The U.S. Department of Justice Commemorates its Progress on China Initiative-Related Investigations and Prosecutions Over the Past Year

Dechert LLP’s White Collar Practice and Global Litigation Group are active in representing multiple clients—including defendants, targets, and victims—in investigations and prosecutions arising under the Department of Justice’s China Initiative.  Our diverse, high-impact team of former federal prosecutors, a former White House lawyer, other firm litigators, and a deep bench of international trade and government regulation attorneys, are regularly called upon to handle a variety of complex, cross-border matters with efficiency, accuracy, and speed.  With more than 20 locations throughout the world and a deeply integrated, multidisciplinary platform, leading companies—whether international, Chinese, or American—and their leadership teams count on our counseling, litigation, investigative, and defense strategies to secure successful results.  

Key Takeaways:  

• November 2020 marks the two-year anniversary of the Justice Department’s “China Initiative,” which focuses on investigating and prosecuting individuals and companies seen as aiding China’s efforts to access United States’ classified and trade-secret information to benefit China, including China’s economy and military.

• A November 16, 2020 Justice Department Report highlighted the numerous China Initiative cases and investigations conducted over the past year, involving economic espionage, trade secret theft, prosecutions against researchers and academics, and efforts to counter foreign intelligence activities. 
  
  
• The China Initiative has represented a key part of the Trump Administration’s strategic response to these perceived threats and is likely to continue under a Biden Administration, if potentially with a modified focus.

On the two-year anniversary of the “China Initiative,” the United States Department of Justice (“DOJ”) published “The China Initiative: Year-in-Review (2019-20).”¹ As outlined in a previous OnPoint by Dechert’s White Collar Practice and Global Litigation Group, DOJ launched the China Initiative in November 2018. The Initiative “reflects the strategic priority of countering Chinese national security threats and reinforces the President’s overall national security strategy.”² And it has led to a significant number of criminal prosecutions of Chinese nationals and companies and those who assist them, in connection with the alleged theft of intellectual property, hacking, economic espionage, and efforts to influence the American public and policymakers without proper disclosure.  The DOJ’s recent Report not only catalogs the cases that it believes to be a success, but also provides a window into the types of cases that DOJ is likely to pursue in the future. Although a Biden Administration might adjust the strategy and the public messaging in certain ways, the Initiative is likely to continue apace.

Dechert’s White Collar Practice and Global Litigation Group are closely monitoring the developing landscape of investigations and prosecutions arising from this U.S.-China complicated, if not fractious, geopolitical landscape. In this OnPoint, we discuss some of the cases highlighted in the DOJ’s Year-In-Review in order to unpack how they might forecast the DOJ’s strategy in the future. 

The DOJ’s China Initiative Report

The DOJ’s China Initiative Report highlights the China Initiative’s goals and achievements as it reached its two-year anniversary. Within the Report, Attorney General William Barr commented that within the last year “the Department has made incredible strides in countering the systemic efforts by the [People’s Republic of China] to enhance its economic and military strength at America’s expense.”³ FBI Director Christopher Wray added that “the China Initiative is helping to disrupt” the Chinese government’s “theft of sensitive information and technology.”⁴ And the Report highlights a number of cases that offer a window into the types of prosecutions that DOJ is likely to pursue going forward.

Economic Espionage and Trade Secret Theft. Since the China Initiative’s inception, the DOJ has charged five economic espionage cases and more than ten trade-secret-related cases.⁵ One economic espionage case that DOJ chose to highlight in its Report was brought against United Microelectronics (“UMC”), Fujian Jinhua (the Chinese state-owned enterprise), and several individual defendants—which was unsealed the day the China Initiative was announced.⁶ This year, on October 28, 2020, UMC pleaded guilty to trade secret theft and paid a $60 million fine, which is “the second largest ever in a criminal trade secret prosecution.”⁷ In its plea, UMC admitted to hiring three individual defendants who accessed confidential information from the victim company, Micron Technology, Inc., allegedly for the benefit of Fujian Jinhua.⁸ Assistant Attorney General John Demers commented that the case is a “glaring example of the PRC’s ‘rob, replicate, and replace’ strategy, in which it robs a U.S. institution of its intellectual capital, replicates the stolen technology, and then endeavors to replace the U.S. institution on the Chinese and then global market.”⁹ And David L. Anderson, the United States Attorney for the Northern District of California, observed that the plea “points this case towards trial against Fujian Jinhua in 2021,”¹⁰   making this prosecution one to continue watching in the new year, especially if there is a trial on the horizon involving Fujian Jinhua.

Non-Traditional Collectors. Researchers and academics—or as the Report dubs them “non-traditional collectors”—have been a major focus of the China Initiative thus far. The DOJ has identified academia as “one of our most vulnerable sectors, because of its traditions of openness, and the importance of international exchanges to the free flow of ideas.”¹¹ This has led to the prosecution of researchers “who have deliberately deceived authorities about their ties to China.”¹²  A pattern identified by the DOJ is the PRC’s use of talent programs to obtain information developed in the United States for the benefit of China’s economy or military.¹³  These cases have resulted in charges against researchers for “fraud, false statements, tax, [and] smuggling.”¹⁴  The China Initiative Report highlighted cases charging six individuals with “concealing their [People’s Liberation Army] affiliations in order to obtain visas that allowed them to travel to the United States.”¹⁵  And the Report added that the pursuit of these cases had led a number of similarly affiliated researchers to flee the United States.¹⁶

