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31 December 1998. Thanks to Anonymous.

The New York Times, 31 December 1998

Bipartisan Report Finds Theft of Nuclear Technology That Hurt National Security

By Jeff Gerth and Eric Schmitt

WASHINGTON -- A select House committee, in a classified report unusual for its bipartisanship, has found that over the last 20 years China obtained, sometimes through theft, some of the most sensitive of American military technology, including nuclear weapons design, Government officials and witnesses before the panel say.

The committee's final report, unanimously approved by its five Republican and four Democratic members Wednesday, found that during Republican and Democratic Administrations alike, China acquired a range of technical secrets far beyond the satellite- and missile-related technology whose transfer by American satellite companies during the Clinton Administration prompted the start of the panel's inquiry in May.

In a carefully worded statement after the report had been approved, the committee's chairman, Representative Christopher Cox, Republican of California, said that China's acquisition of American technology had harmed national security and that its "acquisition efforts over the past two decades" had been a "serious, sustained" activity.

The panel's 700-page report is secret because so much of its six-month inquiry dealt with classified information, and it released no details from that report Wednesday.

It promised to begin a process, in consultation with the Clinton Administration, to declassify as many of the findings as possible.

But witnesses and intelligence officials who worked with the committee said it agreed with assessments by the Pentagon and the State Department that information shared with Chinese scientists by two American companies, the Hughes Electronics Corporation and Loral Space and Communications, had improved Beijing's ability to launch satellites and ballistic missiles.

In addition, witnesses said, the panel's conclusion that China had stolen military-related American technology may prove to be the most explosive part of the report.

The panel uncovered, for example, a pattern by the Chinese of stealing nuclear-weapons design technology from American nuclear laboratories, said one person who has read part of the report. It was unclear when or over what period of time any of these nuclear-related thefts might have occurred.

The committee, officials said, faulted policies of the Reagan, Bush and Clinton Administrations but did not say whether the problems were worse in one Administration than in another.

It made 38 recommendations for legislation or executive orders to address those policy failures. The recommendations covered policy categories like security at weapons laboratories, the handling of sensitive intelligence data and export controls.

While the committee did not directly examine covert Chinese contributions to the 1996 American election campaigns, officials said, it did investigate the activities of a Chinese aerospace executive, Liu Chao-ying. Ms. Liu was a conduit for Chinese Government payments to Democratic fund-raisers and, with her father, Liu Huaqing, formerly the senior general in the Chinese military, has been involved in Beijing's effort to acquire military-related technology.

The House committee began its inquiry in the spring after The New York Times had disclosed that American satellite makers had helped Chinese scientists rectify failures in their rocket programs, conveying information applicable to long-range ballistic missiles. Over the last six months, the panel held 33 hearings, all closed, taking testimony from intelligence officials, industry executives and nuclear-weapons experts.

The committee's inquiry initially focused on the interaction between China and the American manufacturers whose satellites were carried into orbit on Chinese rockets.

It soon branched out to examine the export of other American technology to China, including advanced computers and machining equipment.

The panel hired outside experts to examine whether scientists from Hughes Electronics, a subsidiary of the General Motors Corporation, and Loral Space and Communications had harmed national security by giving the Chinese lessons in rocket technology after the failure of two Chinese rockets in the mid-1990's.

Both companies deny any wrongdoing, but earlier this month the Administration completed reports of its own that raised national security concerns about the assistance, especially help that Hughes provided the Chinese in 1995.

The intelligence arm of the State Department found that the 1995 'tutorial" by Hughes "resulted in significant improvement" to China's rocket program and that the lessons were "inherently applicable to their missile programs as well."

In a news conference at the Capitol Wednesday, members of the committee said their analysis had gone far beyond the reviews of the failed Chinese rocket launchings involving Hughes and Loral.

"There was harm in some of the transfers of technology that occurred," said the committee's ranking Democrat, Representative Norm Dicks of Washington, "but it's also fair to say this is not the only problem we uncovered. These are serious problems that must be addressed by the Administration and by the Congress."

It is public knowledge that the Chinese have an aggressive military and economic espionage program and that they have long sought to acquire American technology, legally and illegally.

But the House panel, formally the Select Committee on U.S. National Security and Military/Commercial Concerns With the People's Republic of China, learned new details about the depth and scope of these activities as it completed the most comprehensive examination of the issue ever conducted by any part of the American Government.

The witnesses before the panel included officials from American nuclear weapons laboratories, one witness said. Last year the General Accounting Office, the investigative arm of Congress, issued a report that questioned the adequacy of security at the weapons labs, and touched on a decision during President Clinton's first term to reduce background checks of various foreign visitors there. (The visitors, most of whom are Russian and Chinese, are not allowed access to classified areas.)

