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David J. Phillip / AP
Federal agents carry boxes out of Arc Electronics Inc. in Houston on Wednesday. The Justice Department said it had broken up a smuggling ring aimed at illegally exporting microelectronics from the United States to Russian military and intelligence agencies.
Updated 9:18 a.m. ET: NEW YORK -- An elaborate network aimed at illegally acquiring U.S.-made microelectronic components for Russian military and spy agencies has been broken up, the Justice Department said on Wednesday - but Russia later denied its spy agencies were involved.
Federal prosecutors unsealed an indictment charging 11 alleged participants in the network, as well as companies based in Houston, Texas and Moscow, with illegally exporting high-tech components from the United States to Russian security agencies.
NBCNewYork.com reported that allegations involve illegally exporting approximately $50 million worth of high-tech microelectronics.
Alexander Fishenko, an owner and executive of the American and Russian companies, was also charged with operating as an unregistered agent of the Russian government inside the U.S. Fishenko was born in Kazakhstan and became a naturalized U.S. citizen in 2003.
According to the indictment unsealed in Brooklyn federal court, the procurement network began obtaining advanced, technologically cutting edge microelectronics from manufacturers and suppliers within the U.S. and exporting those goods to Russia in October 2008, while evading the government licensing system set up to control such exports.
Russia warns Obama's 'reset' in relations 'cannot last forever'
The microelectronics shipped to Russia have applications in a wide range of military systems, including radar and surveillance systems, missile guidance systems and detonation triggers, NBCNewYork.com reported.
'Web of lies'
Court papers say the network induced manufacturers and suppliers to sell them the high-tech goods -- and to evade applicable export controls by providing false end-user information in connection with the purchase of the goods -- concealed the fact they were exporters, and falsely classified the goods they exported on export records submitted to the Department of Commerce.
Prosecutors say the network's principal port of export for the goods was John F. Kennedy International Airport.
"As alleged in the indictment, the defendants spun an elaborate web of lies to evade the laws that protect our national security," U.S Attorney Loretta Lynch said. "The defendants tried to take advantage of America's free markets to steal American technologies for the Russian government. But U.S law enforcement detected, disrupted and dismantled the defendants' network."
Two law enforcement officials told Reuters that Fishenko and seven alleged associates were being held in custody in Houston. One of the defendants was scheduled to appear in court on Wednesday in Houston, and the others on Thursday.
It was not known if they had yet entered any pleas, one of the officials said late on Wednesday. He said that prosecutors expected to ask for those arrested to be transferred to the custody of federal authorities in Brooklyn.
Three other individuals charged in the indictment are currently in Russia, the official said.
A court document made public by prosecutors outlined further details of the government's case against those charged.
It alleged that Fishenko used a Houston company called Arc Electronics to acquire U.S.-made technology for Russian government agencies, including the Russian armed forces and Russia's principal domestic intelligence agency, the Federal Security Service or FSB, a successor to the Soviet-era KGB.
According to the document, among electronic components that the procurement network sought were microcontrollers, microprocessors, static random access memory chips and analog-to-digital converters. Prosecutors claim that such items can be used for a wide variety of sensitive military and intelligence purposes, including radar and surveillance systems, missile guidance systems and detonation triggers.
However, Russia's deputy foreign minister Sergei Ryabkov said on Thursday the country's spy agencies were not involved. "The charges are of a criminal nature and have nothing to do with the work of the secret services," Ryabkov was quoted as saying by Russian news agencies, Reuters reported.
He said the situation had caused deep concern in Russia, and Russian diplomats had met one of the accused to discuss the situation and was preparing to meet the rest.
Surveillance
During the U.S. investigation of the alleged procurement network, which began in July 2010, the U.S. government had engaged in extensive court-approved surveillance of the email and telephone communications of those arrested, the document says.
Prosecutors say that among items collected during the investigation was a letter in which an electronics production laboratory operated by the FSB allegedly complained that certain microchips -- purchased from Arc in Houston through an affiliate of Fishenko's Moscow company -- were defective and needed to be replaced.
More Russia coverage from NBC News
Prosecutors say that when the Russia-based affiliate received the letter from the Russian intelligence agency, it forwarded it to Arc in Houston seeking replacements for the microchips.
At one point, in an effort to show their activities were innocent, Arc told Americans it had approached that it manufactured traffic lights, a U.S. official said.
NBC New York's Joe Valiquette and Reuters contributed to this report.
