Suspected Chinese Spy Charged in Plot to Trade Secrets

SAN FRANCISCO (CN) – A suspected Chinese spy faces 10 years in prison and a $250,000 fine if convicted on charges of exchanging United States government secrets with a double agent, federal prosecutors announced Monday.

According to a newly unsealed indictment, Xuehua “Edward” Peng, a 56-year-old naturalized U.S. citizen and San Francisco Bay Area resident, orchestrated six “dead drops” with an unnamed double agent. Peng allegedly left cash in hotel rooms, which the unnamed source swapped for memory discs containing classified information that was cleared by the U.S. government to be sent to China for the purpose of obtaining evidence for the prosecution.

“The charges announced today provide a rare glimpse into the secret efforts of the People’s Republic of China to obtain classified national security information from the United States,” U.S. Attorney for the Northern District of California David Anderson said at a press conference Monday.

The unnamed double agent was recruited by members of China’s Ministry of State Secrets during a trip to China in March 2015. After reporting the recruitment to U.S. authorities, the unnamed source began dropping digital cards containing classified information for Peng to retrieve at hotel rooms between June 2015 and June 2018, according to the indictment.

Peng, who runs a tourist and sightseeing company for Chinese visitors in San Francisco, entered the U.S. in 2001 as a temporary business visitor. He became a lawful permanent resident in 2006 after marrying his wife and then became a U.S. citizen in September 2012.

According to the indictment, Peng would tape envelopes containing $10,000 to $20,000 in cash at the bottom of dresser drawers in hotel rooms, which the unnamed source would swap with memory cards containing classified information. Peng would then retrieve the memory discs and personally deliver them to agents in Beijing.

The dead drops took place at hotels in Oakland and Newark, California, and in Columbus, Georgia.

The investigation and prosecution have nothing to do with current trade tensions between the Trump administration and Republic of China, according to John Bennett, Special Agent In Charge of the San Francisco FBI Field Office.

“We don’t care about the politics here,” Bennett said. “What’s going on in the rest of the world, it doesn’t matter to us. We will prosecute those individuals who we feel are violating federal law.”

Anderson said the investigation and prosecution are part of a larger effort to counter Chinese espionage in the Northern District of California, where Silicon Valley has made the area a particularly attractive target for stealing intellectual property from technology companies, in addition to national security information from government agents.

“The Northern District of California is ground zero for a largely secret battle between People’s Republic of China-controlled spies & thieves and the U.S. intelligence and law enforcement communities tasked with protecting our people, our ideas and our national defense,” Anderson said.

Video evidence of Peng dropping money and collecting the discs in hotel rooms were attached as digital files to the criminal complaint and uploaded to the Justice Department’s YouTube channel.

Peng was arrested at his home in Hayward and made his initial appearance before U.S. Magistrate Judge Joseph Spero on Sept. 27. He is scheduled to appear in U.S. Magistrate Judge Jacqueline Scott Corley’s courtroom for a detention and identification of counsel hearing on Wednesday.


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