Chinese telecom giant Huawei gained access to U.S. intelligence through adviser

Huawei's Shanghai headquarters

Huawei Technologies Shanghai headquarters. AP photo

An American adviser to China’s Huawei Technologies, the global telecommunications equipment maker linked to the Chinese military and intelligence services, was forced to step down from two U.S. intelligence advisory posts recently after his connection to the company was exposed. 
The case of Theodore H. Moran, a former State Department policy adviser and current Georgetown University financial specialist, is the latest in a series of security lapses within U.S. intelligence agencies caused by trusted insiders. 
It highlights one of the most significant cyber threats: The use of state-run Chinese companies for cyberespionage and cyber-reconnaissance for future conflicts. 
The list of compromises in recent years includes the loss of hundreds of thousands of classified documents to Wikileaks by Army Sgt. Bradley Manning; the compromise of National Security Agency secrets by former contractor Edward Snowden and the compromise of military planning secrets. 
Rep. Frank Wolf, R-Va., revealed Moran’s dual roles as an international adviser to Huawei and an adviser to the National Intelligence Council and DNI Advisory Panel on Foreign Investment in the United States.  
Wolf said in a Sept. 25 letter to DNI James Clapper that Moran’s intelligence adviser roles “should be terminated immediately.”
Wolf said Moran likely helped Huawei “gain greater access to U.S. infrastructure.” 
Some time after the letter was sent in September, Moran gave up both posts, according to a spokesman for the ODNI. The Associated Press first reported the story. 
A spokesman for the Office of the Director of National Intelligence (ODNI) did not return emails seeking comment on whether the intelligence community is conducting a damage assessment or whether secrets were compromised. 
Analysts say a person like Moran, who held a security clearance, could be useful to the Chinese as a source of information and as an influence agent who could skew intelligence assessments about security threats posed to foreign investment in the United States. 
Huawei Technologies, founded by a PLA engineer, three times was denied purchases or joint ventures with U.S. telecommunications companies based on government intelligence reviews that said the company is a security risk. 
Huawei has denied it poses a security risk and has claimed it is a victim of U.S. economic treatment. 
Huawei spokesman William Plummer confirmed Moran is a paid adviser to the company. As for Wolf’s criticism, Plummer said: “Our legislators should perhaps spend more time law-making and less time muckraking.” 
Numerous U.S. government and intelligence reports produced over the past six years identified Huawei as a security threat.  
Moran is a senior fellow at the Peterson Institute of International Economics and a Georgetown University professor at the School of Foreign of Foreign Service. He worked as an adviser to the State Department’s policy planning staff from 1993 to 1994, during the administration of Bill Clinton. 
Moran told AP he was “totally transparent” about his relation with Huawei and informed the NIC in 2010 about his membership on the company’s advisory board. 
“I complied with all conflict of interest reports and procedures of the National Intelligence Council,” Moran said. 
“If he wants to make a lot of money advising Huawei, that’s his prerogative,” Wolf told the AP. “But he shouldn’t be on a critical advisory board that provides intelligence advice on foreign investments in our country.” 
A Huawei policy paper written by Moran in May argued against targeting companies like Huawei based on their national origins “doesn’t nothing for U.S. security in a world of global supply chains.” He also criticized U.S. discrimination against companies like Huawei. 
A House Intelligence Committee report on Chinese cyber espionage identified Huawei and another firm, ZTE as security threats that could facilitate intelligence collection by the Chinese government. The report urged U.S. companies not to use Chinese equipment. 
Telecommunications are not the only vulnerability to Chinese cyber attacks, the House report said. Other infrastructures, including electric power grids; banking and finance systems; natural gas, oil, and water systems; and rail and shipping channels all depending computerized control systems. 
“Therefore, a disruption in telecommunication networks can have devastating effects on all aspects of modern American living, causing shortages and stoppages that ripple throughout society,” the report said. 
“Second, the security vulnerabilities that come along with this dependence are quite broad, and range from insider threats to cyber espionage and attacks from sophisticated nation states.”  
Former CIA and NSA director Michael Hayden has said there is evidence Huawei engaged in espionage on behalf of the Chinese government.
The House report also warned about Chinese intelligence operations through telecommunications. 
“Chinese intelligence collection efforts against the U.S. government are growing in scale, intensity and sophistication,” the report said. “Chinese actors are also the world’s most active and persistent perpetrators of economic espionage.” 
“Further, Chinese intelligence services, as well as
private companies and other entities, often recruit those with direct access to corporate networks to steal trade secrets and other sensitive proprietary data, the report warned. “These cyber and human-enabled espionage efforts often exhibit sophisticated
technological capabilities, and these capabilities have the potential to translate into efforts to insert malicious hardware or software implants into Chinese-manufactured telecommunications components and systems marketed to the United States.” 
Huawei and ZTE “provide a wealth of opportunities for Chinese intelligence agencies to insert malicious hardware or software implants into critical telecommunications components and systems,” the report said. 
Huawei also legally obligated to respond to requests from the Chinese government to use access to systems for malicious purposes under the cover of national security, the report said. 
Other nations also are grappling with Huawei’s reach within the telecommunications market. Australia’s government curbed Huawei from providing telecommunications equipment in that country. Britain’s government also is investigating Huawei, specifically a technology center set up by the company in Britain and whether its access to British telecommunications equipment poses a threat. 
In Switzerland, the government suspects Huawei has engaged in cyber espionage against the government and private sector there. 
Huawei operates a Swiss headquarters near Bern and operates a telecom network for the Swiss company Sunrise. That company’s customers include several key agencies, including the UN European office in Geneva, the European Organization for Nuclear Research. 
The company also operates the networks of several banks. Zurich’s NZZ am Sonntag newspaper first reported the Swiss connections. 
Huawei has been linked by the U.S. government to key cyber attack groups in China. 
For example, in December 2012, Huawei took part in an international conference on cryptology and information security in Beijing. The conference was co-sponsored by the Shanghai Jiaotong University that has been linked to PLA cyber espionage. 
Faculty at Shanghai Jiatong are known to have taken part in research for the PLA’s Unit 61398, the elite cyber warfare and cyberespionage groups. 
Larry Wortzel, a former U.S. military intelligence officer and commissioner at the congressional U.S.-China Economic and Security Review Commission, said China uses companies like Huawei and ZTE as part of its cyber strategy of gaining economic secrets and preparing the battlespace for future conflict. 
“These firms benefit from a network of state research institutes as well as government funding in programs that have affiliation or sponsorship of the People’s Liberation Army,” Wortzel said in a recent speech. 
One strategy used by companies like Huawei is to “hire former legislators and government officials from the targeted country as spokesmen, employees or lobbyists.” 
Wortzel said the hiring of former U.S. officials raises questions about the role of the companies in furthering Chinese economic, foreign and security policies and whether senior executives and board members are subject to Communist Party coercion. 
“Thus far, Huawei has not revealed such information,” Wortzel said. 

–Bill Gertz
Dec. 8, 2013