now the Soviets employ a wide range
of highly educated people cloaked as Soviet bloc
exchange students, visiting academicians, trade and sci-
entific delegates, legal immigrants and "illegal" agents
disguised as nationals of countries friendly to the United
States, the security experts said.
"They don't just come [here] under the guise of Soviet
students or Soviet nationals," Mr. Guibord said in an
interview at the Ford Aerospace plant here. "They come
under the guise of representatives of some other coun-
try that is not necessarily friendly to the Soviet Union.
"That's the way they do their job here and they do it
very effectively, from the many cases we have," he said.
Mr. Guibord said Ford's combined 5,700 employees in
Sunnyvale and Palo Alto constantly are made aware of
espionage threats through the corporation's security
education programs. The programs feature film presen-
tations on computer security ? one film is called "Cloak
and Data" ? and lectures on Soviet recruiting tactics
and KGB technology "wish lists."
Because it conducts research on top secret communi-
cations used in nuclear and conventional warfare, Ford
Aerospace is regarded as a key espionage target of the
Soviet Union, said Mr. Guibord.
The CIAs new report on Soviet industrial espionage
lists Ford Aerospace as the 22nd most important tech-
nology target. General Electric Co., Boeing Co. and Loc-
keed Corp. were listed as the top three, in that order.
The West Coast spy attack is carried out by the Soviet
KGB, the GRU and a host of Soviet bloc surrogate intel-
ligence, trade and scientific agencies, according to intel-
ligence sources.
The CIA also has identified three major Soviet
agencies?Mt are used to collect technology and data
from open sources through visits to the West: the Soviet
Academy of Sciences, the State Committee for Science
Continued
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2.
and lechnology and the State Committee for Foreign
Economic Relations.
"They and others help send approximately 2,000
Soviet-bloc citizens to the United States each year in a
non-tourist status," the CIA report stated. It also charged
that many of these peolfro F"have been co-opted to some
degree by the Soviet intelligence services" in the tech-
nology collection effort.
Besides the Soviets, agents from China ? from both
Taiwan and the People's Republic of China ? Japan,
France, Israel and Korea also conduct industrial espi-
onage here but with far less critical national security
implications, FBI officials said.
The extent of Soviet bloc espionage in Silicon Valley
was first brought to public attention in the celebrated
1983 espionage case of James Durward Harper- Jr.
iHarper, a Silicon Valley engineer, married the secretary
to the president of a defense contractor that handled
some of the Air Force's most secret U.S. ballistic missile
defense secrets.
According to the CIA report, Harper worked as an
agent of the Polish Tritaligence service for 10 years
between 1971 and 1981. The couple sold the -missile
defense data for $560,000 to a Polish colonel working
under cover in Silicon Valley as a Polish Machine Indus-
try official.
Harper was arrested in 1983 and later was convicted
for espionage after offering to work as a double agent
for the ca.
West Coast FBI Agent R. Patrick Watson said all of
the secrets sold to the Polish colonel "went immediately
to the Soviets."
"In the Harper case, the information on ballistic mis-
siles .. . was analyzed by Soviet technicians and the
tasking was set by Soviets, so sometimes it blurs on
whether you're dealing with Polish or Soviet [agents] ?
it's going to the same people," Mr. Watson said in an
interview in his San Francisco office.
The Polish colonel and another Polish agent who han-
dled the case were awarded medals by the late Soviet
leader Yuri Andropov. Mr. Andropov was head of the
KGB at the time, one intelligence source noted, adding
that the espionage collaboration occurred at the height
of Poland's attempt at liberal reforms during the period
of the Solidarity trade union movement.
The CIA report on technology transfers listed the
Harper case asone of the five most successful espionage
operations aimed at netting Western technological
secrets. It states that Harper's wife had access to the Air
Force's Ballistic Missile Defense Advanced lbchnology
Center through the center's contract with a small elec-
tronics firm called Systems Control Inc. in Mountain
View, near Sunnyvale.
"Harper provided dozens of documents on potential
U.S. ballistic missile defense programs, ICBM basing
modes, and related technology [and] afforded the Soviets
a unique look at potential U.S. future systems concepts,"
the report said.
Richard Niemi, a Ford Aerospace security official in
Sunnyvale, said the Harper case jolted Silicon Valley
industry executives "from management on down" into
realizing the scope of Soviet espionage efforts.
"First and foremost, the Harper case brought it home
to the valley" Mr. Niemi said.
"We started checking our subcontractors list to see if
Harper had worked for us," Mr. Guibord of Ford Aero-
space said. "That woke a lot of people up. They started
asking, 'Could it happen to us?'"
As a foreign counterintelligence specialist who has
tracked Soviet spies for nearly 20 years in New York,
Washington and now San Francisco, FBI Special Agent
Watson said the official Soviet presence in California,
though smaller than the Soviet's East Coast operation, is
still very active. He estimated that one-third of the 45 to
50 diplomats and an unspecified number of staff at the
Soviet Consulate in San Francisco are intelligence offi-
cers.
"But proportionately, if you look at the size of their
establishment here, I think you'll see the same type of
effort being made," Mr. Watson said.
Nine hundred eighty Soviets work at diplomatic and
consular offices in the United States, including 153 non-
diplomatic office and maintenance workers in Washing-
ton and San Francisco, according to the State
Department. Besides the diplomatic presence, 90 Soviet
journalists and commercial representatives work in the
United States.