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Leave a Comment:
I'm glad this was caught. Was it a setup sting, like to see if they would buy it from the beginning? Russia does way to much spying on and in America and I never hear of any in Russia by America. I always feel like Russians are spying or trying to buy US things that are military and illegal. There are enough stories of just our troops and own people who want these things like scopes and binoculars and C4 that I always feel that it is endless in the want of other countries and in the wanting of America's better military weaponry. Also does when TV has James Cameron on it that Russia is always caught buying illegal weapons?? I wonder if it would cross with past problems, like Family Guy. Also it was done when our President was most busy and a predictable time and date of this person being busy, is that not happened before of when the Russians try and buy illegal weapons from America. It seems to be to catch Obama while he is busy and pull off a steal with a predictable date and time.
That is the least of the US problem. One out five research in US universities ends up being stolen by foreign university employees to help their native countries such as India, China, Taiwan, Korea, Japan, Pakistan etc. I am not surprised by Russians stealing some technology, but then that is what we are able to catch and told as it happened. Millions of flash drives cross international boundaries and can you imagine what may be on one of those devices?
Sometime it has nothing to do with security or military products. Even our best of the best allies such as UK, Germany, Japan do obtain technological development almost near completion and produce it before the US companies do. It has happened to a Massachusetts company where their technology which they spent great deal of time and money was looted by Japanese company on a CD rom. That was bold and day light robbery. It did not have a significant military application but economic one.
James........what B.S. you spout. Buying the electronics has been going on for a long time, had nothing to do with president being busy. Do you suggest that only president Obama does all the work completely alone? Only President Obama is doing surveillance on each and every spy in the United States.......? Typical Romney fox news watcher response.
Now most of our big company have research centers located in China, we don't have to worry about something like this done by China anymore.
We should hang anyone caught giving away our technology to any country not obtaining it legally.
Starsailing: your statement was credible until you slammed Romney and Fox watchers, your entitled to your opinion of course but that statement shows a liberal remark painting everyone with one brush. Not a bright statement in any way shape or form.
Romney and Bain company steal U.S. Jobs and send them overseas for years. The repubs block taking away tax breaks from those companies 7-19-12 that steal jobs from the U.S. So it is alright that the rich steal jobs from America and repubs protect them!
WHY ARE REPUBS ALLOWING COMPANIES TO STEAL AMERICAN JOBS?
Russia spends on defense less than 10% of what US does. And they still manage to steal stuff from us. Pretty impressive. We should be so frugal and effective.
SZtop....check out all the Romney and Fox news watchers blaming Obama.....now you want to say my comment was not credible after all the rants they post blaming Obama nonsense?.......MY POST IS CREDIBLE, with or without your opinion!
Repubs , Fox news watchers, Romney followers all cheer when something bad happens to America. Just like the repubs pledged to take the economy down , vote against America the night President Obama took office. All to make President Obama appear to fail. When it is the rt wingers failing and being anti American for their own party, the party of NO!
Russia denied it? No @!$%# !!!
Where's Chapman? I hope Anna is exposed this time.
How pathetic of Russia. This is a country that Mittens thinks is our #1 foe? 150m people and they cant make their own microchips and they're a threat??? Please...
@Starsailing -
Did you really declare James’s idiocy as a Romney/Fox news slant? I don’t see the line or dots you used for this connection but you did open your own box of lines to connect who your idiocy of allegiance falls upon.
"...and I never hear of any in Russia by America."
Take that as a GOOD thing.
If we don't know we're spying on, they don't know what we're spying on.
Hopefully, at least.
At least, we get to pretend that our tax dollars are protecting us. Somehow.
whata....and yours is to yourself I see!
Now put them on trial; convict them of the spying; and then hang them publicly so the Soviet Union can see what we do to spies. And yes, I meant to call them the Soviet Union!
This is more of what happens when you have a weak foreign policy in place. Hey Mr. Obama, do you still feel that you should be a pacifist in trying to hit a "reset" button? After the elections, do you think you will have more room & leverage to give in to Putin on missle defense?
WHEN DOES ENOUGH, BECOME ENOUGH!!!!
It's time to fire this weak pathetic excuse of a leader. I've had enough of giving away what makes the US great and apologizing to every nation we allegedly offend because of who we are!!
This has occurred under every President since FDR at least. The Russians have always tried to steal what they couldn't make for themselves.
So does everyone else. Like theft of US jobs.
Right on Carl ......... we need Taco Bender Mitt in there he would start a war with everyone.
His foreign policy will be kill them all in the name of Mormonism.
Obama is probably going to send Hillery to Putin with the reset button again.
im with ya carl. pay no attention to these idiot libs. they r all pissed that mitt kicked oblowmas butt last night. i hope you libs got a good taste of whats coming this november.
where are you this am ron? crying in your cheerios im sure. LMFAO!!! what a loser!!!
Seriously Carl, do you really want to go there? OK, let's look at the facts here:
1) The guy's company is based in Houston, TX, backyard of George W and Ricky Perry.
