Espionage in the heartland of the United States?
For two-plus years, perhaps for as many as four, a different type of harvesting has been occurring throughout the heartland of the United States. According to the criminal complaint (see below), filed by the United States Attorney, Nicholas A. Klinefeldt, a Chinese company, Kings Nower Seed, and their personnel have been harvesting more than $30 million worth of intellectual property from multiple US conglomerates. The criminal complaint requests an arrest warrant for MO Hailong, aka Robert MO, who is alleged to have led the concerted effort to steal and ship to China the the next generation of “inbred” or “parent” corn seeds, market value at approximately $30-40 million and 5-8 years of research from Pioneer, Monsanto and LG Seeds (perhaps others as well).
Seed corn harvested
A review of the criminal compliant outlines a sophisticated apparatus pulled together and executed by MO. The group, apparently working with help of insiders within Pioneer and Monsanto, were able to travel to the exact geo-coordinates of the fields growing the sensitive test seeds. Reading the complaint closely, it is clear that Mo was the linchpin of the effort.
Mo traveled, often to the midwest from his Boca Raton residence, which he shares with a LI Ping aka (Carolyn Li Ping), to Chicago and Kansas City in 2011-2012. The interviews of those from whom Mo purchased seeds in Iowa and Missouri noted he was a customer since 2009, buying multiple bags of seed and always paying cash. Mo was observed shipping seeds which he purchased and stole from the fields to his Boca Raton residence via UPS. Our analysis of Mo and his status in the United States, noted Mo and Li Ping purchased the 2000 square foot house in Boca Raton in 2009 for $300,000. It would appear the purchase of the house coincided with his initiation of his heartland activities.
It would be one thing to steal or inappropriately obtain licensed technology, but Mo and company went one step further. They set up an operation in Monee, IL to grow the commercially acquired seeds in anticipation of being able to identify the one-half of one percent of the inbred seed which is in each bag and then harvest the inbred seed which is distinguishable from the hybrid seeds. Kings Nower Seeds purchased the Monee, IL farm for more than half a million dollars, $600,000 to be exact in late-March 2012. Which coincides with the beginning of the spring land preparation; and put the property back on the market in September 2012 for $300,000. Perhaps after having harvested the inbred-seed?
Nation State sponsored?
We view the sophistication of the operation which commenced with the arrival of Mo in 2009, the frequency and expense of the travel to/from the midwest, the 750+ mile driving days, the use of an alias persona of a real person within the official delegation of the Vice President of China; the co-conspirator Wang Hongwei who not only operated from Canada, but had in his possession the geo-coordinates of locations in the US of interest; the level of clandestinity used; the multinational aspect of the caper (Hong Kong, Canada, China and the US); the deep pockets of those engaged; all to indicate PRC knowledge of, if not directly involved.
The case is more than just low level activity. Interestingly, in this instance, the Pioneer Seed company has been in China since 1997 and their China business is valued in excess of one billion dollars. Apparently, not all in China were party to the joint venture and the desire to create a homegrown entity to compete with the multi-nationals is high.
It is not surprising that counterfeit seeds is a problem in China, which is exacerbated when the theft of genuine seeds is also occurring. In October 2011, Pioneer’s China lead, William Niebur, vice president and general manager of Pioneer China, told “China Real-Time Report that Pioneer regards counterfeit seeds as a serious issue in China, as the counterfeits undermine seed companies’ intellectual property and the market’s confidence in seed quality. Pioneer is working with Chinese authorities to enforce the law, he said. He estimated there were as many counterfeit seeds on the market as Pioneer’s sales volume, though demand for Pioneer products remains strong. As for China’s efforts to grow an agrotechnology giant, Niebur cited joint ventures Pioneer has with Chinese firms as examples of such efforts. “Pioneer considers itself a partner to the China seed industry,” that has assisted Chinese firms with manufacturing, planting technology, packaging and delivery systems, he said in e-mailed comments [to China Real-Time Report].”
Perhaps the VP identified in the complaint is Niebur, regardless, what is interesting is the comment attributed to the VP, “DBN best-selling corn seed products in China utilize a male parent (inbred) line of seed that Pioneer determined their company developed. The Pioneer VP confronted the DBN [unidentified] official on the success of the product since it utilized Pioneer-developed genetic trait, and the DBN official smiled and nodded, implicating acknowledging to the Pioneer VP the truth of the accusation.”