It is unclear exactly how much the American public will ever learn about the committee's findings.

The issue of what to disclose is usually resolved by the release of general conclusions, and the withholding of details that might reveal how the sensitive information was acquired.

Any process in which the report is declassified would involve the Clinton Administration, officials at various intelligence agencies like the C.I.A. and the House of Representatives.

"Certainly we look forward to reading the report and studying its recommendations," said David C. Leavy, a White House spokesman. "In terms of declassification, we need to work with the committee and relevant agencies in an appropriate way to move forward."

That the committee could find political unity in a year of divisive discourse was probably due to the serious national security concerns that were the panel's work.

Other than Cox and Dicks, the members of the committee were Representatives Curt Weldon of Pennsylvania, Porter J. Goss of Florida, James V. Hansen of Utah and Doug Bereuter of Nebraska, all Republicans, and John M. Spratt Jr. of South Carolina, Robert C. Scott of Virginia and Lucille Roybal-Allard of California, Democrats.

Most of the members have been active in national security issues.

Copyright 1998 The New York Times Company

The Washington Post, Thursday, 31 December 1998, Page A1

Panel Faults Space Aid to China

By John Mintz

Washington Post Staff Writer

Two American aerospace companies damaged U.S. national security when they provided Chinese space engineers with technical rocketry data that could have assisted Beijing's ballistic missile program, a House committee concluded yesterday in a classified 700-page report.

The panel's report is the most comprehensive review so far of evidence that Hughes Electronics Corp. and Loral Space & Communications Ltd. shared sensitive U.S. technologies as they pursued commercial relations in China. The committee's findings appeared to include detailed criticism of the Clinton administration's policy of loosening high-tech export restrictions as a way to promote trade.

In a rare show of bipartisanship on what for months has been a divisive issue, the special panel chaired by Rep. Christopher Cox (R-Calif.) voted 9-0 yesterday to endorse the secret five-volume study and send it to congressional leaders and the Clinton administration.

The panel is expected to release a shorter, unclassified version of its findings within a few months, after it is reviewed by government agencies. Several other congressional committees and the Justice Department are conducting separate investigations of the same and other allegations of technology transfers to China.

The panel's report contains 38 recommendations, most aimed at tightening the rules governing American technology exports to China, congressional sources said. Among the proposals are granting more export licensing authority to the Pentagon and the State Department and reducing the role of the pro-export Commerce Department. American high-tech industries have warned that such a move would hurt exports of U.S. electronics and computers and favor U.S. competitors in Europe and Asia.

Loral and Hughes have consistently denied they harmed American security in doing business in China. In finding otherwise, the Cox panel endorsed a conclusion by Air Force intelligence in its reviews of two separate incidents in which Chinese rockets exploded while carrying U.S. satellites.

In 1995, after the explosion of a Chinese Long March rocket and destruction of the Hughes satellite, Hughes officials discussed with the Chinese ways of improving the rocket. After a 1996 rocket mishap that demolished a Loral satellite, a Loral engineer faxed to the Chinese the results of a corporate review into the cause of the accident.

The Central Intelligence Agency partly disagreed with the Air Force, saying Loral did not give China much useful information. Adm. Joseph W. Prueher, chief of the U.S. Pacific Command, recently said the U.S. launches helped Chinese ballistic missile capabilities "only incrementally, not [by] any quantum leaps."

Cox hinted to reporters at the Capitol yesterday that the Loral and Hughes cases were less significant than other Chinese attempts to acquire restricted U.S. technology. "We were rapidly led to considerably more serious national security problems than the Loral-Hughes cases," he said.

Congressional sources said the panel had focused on efforts by Chinese intelligence agents to acquire a range of U.S. military technologies over the last 20 years, including high-performance computers. Cox referred to these computers last month, when he told a trade publication that the panel had uncovered new information "of grave concern to all members of the committee, in both parties," congressional staff members said.

The allegations involving the aerospace companies have been potentially damaging to the Clinton administration, which made it easier for U.S. firms to export sensitive technology. The sensitivity of the charges was heightened for the White House because the chairman of Loral, Bernard Schwartz, has been a major donor to Democrats.

Republican leaders initially predicted the panel's probe would damage Clinton's standing in the midst of the Monica Lewinsky scandal. House Speaker Newt Gingrich (R-Ga.) said allegations that President Clinton had backed the China deals as a favor to Schwartz were "the closest thing to an impeachable offense." But the Republicans eventually decided against including the satellite issue among subjects to be taken up in the House Judiciary Committee's impeachment hearings.

Cox, 45, who represents conservative Orange County, Calif., said the panel's deliberations were a model of bipartisanship even during late-night negotiating sessions this week, and the ranking Democrat, Rep. Norman D. Dicks (D-Wash.), agreed.

