Why Red China Targeted the Clinton White House By
Timothy W. Maier
Writing for Insight Magazine
Beijing's leaders have set their sights on American encryption and satellite technologies that, once obtained, could kill vital U.S. intelligence operations worldwide. The covert plot was launched in 1992 -- the same year Chinese operatives signed a military intelligence agreement to share secrets with Russia.
Red Chinese spies are among us. Their infiltration is so deep, say U.S. intelligence experts, that the prime targets appear to be America's supersecret encryption and satellite technologies. Once obtained, their possession by Beijing could provide access to the most sensitive U.S. military secrets and wreck American intelligence-gathering worldwide. Interviews with Russian and U.S. intelligence specialists indicate that China also has plotted covertly to acquire top U.S. computer technology to disrupt U.S. intelligence operations and prevent American spies from monitoring Red Chinese activities.
. . . . The current problem involves Bill Clinton's Chinese friendships, fund-raising and what some consider the president's contempt for security. But it began much earlier.
. . . . In the 1970s, under the leadership of then-Secretary of State Henry Kissinger, the United States became a willing partner of Beijing by providing computer technology for Chinese missiles, ostensibly for defense against a Beijing feared Russian invasion. Senior U.S. intelligence sources say those missiles now are pointed at Los Angeles, Hawaii or Alaska. In the meantime, Kissinger has become a multimillionaire trade partner for American firms conducting business in China. And, as Premier Li Peng publicly has stated, "Chinese will never forget the contributions made by Kissinger" (see "Lion Dancing With Wolves," April 21).
. . . . Two decades later the policy of building up the Red China military continues. Insight has learned that a covert operation run by the CIA and National Security Council, or NSC, last year resulted in providing Beijing with missile hardware and software including programming and targeting capabilities and guidance systems, according to sources familiar with that operation. The NSC supposedly arranged the deal to set up a disinformation campaign in which future U.S. data might be used to disrupt Chinese intelligence, the sources say. "This was real-time data gone - maybe 10, 20, 30 billion dollars' worth of technology," one source says. "The thought was that we had to give away some good stuff for them to take the bad stuff."
. . . . A 1995 General Accounting Office, or GAO, report ordered by the Pentagon and State Department and critical of exports to China portrays the United States as being a blind trading partner of China. The unclassified report shows that the United States approved 67 export licenses to China for military-industrial products between 1990 and 1993, including $530 million of missile-related technology. "The Department of Justice is concerned the Department of Commerce might not be identifying or seeking interagency concurrence on all potential missile technology export-license applications," the report declares.
. . . . According to William Triplett II, former chief Republican counsel to the Senate Foreign Relations Committee, the British and French were furious when Clinton dismantled the Coordinating Committee for Multilateral Export Controls, or COCOM - an international arrangement to prevent export of military high-tech. That decision, he says, secured the export to Russia and China this year of supercomputers capable of building sophisticated nuclear-guidance systems. California-based Silicon Graphics, now under federal investigation for illegal exporting, sold the supercomputers to the China Academy of Sciences and to a Russian nuclear-weapons lab, claiming the sales were based on an understanding that the technology would be used for environmental purposes. The company says it now feels terrible about these sales.
. . . . Insight also has learned that Chinese agents have formed a secret partnership with Russian military intelligence, according to intelligence specialists working closely with the FBI. Intercepting signals from satellites and breaking into private and government computer systems are part of the purpose of this joint agreement secretly signed in 1992, says a former high-ranking Russian military intelligence agent who was stationed in Beijing and has spoken exclusively to Insight. "They share sensitive information with the goal of destroying the United States," the agent says, noting that the U.S. Navy port facilities at Long Beach, Calif., recently signed over to the China Ocean Shipping Co. pending civil litigation, are to be used as a joint Chinese-Russian intelligence operation.
. . . . The FBI learned of a major Chinese espionage plot to influence the elections last year and launched an investigation. The ex-Russian agent says China's political leaders initiated the operation after meeting to discuss how best to penetrate the U.S. government. "It was a political group decision," the source observes.
. . . . What's surprising, says a former NSC staffer, is the reaction in the administration when the FBI reported the Chinese plot to influence the elections. "We have the smoking guns that the Chinese are trying to direct covert actions against the U.S., and nothing is done," the former staffer says. "Any other time it would have meant the expulsion of the Chinese ambassador."