Analysis:
The compromise of MO Hailong did not happen due to superior analytic work by the FBI or any law enforcement entity. The MO operation was in place and operating for some time, perhaps as early as 2009. It was two farmers in Iowa who saw something and reported it as suspicious to the Pioneer field rep, who mentioned it to the Pioneer security personnel. Kudos go to Pioneer for sensitizing their field reps to report that which does not fall into the realm of normal activity. Better had the Pioneer Security team picked up their phone and contacted their liaison with the FBI in Des Moines.
Many questions remain unanswered. Where else did MO travel from his Boca Raton base. What role does Carolyn Li Ping play in this activity, if any, as she is a Kansas State University graduate. The Canadian angle, how much Chinese activity is taking place in Canada by this same crew or others targeting Canadian agriculture? If Kings Nower Seeds were so easily able to step over the line of appropriate business conduct and engage in espionage, where else has LI Shaoming allowed this type of investment. What is the role of the US persons who assisted with the real estate and logistics. And to a core issue, who are the insiders in Pioneer and Monsanto who are providing the identities of the test fields to the Kings Nower Seed crew. What part, if any, did Pioneer and Monsanto’s foot print in China make them a target for espionage in the United States. What role did their Chinese employees in China or the US play?
The take away for all companies – have a security plan, educate your employees and contractors. Operate from a position of trust, have in place the capabilities to verify the trust if suspicion arises. Conduct strategic competitive analysis so you may be aware of what areas of research your competition is engaged? Reward employees for reporting anomalies. When implementing protections, explain to your employees, contractors and vendors the why behind your intellectual property protection regimes, and never allow convenience to trump security.
The cast of characters
Mo Hailong “Robert” – a lawful permanent resident (H-1-B visa holder) in the United States – Director of International Business of Beijing Dabeinong Technology Group Company (DBN).
Hougang Wu – Chairman of Dalian Zhangzidao Fishery Group – an alias used by Mo Haiilong as part of the official Chinese delegation accompanying the Vice President of China during his visit to Des Moines, IA on 15/16 February 2012. [Note: WU Hougang is a legitimate person and he is the Chairman of the Zhangzidao Fishery Group. It is unknown if he signed up as a member of the delegation and provided his registration and identity documents for Mo’s use – a witting participant, or if he was unwitting of the use of his name and that of us company in the activities]
Wang Lei – Vice Chairman of Kings Nower Seed – accompanied MO on his visit to the fields in Iowa, and was part of the VP of China delegation in Des Moines 15/16 February 2012
LI Shaoming – CEO of Kings Nower Seed – Phd Scientist – directing and participating in the collection of US intellectual property
Xaoming Bao – Chinese national, former Pioneer employee – met with Wang and Mo during VP China visit at a bar in Urbandale, IA. (Bao’s spouse is a current Pioneer employee). [Note: Xaoming Bao – has 18 patents in the plant genetics field, many of which are assigned to Pioneer]
YE Jian – PRC National and employee of Kings Nower Seed (per visa application) – involved over the course of the summer of 2012 in the collection of seed from farms located in the Northern Indiana, Illinois, Iowa farmland – In a conversation which the FBI surveillance obtained (pages 13-15 of the complaint) it is clear YE and LIN are knowledgable as to the illegality of their efforts.
LIN Young – PRC National and employee of Kings Nower Seed (per visa application) – involved over the course of the summer of 2012 in the collection of seed from farms located in the Northern Indiana, Illinois, Iowa farmland – in a conversation which the FBI surveillance obtained (pages 13-15 of the complaint) it is clear YE and LIN are knowledgable as to the illegality of their efforts.
Eugene Yu – Chinese-American realtor in the Chicago area (research shows a realtor associated with Charles Rutenberg Real Estate of Naperville, IL, by the name of Eugene Yu. No other realtors in the Chicago metro with this name were found) – Yu served as middle-person on the lease of a storage facility in New Lenox, IL, provided transport to YE, and spent a good deal of time on the Kings Nower Seed farm in Monee, IL. [NOTE: It is unknown if YU was witting of the espionage taking place, or if he was unwittingly duped into providing support to the activity, viewing Kings Nower Seed as a lucrative client given their purchase of the Monee, IL farm.]
