3,500 Chinese spy companies identified in Canada and U.S.

3,500 Chinese spy companies identified in Canada and U.S.

 August 8, 2003

3,500 Chinese spy companies identified in Canada and U.S.

By Asian Pacific News Service 

The man looks and acts like any other Korean corner store owner - a hardworking newcomer to Canada.

You cannot tell by his simple appearance that he owns the building the store is in and that he has just bought a million dollar mansion in the posh Beaconsville area of Montreal.

You also cannot tell that he is one of North Korea's foremost spies in Eastern Canada who actually owns a large computer business in Mapo, South Korea, that employs hundreds of people.

In the highrise glass towers of Vancouver - Tricell (Canada) Inc. and Top Glory Enterprises Ltd., both incorporated in the late '80s work for the Communist government of China.

Among their jobs was to help facilitate the covert entry of secret police into Vancouver by hoodwinking the Canadian government. The agents were hunting for high profile fugitive businessman, Lai Changxing, who himself was recruited by the Chinese military to spy on Taiwan.

The visitor visas from the bogus business delegation was endorsed by Chinas Ministry of Trade and Economic Co-operation (MOFTEC) - one of the most powerful ministries in the Chinese government, responsible for such vital areas as negotiating China's entry into the World Trade Organization.

From the windows of both these firms, which constantly invite "Chinese business delegations" to Canada, company officials can see the arrival and departure of ships belonging to the maritime behemoth - COSCO.

The shipping line is intimately linked to the China International Trust and Investment Corp., a key fundraiser for the Chinese government and a technology-acquiring source for Chinas military.

Its vessels have been caught carrying thousands of weapons into California and Chinese missile-technology and biological-warfare components into North Korea, Pakistan, Iraq and Iran, according to U.S. intelligence reports.

Insisting there is no evidence to show COSCO is involved in any illegal activity - the Vancouver Port Authority has a "gateway to North America" deal with the shipping giant.

When Canada's Nortel Telecommunications based in Brampton, Ontario wanted to do business in China, they hired Katrina Leung's company - Merry Glory Ltd.

Little did they know that 49-year-old corporate matchmaker would be in the limelight several years later accused of having have slept her way into the good graces of two FBI agents while stealing secrets for the Chinese government.

Leung, who was paid $1. 2 million in 1995 and 1996 for negotiating the Nortel-China deal, has strong connections to Canada's Chinese business associations.

Around the same time, the modern day Matahari was greasing the way for Nortel, the Canadian spy agency - CSIS - was conducting an investigation in the offices of Ontario Hydro regarding the theft of information in the nuclear technology field by "an individual of Chinese origin".

According to a secret intelligence report obtained by The Asian Pacific Post, the individual sent unauthorized faxes, some containing hours worth of data, to a telephone number in the offices of the State Science and Technology Commission of China.

The report said that there were two other cases where Canadian companies have alleged that their employees had been selling industrial secrets to China.

Like other ambitious young men who based their businesses in Hong Kong, James Ting was a citizen of the world, an entrepreneur who constructed a universe of interrelated companies and finances from Toronto to Tokyo to New York.

Ting was a darling of the Chinese-Canadian trade lobby. Even the Prime Minister's Office website lists Ting's Semi-Tech, once ranked as the nations 10th largest employer, as a member of Team Canada's business deals with China.

On the flip side, spy watchers were warning Ottawa without much success, that Ting was China's frontman to acquire high and medium technology and engage in economic and industrial espionage.

Among the companies Semi-Tech showed as part of its organization were several Chinese state-owned companies, related to military and intelligence activities obviously using what seemed to be a Canadian consumer based company as cover.

Two months ago, after avoiding a global manhunt while hiding in China, Ting surrendered to Hong Kong authorities where he is accused of serious financial crimes.

The mega-dealmaker, who stripped down companies in the west and to take their technology back to the east, left a trail of nearly $2 billion in debts and thousands without jobs.

The cases listed are but a small illustration of what the Federal Bureau of Investigation (FBI) said this week was the greatest espionage threat to North America in the next 10 years to 15 years.

FBI Director Robert Mueller told the United States Congress that China has more than 3,000 "front" companies in America whose real purpose is to direct espionage efforts. Some of the thousands of Chinese visitors, students and business people who go to the United States each year also have a government intelligence task to perform, authorities say.

"Left unchecked, such a situation could greatly undermine U.S. national security and U.S. military and economic advantage," Mueller told Congress.

"They figured out that what they want is throughout the United States, not just embassies, not just consulates," David Szady, FBI assistant director for counterintelligence, said in a published interview. "Its a major effort."

To meet this challenge, the FBI has transferred 167 agents into counterintelligence and set up an anti-espionage operation for the first time in all 56 field offices. Each is putting together a comprehensive survey of the potential espionage targets in their domain to give the FBI its first broad national picture.

Preventive efforts include FBI meetings with corporate executives, university officials and others to gauge vulnerabilities. It also means undercover work at conferences that draw foreign scientists and development of intelligence "assets" who describe for an FBI agent what the foreign government wants.

The FBI has made fighting espionage the No. 2 priority behind stopping terrorism, with the same philosophy of tracking and stopping spies rather than waiting to prosecute them.