"This is a solid bipartisan product," Dicks said. "Chris Cox ... was willing to work with all members. We had a very fair and deep look at this very important national security issue."

While declining to comment on the substance of the findings, Cox said, "I'm very anxious to declassify as much of this report as possible."

Democrats pointed out that the panel, made up of five Republicans and four Democrats, didn't ask the Justice Department to open any new investigations of the matter. But industry executives found little comfort in the panel's overall conclusion.

"If the report takes steps to take [export laws] back to times like the Cold War, that's a mistake," said Mark Rosenker, spokesman for the Electronic Industries Alliance, a trade group.

Copyright 1998 The Washington Post Company


News From . . .
U.S. Representative
Christopher Cox

Cox Committee Votes Unanimous 700-Page Report on PRC Targeting of U.S. Military Technology

WASHINGTON, D.C. (Wednesday, December 30, 1998)—The Select Committee on U.S. National Security and Military/Commercial Concerns with the People’s Republic of China unanimously voted to approve a five-volume, 700-page report on the transfer of sensitive U.S. technology to the PRC. The report goes well beyond the two cases that spurred the investigation, involving Space Systems/Loral and Hughes, and addresses PRC targeting of not only so-called "dual-use" technologies, but also sensitive military technologies.

"These transfers are not limited to satellite and missile technology, but cover other militarily-significant technologies," said Committee Chairman Christopher Cox (R-Orange County). "Rather quickly, our investigation led to even more serious problems of PRC technology acquisition efforts targeted at the United States. The seriousness of these findings, and their enormous significance to our national security, led us to a unanimous report."

The Select Committee met for its 34th and final time today, capping a six-month effort launched by the near-unanimous vote of the House on June 18, 1998 to establish the Committee.

"Six months ago this Select Committee did not exist," Chairman Cox said. "It had no staff, no offices, no telephones. Within six months, the Select Committee assembled an extraordinarily professional staff, conducted a thorough, multi-faceted investigation, and prepared the report approved today."

The investigation was headed by professional investigators with significant national security experience. The staff included C. Dean McGrath, Jr., former Deputy Staff Director and Deputy Assistant to the President; Rick Cinquegrana, Deputy Inspector General of the CIA; Dan Silver, former General Counsel of the CIA and of NSA; Lewis Libby, former Deputy Under Secretary of Policy at the Department of Defense; Nicholas Rostow, former Legal Adviser to the National Security Council; Michael Sheehy, Minority Staff Director, House Permanent Select Committee on Intelligence; and Michael Davidson, former Counsel to the Senate.

The Committee held 22 hearings and heard more than 200 hours of testimony from more than 75 different witnesses. It conducted more than 700 hours of interviews and depositions of more than 150 individuals, issued 21 subpoenas, and conferred use immunity upon four witnesses with the concurrence of the Department of Justice.

Moreover, Chairman Cox added, "the investigation was completed on time and under budget."

"The investigation quickly turned to classified matters when it became clear that far more was involved in U.S. technology transfer to the PRC than just isolated cases," Chairman Cox said.

The report’s entire 700 pages are temporarily classified "Top Secret." It will be presented to the Speaker of the House and the Minority Leader on Saturday, January 2. At the same time, it will be provided to the President and the House Permanent Select Committee on Intelligence for de-classification review.

In a statement in the Capitol announcing the unanimous vote, Chairman Cox said the Committee could not answer most questions relating to either classified or unclassified information until the report is reviewed by the Select Committee staff to carefully separate out the two.

"The classified and unclassified information is currently so intertwined that we would risk inadvertent disclosure of classified information if we did not first submit the report and our answers to your questions to staff review," he said.

The Committee did announce, based on unclassified information, that the transfer of sensitive U.S. technology to the People’s Republic of China by both Hughes and Loral damaged the national security. These cases, which came to light after news reports that Loral received a waiver to launch a satellite in the PRC despite being the subject of a criminal investigation into prior technology transfers, were a significant reason that Congress created the Select Committee in late June 1998.

"The PRC’s targeting of sensitive U.S. military technology is not limited to missiles and satellites, but covers other military technologies," Cox said. "Sensitive U.S. military technology has been the subject of serious PRC acquisition efforts over the last two decades, and continues today. A significant reason for the creation of the Select Committee was to determine whether Space Systems/Loral and Hughes were responsible for the transfer of technology that damaged the national security of the United States. Based on unclassified information, we have found that national security harm did occur. We have investigated these questions more thoroughly than any other part of the U.S. Government."

The Select Committee is making 38 recommendations to protect sensitive U.S. military technology from the PRC. These recommendations also recognize the need for continued American leadership in technology and continued U.S. international competitiveness.

A declassified version of the report will be made available to the public and press as soon as possible, Chairman Cox said.

# # #

House report on setting up the select committee: