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Counter Proliferation Investigation Unit

Chinese national pleads guilty in Colorado to illegally exporting radiation-hardened computer circuits used in satellite communications to China

DENVER — A Chinese national, who was residing in Oakland, Calif., pleaded guilty Sept. 3 to conspiracy to violate the Arms Export Control Act and to Smuggle Goods from the United States.

This guilty plea was announced by U.S. Attorney John Walsh, District of Colorado, and U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI) Special Agent in Charge Kumar C. Kibble.

Philip Chaohui He, aka Philip Hope, is scheduled to be sentenced by Senior U.S. District Court Judge Wiley Y. Daniel Dec. 18. He is currently in federal custody.

According to court documents, including the stipulated facts contained in the plea agreement, He attempted to illegally export to China radiation-hardened computer memory circuits used in satellite communications with a value of almost $550,000. He, the only employee of Oakland, California-based Sierra Electronic Instruments (SEI), purchased 312 radiation-hardened circuits from a Colorado manufacturer. The circuits purchased by He are categorized as defense articles within the International Trafficking in Arms Regulations (ITAR). Lawfully exporting defense articles requires licensing from the U.S. State Department's Directorate of Defense Trade Controls.

On April 28, 2011, an unindicted co-conspirator caused two wire transfers totaling about $489,720 to be sent to He's bank account in California. On or about May 9, 2011, He provided payment in full, $549,654, at the time He placed the order with the Colorado manufacturer. According to the indictment, on or about May 17, 2011, He provided false certification to the Colorado manufacturer that his company was purchasing the integrated circuits for end-use in the United States only. He further acknowledged that the items were controlled by U.S. Export Laws and could not be transferred, transshipped or otherwise disposed of in any other country, without the prior written approval of the U.S. Department of State.

On Dec. 11, 2011, He drove to the Port of Long Beach, Calif., and met with two men in front of a docked ship bearing a Chinese flag. The Chinese-flagged ship was registered to Zhenhua Port Machinery Company LTD, a subsidiary of the China state-owned corporation China Communications Construction. The ship had recently arrived from Shanghai, China, and was scheduled to return Dec. 15, 2011.

He concealed 200 integrated circuits in several plastic infant formula containers placed inside five boxes which were sealed and labeled as "milk powder" written in Chinese. He transported the boxes in the trunk compartment of his vehicle. Neither He, nor his company SEI had a license to export defense articles of any description.

"We have specific laws designed to protect sensitive American technology from getting into the wrong hands overseas," said U.S. Attorney John Walsh. "Defendant He attempted to smuggle export-controlled radiation-hardened computer chips to China, and faces serious punishment for his criminal activity."

"The Arms Export Control Act is designed to prevent having our technology illegally exported and ultimately used against us," said Kumar C. Kibble, special agent in charge of HSI Denver. "Our HSI special agents in Colorado Springs, San Francisco and Los Angeles worked together with our law enforcement partners to investigate Philip He and eliminate the threat he posed to this country."

For conspiring to violate the Arms Export Control Act (AECA) and to smuggle goods from the U.S., He faces not more than 5 years in federal prison, and a fine of up to $250,000.

The Defense Security Service and the Defense Criminal Investigative Service provided critical assistance to HSI with this investigation. Assistance was also provided by the U.S. Attorneys Offices located in the Northern and Central Districts of California.

He is being prosecuted by Assistant U.S. Attorney Matthew Kirsch.