. . . . The ex-Russian intelligence agent's allegation of Chinese penetration has been confirmed by Randolph Quon, a former Hong Kong investment banker for two decades. Quon is close to several of the Chinese princelings - the sons and nephews of China's ruling leaders who head the major Red Chinese trading companies. He says China had a "guan-xi," or connection to get access, for its U.S. political operation. "Li Peng was told the Lippo Group had a back channel to the White House, to Bill Clinton," Quon says, through "dealmaker" John Huang, the former Commerce official and ex-vice president of the Indonesia-based Lippo Group, which had extensive joint ventures with Chinese power companies. All utility companies in China are operated by the People's Liberation Army, or PLA, say defense-intelligence specialists.
. . . . Quon claims 20 members of the Communist Party undertook a "strategic-information warfare campaign in the U.S." Part of that plan, he says, was taking control of Lippo - a company that worked to form a strong relationship with China for economic and military opportunities. Four days after Clinton's 1992 victory the Lippo Group sold 15 percent, and then later 50 percent, of its interest in the Hong Kong Chinese Bank to China Resources [Holdings] Co., a Chinese military front company for spy operations, according to U.S. defense-intelligence agents.
. . . . There were a number of objectives to these moves, but espionage headed the list. The key was encryption. A former NSC expert on intelligence encryption says China needs encryption technology badly and targeted the United States to get it. "The Chinese are into information warfare the ability to use computers to collect intelligence and conceivably to damage the U.S.," says the NSC staffer who served under Reagan. "It would cause real trouble for the U.S. if they obtained U.S. encryption technology. It will be a hit against the quality of American intelligence operations."
. . . . How vulnerable are U.S. defense computers? An unclassified GAO report ordered in 1996 by the Senate Governmental Affairs Committee warns there were 250,000 hacker attacks in 1995, of which 65 percent were successful penetrations. In addition, it says, 120 countries are capable of breaking into 2.1 million U.S. defense computers. Two Dutch hackers successfully tapped into computers during the Persian Gulf War and learned the precise locations of troop deployments. They then attempted to sell the classified information to Saddam Hussein, who turned it down because he thought it was a U.S. trick, according to the report. "At a minimum, these attacks are a multimillion-dollar nuisance to defense," the GAO report states. "At worst, they are a serious threat to national security."
. . . . Senior U.S. intelligence officials say the Chinese waited patiently for an opportunity to strike and found vulnerability in a White House that seemed more concerned with filling a depleted Democratic National Committee war chest than with national security. Clinton denies security has suffered under his tenure, and Vice President Al Gore says he did nothing wrong in granting access to big-buck donors, but claims he won't "do it again."
. . . . Sven Kramer, who long served the NSC at the White House under Republican and Democratic presidents, says he is disgusted with the cavalier actions of an administration that critics say put a dialing-for-dollars campaign ahead of national security. Kramer asserts he finds it difficult to believe that the United States would surrender key ports in Long Beach and at either end of the Panama Canal to a PLA-led shipping company called COSCO. He cites the "foolishness of the intelligence community" for not blowing the whistle on these operations.
. . . . He is not alone. Bipartisan former intelligence officials, who asked not to be identified, trace this national-security breakdown to Clinton's out-of-control fund-raising campaign. They cite the selling of White House access to drug dealers and heads of Chinese gun-smuggling companies, as well as presidential one-on-ones with sons and daughters of the highest commanders in the PLA. They note that security clearances were overlooked and access to the president and high administration policy wonks was granted without so much as a FBI background check even for White House coffee-klatsch guests. .... Remember that in 1992 American voters elected Clinton as one who viewed the rulers of China as the "butchers of Beijing." Former Time journalists Ross Munro and Richard Bernstein write in their book, Coming Conflict with China, that the Chinese realized they needed to turn Clinton around and looked for ways to do so. The Chinese call it "zou-hou-men," which translates as back door. "The phrase expresses the realistically cynical view that qualifications, skill and lower prices mean less in China than the ability to skirt the official rules and to slip into the Palace of Power via the rear entrance," the authors write.
