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May 31, 2011Alexandria, VA, United StatesCounter Proliferation Investigation Unit

2 Chinese nationals pleaded guilty to illegally attempting to export radiation-hardened microchips to the PRC

ALEXANDRIA, Va. – Two Chinese nationals pleaded guilty to participating in a conspiracy to violate the Arms Export Control Act and smuggle radiation-hardened microchips from the United States for companies controlled by the People's Republic of China (PRC). This case stems from an investigation by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI).

"U.S. export and embargo laws are in place to protect our sensitive technology and commodities from falling into the hands of those who seek to utilize it against us," said John P. Torres, special agent in charge of ICE HSI in Washington. "ICE HSI will continue to work with our foreign and federal law enforcement partners to ensure that those who illegally export sensitive materials are investigated and brought to the U.S to face prosecution."

"Today's convictions represent another example of the threat posed by those who illegally seek to obtain advanced American military technology for the benefit of PRC, both economically and militarily," said U.S. Attorney for the Eastern District of Virginia Neil H. MacBride. "These defendants sought advanced U.S. technology for the use by the PRC for military and space-related programs. Whether it's through illegal exports, classic espionage, or economic espionage, the objective is the same: to obtain sensitive technology, secrets, or other data that will help the PRC modernize its military and expand its economic capabilities. The convictions of two Chinese nationals who violated U.S. export and arms embargo laws from within their own country is another example of our office's commitment to defend U.S. national security both at home and around the globe. The guilty pleas are a direct result of the patient and dedicated efforts of our law enforcement partners both in the U.S. and abroad."

"DCIS continues to work with our investigative partners and the international law enforcement community to identify and bring to justice those who threaten the national and economic security of the United States," said Robert E. Craig, special agent in charge of the Defense Criminal Investigative Service's (DCIS) Mid-Atlantic Field Office. "The actual or attempted illegal export of munitions list items places U.S. and allied war fighters at risk and undermines the research and development efforts of our Defense Industrial Base. This case demonstrates the ongoing, vigilant efforts by DOJ, DHS, and DOD to combat the illicit trade of defense articles."

Hong Wei Xian, a/k/a "Harry Zan," 32, and Li Li, a/k/a "Lea Li," 33, both from the PRC, pleaded guilty today to conspiring to violate the Arms Export Control Act and to smuggle goods unlawfully from the United States. They face a maximum penalty of five years in prison when they are sentenced on Aug. 26, 2011.

Xian and Li were officers of Beijing Starcreates Space Science and Technology Development Company Limited (Beijing Starcreates), which, among other things, engages in the business of importing and selling programmable read-only memory microchips to China Aerospace Science and Technology Corporation. Aerospace Science and Technology Corporation is controlled by the PRC government and plays a substantial role in the research, design, development and production of strategic and tactical missile systems and launch vehicles for the PRC.

Since 1990, the U.S. government has maintained an arms embargo against the PRC that prohibits the export, re-export, or re-transfer of any defense article to the PRC. Prohibited defense articles are placed on the U.S. Munitions List, which includes spacecraft systems and associated equipment. A programmable read-only memory microchip (PROM) serves to store the initial start-up program for a computer system and is built to withstand the conditions present in outer space.

According to their guilty pleas, Xian and Li admitted that they neither applied for nor received a license from the United States to export defense articles of any description; however, from April 2009 to Sept. 1, 2010, the two contacted a company in the Eastern District of Virginia, seeking to export thousands of radiation-hardened PROMs from that company. Xian and Li knew a license was required, but did not seek to obtain one because it would have required them to identify the end user – their PRC-controlled company – and describe the end use that would occur on behalf of the PRC. To avoid drawing attention to the true purpose of their orders, the defendants conspired to break up orders into multiple shipments and designate countries outside the PRC for delivery.

On Sept. 1, 2010, the defendants were arrested in Hungary pursuant to a U.S. provisional arrest warrant and transferred into the custody of U.S. Marshals on April 1, 2011, after they waived extradition.

This case was investigated by ICE HSI and DCIS, with assistance from ICE HSI Office of International Affairs.

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