2) He became US citizen in 2003, when W was in charge.
3) "exporting those goods to Russia in October 2008, while evading the government licensing system set up to control such exports". Who, again, was the president supposed to be in charge of national security then? Yep, you guessed it. That would be W.
4) "During the U.S. investigation of the alleged procurement network, which began in July 2010, the U.S. government had engaged in extensive court-approved surveillance of the email and telephone communications of those arrested, the document says." So, the only administration that actually did something is Obama's.
I know that the GOTea party is very factually challenged, but are you sure you want to put that one on Obama's doorstep?
Not another Bush's fault you need to try Omama's fault soon
truth seeker - Well said couldn't have laid down the facts better.
The only just punishment for this type cirme is ..death...
Hang 'em high. No 3 square meals a day with hospitalization in prison..... Make an example of them, this is treason or espionage or both.
And you don't believe the U.S. does not do the same thing? We spy and steal our technology is far better but we essentially do the same thing. I say take every asset they have and ship them back to Russia.
This may be only a technical violation as these non-lethal items are sold on the open market. If the Russians didn't buy them here they could buy them in Taiwan, Singapore or Hong Kong. The defendants may just be some immigrant businessmen who believed that in capitalist America everything is for sale.
However, the end user certificate which specifies who the ultimate consumer will be was apparently made out falsely. This is a federal offense even if it does not rise to espionage.
Yeah, right.
I feel strongly that these individuals should be charged and prosecuted to the full extent of the law, and no deals what-so-ever. If any American born individuals are involved, they should be charged with treason, and never see the light of day again. There is simply too much at stake now-a-days to offer any deals to anyone who betrays our country. You would expect the Russians to try to do this, but when it comes to national security regarding it's own citizens and their deliberate sharing, selling and giving sensitive information or material things to other governments, then their punishments should be twice as bad.
Governments like Russia and China are hardcore Communists, and if you know anything about either country, past and present, one would realize that they will do absolutely anything to spread communism and try their best to get control of what they can. Neither country treats their own citizens with respect to what is truly right and as far as respect for human rights----forget it.
Im sure these guys will get prosecuted faster than James Holmes will.. And Who Really cares, they are spys or thief's, What can they actually do to hurt us throw snowballs...
Just sayin..
I think there's a few empty cells in Git'mo.
I hope they like water boards!!!
We do not do "Water Boarding" in Gitm...I mean Guantanamo Bay International Hotel. It's just "Water Sports" sir! Sure there are a few "Athletic injuries...
Another epic fail of the Obama administration. Evidently no reset button has worked with Russia.
Why, because the smuggling ring was broken up ?
Like, there had never been any Russian, or Israeli, or any other, for that matter, spies in the US under other administrations? Is that what you mean ?
Seriously Kala, do you really want to go there? OK, let's look at the facts here:
1) The guy's company is based in Houston, TX, backyard of George W and Ricky Perry.
2) He became US citizen in 2003, when W was in charge.
3) "exporting those goods to Russia in October 2008, while evading the government licensing system set up to control such exports". Who, again, was the president supposed to be in charge of national security then? Yep, you guessed it. That would be W.
4) "During the U.S. investigation of the alleged procurement network, which began in July 2010, the U.S. government had engaged in extensive court-approved surveillance of the email and telephone communications of those arrested, the document says." So, the only administration that actually did something is Obama's.
I know that the GOTea party is very factually challenged, but are you sure you want to put that one on Obama's doorstep?
Copy and Paste again
Truthseeker...seriously. We read it the first time. Your points are inane.
1) Many people live in Texas. Not just the Bush family, Perry family and employees / owners of Arc.
2) Many people became a naturalized citizen in 2003, as well as every other year.
3) key word - "evading". Are you really implying Bush would've given these people the green light?
4) This isn't "Law and Order" or "NCIS". This is real life where "due process" plays part. Unlike the popular TV shows, real life investigators actually need more than an hour to collect enough evidence to warrant the court-approved surveillance and catch the bad guys.
Stop using this story as a media for your political rantings.
The GREED of coporate America easily excels past Patriotism. Get em all and chrge em with treason and then if found guilty, shoot them.
Smarmy - I think you misunderstood, this doesn't have to do with greed, it has to do with Mis-representation by the customer the final destination (end user) of the product.
The Bigger Picture is actually:
1) Sorry - the President and Congress have almost nothing to with the auspices of CIA and FBI and other security related positions other than to act as a symbolic head. You can apply that to Osama Bin Laden - the president just got the final "say-so" but was never involved in the processes up to that point other than reading Leon Panetta's monthly staff notification.
