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Concerns for energy espionage climb as oil downturn continues

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The FBI is warning U.S. energy companies that the oil industry’s downturn is increasing their vulnerability to theft of technological secrets.

Companies that long have faced the prospect of economic espionage must now be prepared for the possibility that workers who have been laid off could be targeted by foreign entities and competitors wanting to steal intellectual property.

“FBI investigations indicate economic espionage and trade secret theft against U.S. oil and natural gas companies and institutes are on the rise,” according to an unclassified briefing report prepared for the energy industry.

Agents shared the report recently with about 150 energy sector executives, managers and others who gathered behind closed doors at the FBI building here.

“These energy companies are on the front lines,” said Perrye K. Turner, special agent in charge of the FBI’s Houston Division.

“We’re trying to raise awareness, educate them about the vulnerabilities and send them away with the best practices on how to protect themselves from insider threats and economic espionage,” he said.

Economic espionage – which involves a proprietary product, process or idea being stolen for the benefit of a foreign government, including state-owned companies – is a federal crime that carries a sentence of up to 15 years in prison and millions of dollars in fines. China has been a major offender, according to officials.

The FBI meeting was not open to the public. Attendees declined requests to be interviewed and asked that their presence remain private.

Economic espionage is an especially sticky subject in the business world and even those seeking information on how to prevent it is known to make investors nervous.

Trade secrets related to the search for crude oil beneath the land and sea and refining oil into gasoline are of particular interest as foreign entities target U.S. companies, universities, think tanks and researchers, according to the FBI.

 Computer hacking, theft, unauthorized photography, dumpster diving and the secret elicitation of information from unsuspecting employees are just some of the ways trade secrets, proprietary information and research can land in the wrong hands, according to the FBI.

David H. Laufman, chief of the Counterintelligence and Export Control Section at the Department of Justice, said U.S. corporations aren’t just facing foreign companies but also governments.

“The threat you all face includes hackers with the full backing of their governments and criminal syndicates; you should not have to face those threats by yourself,” Laufman said as he cautioned the executives to safeguard their companies.

“Identify what you deem to be your crown jewels and implement tiered security efforts to protect them,” he said.

Former workers could knowingly or unknowingly divulge material protected by law and worth many millions of dollars, said Special Agent Michael S. Morgan, a member of the FBI Houston Division’s national security branch.

“There are increased incidents of employees taking proprietary information when they believe they will be, or are, searching for a new job,” Morgan said.

“With the loss of so many jobs in the oil and gas sector, it is important to remain vigilant in their efforts to protect their intellectual property from both domestic and foreign business competitors,” he continued. “Failure to do so will likely result in the businesses losing their competitive advantage.”

Few companies have felt the impact of economic espionage as quickly and brutally as American Superconductor Corporation, a company that designs wind turbines and technology used to operate them. AMSC lost nearly $1 billion in one day on the stock market in 2011 after reporting its woes.

“If they want to steal windmill technology, they pretty much want to steal everything,” the company’s Chief Executive Officer Daniel McGahn, said as he shared his story with the gathering at the FBI building.

A personally troubled employee sold some of AMSC’s secrets to a Chinese firm, which had presented itself as a potential partner for the U.S. company but instead sought to run it out of business.

McGahn said it is important for companies to know their employees and realize that some of them, depending on their positions, could reveal compromising information about themselves and open the door to trouble for the company.

“If they are going to put it out on Facebook, Twitter, whatever, you may want to have your people know what they are putting out publicly,” he said noting that this employee was going through a divorce and had a love for foreign girlfriends, money and international travel.

“You don’t want to cross lines of personal privacy, I am not advocating that in anyway,” he said. “But you need to know what your people are up to as much as possible.”

He noted that his company has recovered from the incident, but said that several employees he had to lay off as a result of the loss are now working in China.

The DOJ’ Laufman pointed to about a half-dozen economic espionage cases that have recently made their way into federal courtrooms around the country.

One defendant, who pleaded guilty earlier this year, was arrested in Iowa after being spotted in a corn field looking for special “inbred corn seeds” that a company had developed.

In 2014 in Pennsylvania, five Chinese military officers, who remain fugitives, were indicted for allegedly hacking into the computer systems of Westinghouse and others.

Also in 2014, an engineer in California was sentenced to 15 years for stealing secrets, basically the formula for the color of his company’s white paint. It marked the first jury conviction for the charge, as most defendants plead guilty in bids for leniency, Laufman said.


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