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Companies face persistent spy threat

Governments back espionage gambits as stakes go higher

By Hiawatha Bray
Globe Staff / September 19, 2011

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When the Devens technology company American Superconductor Corp. accused its former Chinese customer of stealing product secrets last week, it joined a string of Massachusetts companies involved in economic espionage cases in recent years. High-tech leaders like iRobot Corp. and Akamai Technologies Inc. have also been targets of corporate spies.

Many cases go unreported or are settled out of court. Federal officials have prosecuted only seven such cases since the federal Economic Espionage Act was enacted in 1996, in an effort to fend off corporate spying by foreigners.

But corporate security analysts say that businesses are under constant threat from highly sophisticated intelligence operations, often sponsored by foreign governments, particularly China’s.

Another threat: unhappy or cash-strapped employees who are looking to peddle company secrets.

Dave Holley, senior managing director in the Boston office of Kroll Inc., a major corporate security company, said businesses are more vulnerable to spies now because they are scrimping on security to save money in a difficult economy.

“Security is viewed as a cost center,’’ he said, “and unfortunately is being cut in a lot of ways.’’

At the same time, the downturn has increased the threat of intellectual property thefts. Workers facing economic stress may have an extra incentive to betray their companies, Holley said.

Corporate espionage has evolved as thieves use digital technology and the Internet. Criminals use malware programs to infect company computers, just as identity thieves do to steal personal information from home machines.

Ira Winkler, author of “Spies Among Us,’’ a book on digital security, said the Chinese government has excelled in developing and deploying such malware.

“China has infiltrated pretty much every major company in the industrial world and is robbing them blind,’’ Winkler said, adding that it is not just China that is a culprit. “You’ve got Russia and Israel, too.’’

Still, economic spying often involves human beings who smuggle secrets out of the office or laboratory.

Last year, Kexue Huang of Westborough was arrested for stealing trade secrets from an Indiana company, Dow AgroSciences LLC, between 2003 and 2008 and passing the information to a contact in China.

Last week, Huang pleaded guilty to violating the Economic Espionage Act. He could face up to 15 years in prison.

In another insider theft, Elliot Doxer of Brookline contacted an Israeli consulate in 2006 and offered to sell technical secrets from his employer, the Internet data-delivery company Akamai Technologies Inc., of Cambridge. But Israeli officials contacted US law enforcement personnel, and the FBI mounted a sting operation to trap Doxer, who pleaded guilty. He faces sentencing in November.

Some corporate espionage cases are entirely domestic.

Jameel Ahed, a former engineer at the robot maker iRobot Corp., of Bedford, left the company to form his own business, Robotic FX. In September 2007, Ahed’s company won a $280 million contract to build robots for the Army. IRobot sued, presenting evidence in federal court that Ahed had stolen proprietary designs. The Army took back the contract and gave it to iRobot, and Robotic FX went out of business.

Nobody knows the size of the corporate espionage problem. But Bob Hayes, managing director of the Security Executive Council, an organization of corporate security officials, said businesses and the government are not doing nearly enough to fight back.

“There’s no clear evidence to me that we have the policies in place to protect our businesses,’’ Hayes said.

Hayes said businesses must investigate new hires. But they should also be careful about forming alliances with companies that could gain access to proprietary information.

Be careful about outsourcing work to another country, Hayes said. And have a plan for what to do when information is stolen, because perfect security is impossible, and corporate spying will never end.

“That’s always gone on,’’ Hayes said, “and always will.’’

Hiawatha Bray can be reached at bray@globe.com.