2) Products are defined for use espcially in the military world; drawing are either "domestically controlled", "domestically released", approved export" release, or just "fully released". Companies selling these forms of products DO HAVE a responsibility to vet customers and verify tiered distribution.
3) Mis-representation for these types of products is a Federal offense and dependent upon the nature and capability of the product - punishment can range from a small fine to complete seizure and in some cases capital punishment.
4) The U.S. Govt normally perfers to work in the dark in this arena; when this area is made public, there's always additional politics around it so you need to wrap your head around the bigger game going on - did the U.S. Govt allow this to be public as a bargaining chip for some other action occuring in Russia or someplace with Russian influence? Maybe arms smuggling into Syria or Iraq destablilizing those gov'ts or propping up those gov'ts? What is the Bigger Game that MIGHT be going on? Think about when Carter was leaving the presidency, the media ate up Reagan touting the military and strengthening the armed forces and not afraid to use - Carter was playing "good cop bad cop" with the Iranians to free the embassy hostages basically saying "Hey, I'm a nice guy and will work with you, but once I'm out of here, there's this mashuggha freckin' cowboy coming that may nuke your desert to nothing more than a giant glass bowl!
charge them with treason; then public hang. Next case.
"During the U.S. investigation of the alleged procurement network, which began in July 2010, the U.S. government had engaged in extensive court-approved surveillance of the email and telephone communications of those arrested, the document says"
How wonderful I take it that the Dept. of Homeland Security wasn't involved as they don't have to do this with us "revoltin' peasants". I guess they just like the Russians better than us. I think I'm starting to get jealous;)
"Federal prosecutors unsealed an indictment charging 11 alleged participants in the network, as well as companies based in Houston, Texas and Moscow, with illegally exporting high-tech components from the United States to Russian security agencies."
"Alexander Fishenko, an owner and executive of the American and Russian companies, was also charged with operating as an unregistered agent of the Russian government inside the U.S."
WOW, Charges even ...................Why how positively Habeas Corpus of them. Arrested and Charged properly thats really nice that they have rights in this country. NOPE It's official I'm jealous!
MORE likely what will happen is pretty much ANOTHER spy swap, possibly MUCH higher ranking U.S. spies for these people....
Doesn't look good for old Alex...yep, I see long term health care, room and board, and lots of
freetime to read in his future. Alex, what's the Russian word for "SuperMax" prison?Wow, and the plot thinkens!! These boys were playing with some very hot products. Burned!!!!!
RTColorado,
SuperMax тюрьмы ( SuperMax tyurʹmy)
:)
It appears to be back to cold war business as usual with the Russians. That's a shame really.
But I saw the reset button being pushed.
Send H.C. over there. If that isn't enough to scare them then there is no hope left in the world.
'Doomed I say. We are all DOOMED.' (oblique reference to Dr. Smith - Lost In Space)
Guess you had to be there.......
Good job! now if you would PLEASE PAY ATTENTION TO PERSONS IN THE CHICAGO SOUTH SUBURBS and spreading using PRIVATELY OWNED SATIELLITE REMOTE COMPUTERS, they are Forging FBI SEARCH WARRANTS ANd the teenagers are Using these systems to remote RIGHT INTO THE DESKTOPS.. and others using them to remote into auditing systems for banks, stores, grocery accounting offices , medical centers and these persons are NOT AUTHORIZED. .Why do you need to be kicked in the nuts to get it on a silver platter.. THERE ARE EXISTING FELONY LAWS.. YOU EVEN CAN HAVE THE ADDRESSES.. how much damage and harrasment must be done first?? PLEASE TELL ME??
The more things change, the more they stay the same. Next year there will be a drought in Africa and also breaking headlines China will announce that America has declared a trade war with them.
This is not new. Now they recruit Americans as end user/drop ship addresses for cash. I get junk email weekly soliciting me to do this.
Really I would Try anything once to make a couple bucks.. Were do I sign up...
Leave your email address below and i will forward them to you.
The Russians never stopped the cold war BS. They still recruit us citizens with promises of cash but instead of military related war secrets they want the technology and coporate traitors are willing to give it up for a price. lousy stinking traitors. Start executing them and maybe someone will think twice before swindling the US.
yep
yup, were gona lock the barn door now !
One has to wonder what the ratio is between incidents getting caught and going undetected.
Well, damn. The US Immigration and naturalization Service in 2003 would have asked him if he had any spy background (etc) as a part of the interview.
You mean those silly questions don't help flush out bad people?
I am reminded of the ridiculous federal-forced question airline check-in people used to have to ask:
"Did anyone unbeknownst to you place anything in your bag?"
Hey if they were 'unbeknownst' how would I know?
All involved should be tried as spies,shot,and then be deported
This was Rick Perry's jobs program for TX