. . . . One way to skirt the process was to get American businesses to do the lobbying for China's "most favored nation," or MFN, trading status and to get big donors to persuade Clinton to support MFN. China expert Orville Schell, dean of the graduate school of journalism at the University of California at Berkeley, says the Chinese attempt to influence policy may have been a clumsy effort to establish a beachhead, but that the influence peddling most likely was done to get American business on their side.
. . . . I would not be looking for a suitcase of money to a senator and congress," Schell says. "Now there may be some of that. But what is really going on is China is doing a more indirect approach - they are buying and selling more joint ventures. China's leaders know it's who you know. They know the real influence is with American business because they know businesses can exert pressure."
. . . . But for China to influence Clinton it needed a back door to the White House to push Beijing's agenda - or risk losing billions if MFN were rejected. The door was there. Enter John Huang, that former vice president of the Lippo Group, whose whereabouts now are unknown. Although he was granted top-secret clearance on Jan. 31, 1994, Huang officially didn't begin work as deputy assistant secretary of Commerce for international economic policy until July 18, 1994.
. . . . Senate investigators characterize Huang as a "human vacuum cleaner" who sifted through an enormous amount of classified information dealing with China as if he knew his opportunity to do so would be short-lived. During his 18 months at the Commerce Department, Huang was privy to at least 109 intelligence briefings - 70 in 1994 and 39 in 1995, according to recently released records from Commerce. The numbers are a far cry from the 37 classified briefings initially admitted by Commerce, and this has Senate investigators extremely upset. "We could have been plugging up holes" and controlling the damage, says an angry investigator. "The FBI is now doing a damage assessment."
. . . . Other former senior intelligence officers in both NSC and the National Security Agency, or NSA, say it would have been extremely unusual for Huang, who served in the Taiwan air force, to have been cleared for such access without a background check. "That's only done with congressmen," says a former senior NSA official.
. . . . Senate investigators say they are concerned about Huang meeting with a Chinese Embassy official inside his Commerce office 30 minutes after being briefed by John Dickerson, head of the CIA's office of intelligence liaison at Commerce. Records also show Huang placed at least six telephone calls to Lippo shortly after intelligence briefings. Alarmed intelligence sources say Huang's top-secret clearance would have allowed him to see hundreds of classified documents in addition to attending briefings. .... Huang's clearance was not pulled until Dec. 9, 1996, nearly a year after he left Commerce to join the DNC fundraising campaign as a finance vice chairman, Commerce records show. It is yet to be revealed whether he attended classified meetings while at the DNC.
. . . . What this says is that Huang's security clearance was waived," former NSC staffer Kramer says. "That is rare and far too generous of the president. The president can waive security if it is considered urgent in order to go on a trip or be involved rapidly in a project." Records show Huang was not planning any trips.
. . . . Commerce claims the clearance was needed for an International Trade Administration security briefing but acknowledges no records exist to show the briefing ever occurred. That raises the question: What was Huang secretly involved in? Of utmost concern is whether he was briefed on a top-secret project dubbed "Clipper Chip." This "bug-on-the-chip" project, as some intelligence officials call it, began in 1987 inside the NSA to help the Fort Meade, Md., spy agency snoop on its enemies and protect secrets in a joint partnership with federal law-enforcement agencies.
. . . . Initially the Clipper Chip was an electronic device used to secure telephones, but after years of research the Son of Clipper was developed. It was to be placed inside every American-built computer or fax machine to protect it from hackers. The chip also permitted wire-tapping through unique keys that unlock communications encrypted with the chip. The keeper of the keys, according to the plan crafted at the Clinton White House, would be the FBI and Commerce. In a storm of controversy loud warnings of invasion of privacy came from the private communications sector -with the exception of AT&T, which installed the chip. The Clipper Chip was killed last year for commercial use, though it remained in federal computers until giving way to a new system in March 1997.
. . . . NSA records show Clipper Chip meetings were held with NSA, NSC, CIA, FBI and Commerce officials, as well as with former Associate Attorney General and convicted Whitewater attorney Webster Hubbell and former Deputy White House Counsel Vince Foster, two months before Foster died in 1993. Investigators still are trying to determine if Huang attended any of these briefings.
