Justice Dept. Gets First Conviction On Illegal Source Code Exports

Xiaodong Sheldon Meng, 42, formerly a resident of Beijing, China, and resident of Cupertino, Calif., has pleaded guilty to violating the Foreign Economic Espionage and violating the Arms Export Control Act (AECA) and theInternational Traffic in Arms Regulations (ITAR), federal law enforcement officials say.

The defendant entered into a plea agreement whereby he pleaded guiltyto Count Five (EEA) and Count Seven (AECA) of a superseding indictment thathad been filed on December 13, 2006.

Count Five charged that Meng violated the EEA by possessing a trade secret belonging to Quantum3D, a San Jose company by whom he was formerly employed, intending and knowing that this possession would benefit aforeign government, instrumentality, or agent, namely the People's Republic of China ("PRC") Navy Research Center, the U.S. Justice Department says.

The trade secret at issue, known as "Mantis," is a Quantum3D productused to simulate real world motion for military training purposes. Meng installed a demonstration unit of Mantis on the PRC Navy site. Meng also altered Mantis to make it appear as if it belonged to ORAD, Meng's new employer, a competitor of Quantum3D based in PRC. This altered version of Mantis was included as part of the demonstration project in the PRC.

Count Seven charged that defendant Meng knowingly and willfullyviolated the AECA and ITAR when he exported "viXsen" source code, a Quantum3D product that is a designated defense article on the United StatesMunitions List, and for which Meng had no Department of State exportlicense. viXsen is a visual simulation software program used for trainingmilitary fighter pilots.

U.S. Attorney Scott Schools notes that this prosecution isthe result of a nearly three-year joint investigation by the U.S.Attorney's Office Computer Hacking and Intellectual Property (CHIP) Unit, the FBI, the Department of Homeland Security, Immigration and Customs Enforcement (ICE) -- Office of Investigations, as well as Customs & Border Protection (CBP).

"This conviction, the first in the nation for illegal exports of military-related source code, demonstrates the importance of safeguarding our nation's military secrets and should serve notice to others who would compromise our national security for profit," says U.S. Assistant Attorney General for National Security Kenneth Wainstein. "This case is the latest evidence of the Department's enhanced investigative and prosecutorial efforts to keep America's critical technology from falling into the wrong hands."

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