Silicon Valley Employee Charged With Selling Military Secrets

WASHINGTON, Dec 14, 2006 — -- The U.S. Attorney's office in San Francisco announced Thursday a 36-count indictment in an economic espionage case against Xiaodong Sheldon Meng, a former employee of Quantum3D, a Silicon Valley company specializing in military simulations.

Most people have likely never heard of Quantum3D.

According to the firm's Web site, " engines can be found inside U.S. aircraft and tanks, [and] employs commercial chips from...Nvidia, writing software and optimizing them for military use."

China has heard of it, though, and now the country has some Quantum3D software, prosecutors say.

According to the indictment, Meng, a Chinese national with Canadian Citizenship, gave valuable trade secrets belonging to Quantum 3D to members of the Malaysian and Thai air forces and potentially most damaging, to China.

FBI counterintelligence officials have deemed China one of the biggest economic and military threats to the United States. This threat has caused the FBI to set up counterintelligence field squads in every field office across the United States to scour for cases exactly like this one.

The products Meng allegedly dealt with could be found on banned U.S. export munitions lists. Prosecutors say Meng made numerous visits to China, Thailand and Malaysia and provided briefings and demonstrations in China to individuals connected with the Chinese army and navy and various industry groups in the country.

The indictment also says Meng stole numerous Quantum3D products that were solely used for military applications designed for training military fighter pilots in night vision scenarios.

Other Quantum3D technology is used for training pilots and other military and civilian personnel and for enabling engineers to design and test a civilian or military product on a computer before it ever comes to the production floor, this could vastly accelerate advancements in Chinese military technology, officials fear.

"The alleged economic espionage and theft and export of trade secrets such as these visual simulation training software that has military application, no less, has real consequences that could jeopardize our country's military advantages in the world, in addition to creating substantial financial losses for our businesses, which legitimately developed and owned this information," U.S. Attorney Kevin Ryan said in a statement.

Meng was charged with conspiracy, economic espionage and attempted economic espionage; violations of the Arms Export Control Act; 12 counts of theft of trade secrets; 15 counts of foreign and interstate transportation of stolen property; and three counts of making false statements to a government agency.

Meng was originally charged in a 2004 criminal complaint, but the original indictment in the case remains under seal.

Meng allegedly established and worked with other companies for the purpose of selling products that could also be sold to Malaysian and Thai military contractors for their simulation software.

The basis for the economic espionage charge, officials say, hinges on the fact that some of these firms were in competition with Quantum3D for contracts, and Meng approached them after he had terminated his employment with the firm. They allegedly included the companies 4-D Space, Orad, EastCad, Heitech Padhu and Thai Equipment Research Co. Ltd.

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