Training has been strengthened, the career track resurrected and a cadre of intelligence analysts is being built.

In Canada, intelligence reports indicate the number of Chinese front companies to be between 300 and 500.

But unlike the Americans, China experts say the political climate in Ottawa is not conducive to cracking down on this significant threat.

"Virtually all the recent prime ministers and Paul Martin who is likely to be the next have strong connections to China on the personal, business and political fronts," said an intelligence analyst specialising in East Asian affairs.

"They find it difficult to understand this threat some just deny it," he said.

For former Canadian foreign service officer Brian McAdam, this week's FBI warning reads like a passage out of a report he worked on for the Canadian spy agency.

McAdam worked on "Project Sidewinder" which was conducted by the Canadian Security Intelligence Service and aided by the RCMP between 1994 and 1996.

The conclusions were never publicly released, until leaked to the media amidst allegations that "political influence nixed the project."

That study mirrors this week's FBI assertions that China posed the most significant threat to Canada.

Sidewinder, analysts state, did not present theories but indicators of a multifaceted threat to national security. The report was generally ignored by the politicians. It was ahead of its time.

Among those whose connections were investigated were Macao casino king Stanley Ho, who has extensive interests in Canada, and Li Ka-shing, one of the world's wealthiest men, known in Vancouver for his purchase of the Expo lands and companies linked to tycoons like Robert Kuok, Cheng Yu Tung and Henry Fok.

Sidewinder among other things said many of the companies identified by the analysts have contributed "several tens of thousands of dollars to the two traditional political parties, the Liberals and the Conservatives."

A major financial and brokerage house gave the Liberal party C$20,432.94 in 1994, a large petroleum company owned by a Beijing-friendly tycoon gave more than C$100,000 to the same two parties and political donations were also made by a triad-run Chinese film studio.

At the time of the study, analysts said at least 200 Canadian companies are under the direct or indirect control of China.

The central point of the Chinese strategy is first to buy a Canadian company to obtain a "local identity".

Then, using this acquisition, the Chinese-Canadian company invests heavily under the Canadian banner.

But control lies in Hong Kong or Beijing and the financial benefits or fruits of research, often paid for by Ottawa or the provinces, are likely to make their way to Asia.

One China-controlled multinational with assets of more than US$23 billion, had spent more than $500 million buying companies in the forest sector in B.C., petrochemical firms in Alberta and real estate in central Canada.

It said that Triad or Chinese mafia members are behind an international seafood processing company that has offices in Vancouver, Calgary, Montreal and Mississauga. The company is believed to be a front for importing heroin. In addition, company managers have maintained regular contacts with Chinese army officials and paid for visits of Chinese delegations.

Sidewinder warned that the Chinese government was taking advantage of growing business ties between China and Canada to provide cover for intelligence services.

One example cited said a company owned by a Chinese-Canadian national sponsored what was ostensibly a Chinese business delegation to Canada. In reality, the delegation was comprised of Ministry of State Security officials travelling to Canada to conduct an intelligence operation.

Another similar delegation comprised officers from a sensitive sector of the People's Liberation Army, who were attempting to make arrangements to purchase secure communications technology for military purposes.

The Canadian spy agency which was at loggerheads with the RCMP over certain characterizations in the report said the Sidewinder study done by McAdam and others was revised and certain documents destroyed because they were based on unprovable conspiracy theories.

The spy agency later issued a watered-down version of the Sidewinder study to a select government group.

The Security Intelligence Review Committee, the civilian watchdog of Canada's spy agency, has once again been asked to review the handling of Sidewinder by CSIS.

"What is critical here is to compare the FBI study with Sidewinder. What is being released to Congress is what we warned the Canadian government about in the mid-nineties," McAdam told The Asian Pacific Post.

"The stuff about influence in universities, etc., was in Sidewinder... They did not want to listen to us then... maybe they will listen now."

Meanwhile, a report out of Ottawa this week said that Prime Minister Jean Chretien is planning a trip to China as part of an international farewell tour.

"Taxpayers are footing the bill on a trip that is going to do Canadians very little good. Do you think there's one beef farmer in Canada, whether it's Ontario or Western Canada that wants him to go to China - unless he's trying to sell them beef. Why can't he go sit down with the leader in Japan? That is the most important issue right now," said Canadian Alliance House leader John Reynolds, referring to the ongoing crisis caused by the mad-cow disease.

Reynolds said if Chretien wants to wrap up his time in office conducting an international farewell tour to "say goodbye to his friends," thats fine, but he should ask Paul Martin, his anticipated successor, to fill in for him while he is away.

Chretien is to attend the annual Asia-Pacific Economic Co-operation meeting in Bangkok Oct. 17-21 as well as the annual Commonwealth meeting in Nigeria in December.

But sources say he is seriously considering tacking on a trip to China and another one to India after his APEC meeting in Thailand.

The prime minister's office said Chretien may go to Shanghai at the recent request of the Chinese president to attend the opening of two Candu reactors.

The reactors, which employ 450 Canadians, were sold to China by Atomic Energy of Canada Ltd after Ottawa changed legislation to provide Beijing with over $1.9 billion in loans.

The office also confirmed that Chretien is also considering an invitation to meet with the Canada-China Business Council (CCBC) in Beijing.