Wang Hongwei – A dual Chinese/Canadian citizen – On 28 September 2012, Wang HONGWEI entered the US via land-border between the US/Canada in Vermont. Drove to Burlington and then flew to Chicago, obtained a rental car and traveled to the farm in Monee, IL. On 30 September 2013, gave FBI Surveillance in Burlington, Vermont the slip using aggressive counter-surveillance driving methods. At the US/Canada border crossing he was identified and subjected to a USCBP border inspection. He lied to officers and then recanted when evidence was shown that his story of visiting Burlington was compromised by his United Airline ticket in his possession. 44 bags of corn were found hidden in his luggage and in the vehicle. each of the bags was identical as those which were earlier confiscated at O’hare Airport. In addition, he had a notebook with GPS coordinates of farm plots and pictures of Monsanto and Pioneer fields and facilities. He claimed to have purchased the corn from Mo Hailong.
The companies
Kings Nower Seeds – Formed in 2001
The Kings Nower Seeds website notes their research in inbred seeds in a January 2013 post:
“Precise Research and Development
Following the strategy of Precise Research and Development, we built up one transgenic research lab, five inbred line test stations, seven breeding centers and 123 experiment stations. Annual investment on R&D is kept more than 10% of annual sales. Based on our proprietary T+2 model, aided by inbred line test, variety design, DH, molecular, information technology and large-scale variety testing, a fast, effective and accurate breeding system is established. Such a system speeds up breeding and makes the breeding output predictable. In 2008, our technology center was recognized as “Beijing Enterprise Technology Center” and “Science and Technology Research and Development Institution of Beijing Municipal Science and Technology Commission”. Now we hold leading breeding capabilities on hybrid maize and hybrid rice in China.”
Dabeinong Technology Group Company – Formed in 1994
Zhangzidao Fishery Group – founded 1958
“Mapping Mo Hailong’s Espionage”
Mapping Mo Hailong and the co-conspirators.
Including the May 1, 2012 – 750 mile trip by Mo when he traveled from Des Moines, IA to Pattonsburg, MO to Adel, IA, to Monee, IL – over 8.5 hours in his vehicle, buy and acquiring corn
“Espionage in the Heartland: Rice to China” O
n 12 December 2013, a criminal complaint was filed by the United States Attorney in the Kansas District, petitioning for the arrest of two individuals, with ties to China, for the theft of trade secrets from Ventria Bioscience and other companies. Subsequently, these same two individuals were indicted … <read complete analysis>
“US v Mo Hailong”
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Wanted posters issued by the FBI:
“The world press”
Designer seeds thought to be latest target by Chinese
Chinese National Arrested for Conspiring to Steal Trade Secrets
Corporate espionage strikes Iowa’s agricultural technology
Call the FBI! China is trying to steal America’s seeds!
Chinese man arrested for stealing seed technology
Chinese company worker accused of steeling seed
Secrets Stolen, Fortunes Lost: As detailed in Secrets Stolen, Fortunes Lost, the intellectual property of companies in the United States, regardless of locale, are of interest to those who have no problem extracting the research and development investment to avoid making their own. The introduction to Secrets Stolen, Fortunes Lost admonishes:
Intellectual property is your enterprise’s lifeblood; is it safe or are you in danger of being put out of business because a predator has shed that lifeblood? We have found two profound but common misconceptions about intellectual property theft and economic espionage.
One of the great misconceptions is that the threat of economic espionage or trade secret theft is a limited concern—that it is an issue only if you are holding on to some- thing like the formula for Coca-Cola or the design of the next Intel microprocessor. The many real-world stories included in this book illustrate the fallacy of thinking that this threat is someone else’s problem.
The other great misconception, held by many business leaders who do acknowledge the danger to their trade secrets and other intellectual property, is that the nature of this threat is sufficiently understood and adequately addressed. Often, on closer inspection, the information-protection programs these business leaders rely on are mired in Industrial Age thinking; they have not been adapted to the dynamic and dangerous new environment forged by globalization
Secrets Stolen, Fortunes Lost, Preventing Intellectual Property Theft and Economic Espionage in the 21st Century (Syngress 2008 – by Christopher Burgess and Richard Power)