"They're. not really targeting Silicon Valley," he said.
"They are targeting information and people that work in
the Silicon Valley."
The Soviet intelligence service is "a worldwide opera-
tion," Mr. Watson said, and it is hard to measure how
active they are in one location since the Soviets use
agents all over the world to prepare for a single
recruitment, most often outside the United States.
East European and Cuban intelligence services func-
tion as integrated surrogates of the Soviet spy apparatus,
he said.
Mr. Watson said more attempts are made to recruit
Americans outside the United States ? in Mexico,
Canada and Europe ? since the GRU and KGB are
"somewhat reluctant" to operate here because of tighter
security.
"They find it easier and less threatening to meet
[agents] in foreign countries, and Mexico is one of those
countries where they meet agents," Mr. Watson said.
Canada and Austria also are key meeting places for the
Soviets, he added.
Moreover, the CIA believes that "East European intel-
ligence services have been more successful than Soviet
intelligence against priority targets in the United States"
because East Europeans are generally perceived as less
threatening, do not often appear to be surrogates for the
Soviets and operate under fewer travel restrictions, the
CIA report stated.
--Along with more traditional espionage techniques of
recruiting financially or emotionally troubled Ameri-
cans, the Soviets recently have relied more on Ameri-
cans who actively seek out Warwaw Pact buyers of
military or industrial technology secrets.
"We've seen more and more of that here in California,"
Mr. Watson said.
As a result, Soviet spies have caused "incalculable
damage" to American national security over the last few
years, he said.
Mr. Watson said the Soviets have suffered some intel-
ligence setbacks, such as the mass expulsions of Soviet
agents from Britain, France and West Germany in
recent years.
But damage to U.S. national security has been greater
as the result of a few key Soviet espionage cases here,
such as the Harper case, he said.
"There's been tremendous damage done to the
national security," he said. Intelligence assessments con-
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ducted in the wake of recent Soviet spy cases remain?
secret, preventing the public from knowing the extent
of the damage from espionage, Mr. Watson said.
Virtually all of the FBI's recent U.S. espionage cases
involve Americans motivated by greed, a sharp contrast
to the espionage cases of the 1950s when communist
ideology often induced spying, Mr. Watson said.
Without elaborating, Mr. Watson said there has been
only one recent spy case where an individual committed
espionage based on an ideological committment to com-
munism.
He attributed the change in spies' motivations to the
"fast lifestyles" created after more than a decade of
prosperity and affluence brought about by the boom in
Silicon Valley's electronics and computer industries.
"I don't think people have changed very much over the
last 20 or 30 years," Mr. Watson said."! think the situation
people find themselves in has changed; [they're] more
susceptible to being recruited, or are succumbing to the
need for money, and the only way they can make money
is [to] sell what they have. And what they have is classi-
fied information."
In the past year, the FBI has arrested 12 people on
espionage charges, including Thomas Patrick
Cavanagh, who wasicaught selling radar-masking tech-
nology to FBI agents posing as Soviets in San Francisco,
Mr. Watson said.
"We're detecting more instances of espionage than,
we've ever detected before ? there's no question about
that," Mr. Watson said.
By contrast, there were only eight espionage arrests
the previous year, two each in 1983 and 1982 and four irr
1981.
The major base for Soviet spying on the West Coast is
the Soviet Consulate in San Francisco, commonly
referred to as "Green Street," where it is located on a
downtown hill. The consulate roof is decked with sophis-
ticated electronic microwave listening devices, similar
to those on the embassy roof in Washington.
SILICON
VALLEY
3
'iWo espionage cases in the last year were linked to the
consulate: former FBI Agent Richard Miller, now on trial
in Los Angeles, allegedly gave his FBI credentials to a
Soviet emigre who took them to the consulate; Mr
Cavanagh tried to contact Soviet agents in San Francisco
in an attempt to sell details of secret "Stealth" aircraft
technology.
Mr. Watson said Soviet officials ? either trade or
scientific representatives ? travel to California about
four times a month in delegations ranging from two to
10 people. Thirty to 35 percent of these visitors are
Soviet spies, he said.
A defector from the Soviet scientific community told
Western intelligence officials he was briefed by the KGB
for eight days on what technology items to look for prior
to a trip to the West.
Emigres also pose an espionage threat. Although the
flow of Soviet emigres has decreased dramatically since
the peak period of the late 1970s, "From a counterintel,
ligence perspective, we do need to be concerned about
the few agents that are dispatched in this manner," Mr.
Watson said.
According to the latest FBI data available, 158,665
Soviet-bloc nationals emigrated to the United States
between 1974 and 1983, including 70,243 Soviets, 48,252
Poles, 20,526 Romanians and 7,719 Czechs. Figures on
East German emigres were not tabulated until three
years ago and were included with West German emigrest
Students also are a potential espionage threat, Mr.
Watson said. Stanford University and other local univer-
sities and colleges have accepted small groups of War-
saw Pact nationals whose travel is not restricted by the
25-mile limit proscribed for Soviet diplomats in San
Francisco.
The CIA report stated that Stanford and the Univer-
sity of Carror- ?nia at Berkeley have been targets of Soviet
technology acquisition programs since the 1970s.
lbmorrow: Silicon Valley grapples with high-tech crime.
Target for high-tech spies
Declassified in Part - Sanitized Copy Approved for Release 2012/11/08: CIA-RDP90-00965R000302330041-9