. . . . Commerce spokeswoman Brenda Dolan insists that "John Huang has nothing to do with the Clipper Chip, nor should he have. He worked in the international trade administration. He did not work in export of the Clipper Chip." But Senate sources tell Insight that Huang attended weekly CIA and China meetings at which such technology may have been discussed. His top-secret classification would have allowed him to view Clipper Chip documents if he chose, according to intelligence and Senate sources. .... The NSA, one of the strongest supporters of the chip, warns of enemies obtaining it. In a partially unclassified document labeled "Secret Introduction," the NSA says the "use of strong cryptographic products by the myriad of criminal and hostile intelligence agents poses an extremely serious and unacceptable threat to effective law enforcement, the public safety and national security." .... Dorothy E. Denning, professor of computer science at Georgetown University and author of Cryptography and Data Security, supports the use of the chip for law enforcement activities. FBI statistics indicate authorized wiretaps have led to the conviction of 20,000 felons resulting in $296 million in fines, $756 million in court-ordered restitution and $1.8 billion saved in potential economic loss.
. . . . Denning claims it nearly is impossible to crack the Clipper systems. "You have to penetrate and you would have to get in the building, then you would have to get in the safe and then the computer keys," she says. "It's not realistic and even if you have the keys it's not useful unless you have the right equipment."
. . . . The safe room holding the keys is what Charlie Smith, president of Virginia-based Softwar Co. and a critic of Clipper, calls the "Mission: Impossible" room, with the big mainframe computer, stacks of classified data, secret radio frequencies and wired alarm systems. "It's a highly classified library with guards," Smith says. "The clipper or key recovery as it is currently being called was supposed to protect government secrets. Instead, they have built an electronic version of Pearl Harbor and put it neatly in one little row where one guy can walk in and then walk out with it."
. . . . There also are others involved in Clinton fund-raising to whom congressional committees are anxious to pose questions about interest in secret U.S. technology. Ira Sockowitz, a Clinton administration lawyer, admitted during a deposition with Judicial Watch, a Washington based watchdog group pursuing the Clipper documents in relation to Huang's activities at Commerce, that he walked out of the Commerce Department with CIA, NSC and NSA classified files on encryption or decoding software, spy satellites, China, Russia and other countries.
. . . . Sockowitz, who had a top-secret clearance, was appointed by Clinton to serve as a special legal counsel in Commerce. He says he simply was transferring the files to his new post at the Small Business Administration, where he became deputy administrator in the spring of 1996. The records removed contain some 2,800 pages, including a classified report called "A Study of the International Market for Computer Software With Encryption."
. . . . Sockowitz, now a Washington consultant, claims he never met Huang, although the two men worked together on the Asian Pacific American Working Group - the principal unit in the DNC responsible for raising about $7 million in campaign contributions in the Asian communities during 1996 - much of it returned because of questionable origins.
. . . . How spooky does it get? An odd link to this story is that the NSA chose Arkansas-based Systematics on Sept. 14, 1990, to construct the "Mission: Impossible" room called the Secured Compartmentalized Information Facility, or SCIF, in Fort Gillem, Ga., according to an unclassified NSA memo. At that time Systematics was run by Jackson Stephens who, along with Mochtar Riady and James Riady controlled Lippo's Worthen bank, which gave Clinton a multimillion-dollar loan to get through the 1992 presidential election. The same Lippo Group, which later dumped Worthen, is linked to China Resources, a front for Chinese military-intelligence operations, say U.S. defense intelligence sources.
. . . . The concern of the U.S. intelligence community is whether Chinese agents penetrated the SCIF. An NSA staffer notes that the Chinese once managed to bug the Russian Embassy in Beijing, and that if they built the SCIF "they could do a lot of things there."
. . . . That brings the story back to Huang, who worked with the Riadys at Worthem Bank and appears to have formed another intriguing friendship with PLA arms dealer and White House coffee-klatsch guest Wang Jun. China's Far Eastern Economic Review reported in April that Wang admitted to Beijing's political leaders that he had paid Huang $30,000 for reasons unexplained. One Senate investigator says this could be the "smoking gun" that ties Huang to the PLA. If so, it may help prove that the spies among us walked away with U.S. national secrets of incalculable value - and tie the operation directly to the Clinton team.
--used with permission from Insight Magazine--
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