Foreign Intelligence Activities. The DOJ’s China Initiative efforts have also sought to counter foreign intelligence activities by combatting Chinese efforts to target former United States intelligence members and by monitoring career networking and social media sites for suspicious activity. A recent case that the Report highlights is known as “Operation Fox Hunt.”¹⁷  On October 28, 2020, eight individuals were charged with conspiring to act as illegal agents of the PRC.¹⁸  The individuals were alleged to have conducted surveillance and engaged in a campaign to harass, stalk, and coerce certain United States residents to return to the PRC.¹⁹  The Report also mentions the case of Jun Wei Yeo, a Singaporean national, who was sentenced on October 9, 2020 to 14 months imprisonment for acting as an illegal agent of the People’s Republic of China.²⁰  Specifically, Yeo used professional networking social media sites to “spot and assess Americans with access to valuable non-public information.”²¹  Yeo then paid these Americans—who often had access to military and government information—to write reports about this information without disclosing that these reports were for the Chinese government.²²  Assistant Attorney General John Demers explained that although Yeo’s conduct may have appeared “innocuous” it was actually “part of the PRC’s efforts to exploit the openness of American society[.]” ²³  And Michael Sherwin, Acting United States Attorney for the District of Columbia, commented that Yeo’s case shows the “threat” of China using networking sites to gain access to classified information is “real.”²⁴

The Future of the China Initiative in a Biden Administration

Of course, it remains to be seen how the China Initiative’s strategy will change, if at all, under a Biden Administration and a new Attorney General. Some have opined that “President-elect Joe Biden will probably tweak [President Trump’s approach], but Beijing shouldn’t anticipate a significant softening.”²⁵  In fact, Vice President Biden has said that the United States “does need to get tough with China” because “[i]f China has its way, it will keep robbing the United States and American companies of their technology and intellectual property.”²⁶  Against that backdrop, it seems that a Biden Administration will continue to investigate and prosecute economic espionage and theft of trade secrets. At the same time, many expect that a Biden Administration would pursue a less unilateral approach in its foreign relations with China.²⁷  Although President Trump’s Administration recently contemplated a multilateral deal that would put economic pressure on China from multiple countries,²⁸  President Trump’s policies toward China have previously been described as “unilateral.”²⁹  VP Biden, on the other hand, has previously signaled that he believes a multilateral strategy is the most “effective way” to confront China because, “[o]n its own, the United States represents about a quarter of global GDP,” but “[w]hen we join together with fellow democracies, our strength more than doubles,” and “China can’t afford to ignore more than half the global economy.”³⁰

Conclusion

The DOJ’s China Initiative Report reflects the overall strategy and cases the DOJ has been successful in investigating and prosecuting within the last year. At the same time, it signals that DOJ will continue focusing its attention on investigating and prosecuting individuals and companies associated with China that pose national security threats. And, under a Biden Administration, efforts to combat economic espionage and trade secret theft will persist, though it may be coupled with more of an emphasis on a multilateral foreign policy approach.

Footnotes

 1) Press Release, U.S. DEP’T OF JUST., The China Initiative: Year-in-Review (2019-20) (Nov. 16, 2020)
2) Information About the Department of Justice’s China Initiative and a Compilation of China-Related Prosecutions Since 2018, U.S. DEP’T OF JUST. (last updated Nov. 12, 2020).
3)   DOJ China Initiative Report, supra note 1. 
4) Id. 
5) Id. 
6) Id.
7) Press Release, U.S. DEP’T OF JUST., Taiwan Company Pleads Guilty to Trade Secret Theft in Criminal Case Involving PRC State-Owned Company (Oct. 28, 2020).
8) Id.
9) DOJ China Initiative Report, supra note 1. 
10) DOJ Taiwan Company Pleads Guilty Press Release, supra note 7. 
11) DOJ China Initiative Report, supra note 1.
12) Id.
13) Id.
14) Id.
15) Id. 
16) Id. 
17) Id. 
18) Press Release, U.S. DEP’T OF JUST., Eight Individuals Charged With Conspiring to At as Illegal Agents of the People’s Republic of China (Oct. 28, 2020).
19) Id. 
20) DOJ China Initiative Report, supra note 1.
21) Press Release, U.S. DEP’T OF JUST., Singaporean National Pleads Guilty to Acting in the United States as an Illegal Agent of Chinese Intelligence (July 24, 2020).
22) Id. 
23) Press Release, U.S. DEP’T OF JUST., Singaporean National Sentenced to 14 Months in Prison for Acting in the United States As an Illegal Agent of Chinese Intelligence (Oct. 9, 2020).
24) Id. 
25) Jeanne Whalen, Biden likely to remain tough on Chinese tech like Huawei, but with more help from allies, WASH. POST, (Nov. 16, 2020).
26) Joseph R. Biden, Why America Must Lead Again, FOREIGN AFFAIRS (March/April 2020).
27) Whalen, supra note 25.
28) See Kimberly Doyle, White House Floats New Multilateral Deal to Counter Chinese Trade ‘Coercion,’ WASH. EXAMINER, (Nov. 23 2020).
29) See e.g., William Mauldin, GOP Report, Like Biden, Urges Multilateral Approach to China, WALL ST. J., (Nov. 18, 2020).
30) Biden, supra note 26.