secrets and to export military defence information. After Su pleaded guilty last July, a US federal court judge sentenced him to almost four years in prison. Increasingly, players such as Su and notorious figures such as Edward Snowden and WikiLeaks founder Julian Assange — who have made public details about US government surveil- lance activities and a wide range of hacked or stolen government and corporate documents, respectively — are upstaging John le Carré’s Cold War-era spies and double-agents as the principal actors in geopolitical data dramas. But for every relatively high- visibility case involving a rogue agent or defence contractor that’s had prized trade secrets lifted, there are many other instances of corporate espionage and theſt of competitive infor- mation — everything from customer lists to engineering dia- grams, drug testing results and proprietary production pro- cesses — that never surface publicly. These crimes, of course, cause havoc in the target firms, particularly when they are carried out by the agents of foreign governments or organized crime syndicates. Some firms find out only when they discover they’re competing against rivals selling virtual replicas of their own products. The problem is vast in scope: according to estimates from the
US government and private security firms, corporate or eco- nomic espionage costs the US economy anywhere from US$250 billion to US$400 billion annually. In 2014, the chair of the US House Intelligence Committee went even further, describing the theſt of information and intellectual property as “the largest transfer of wealth in the world’s history,” with a cumulative US$2 trillion hit to the US economy. And Canada’s exposure? Hard to say, as Ottawa hasn’t pub-
lished any recent data on this kind of crime. The federal govern- ment’s security policies also appear to be inconsistently applied: in 2013 Ottawa blocked a $520-million takeover bid of MTS Allstream, Manitoba’s telecom company, by an Egyptian firm with indirect business ties to North Korea, but has nonetheless allowed Chinese telecom giant Huawei, identified as a national security threat in the US, to establish supplier relationships with Bell and SaskTel. Security expert Michel Juneau-Katsuya, a former chief of Asia-
Pacific for the Canadian Security Intelligence Service and now the head of Northgate Group, says in 1995 CSIS calculated the value of such theſt to be $10 billion to $12 billion — a figure that was about a third of the then cost of corporate espionage south of the border (US$25 billion, or $34 billion using exchange rates at the time). He reckons the hit to Canada’s economy now could be as high
as $120 billion a year, and describes corporate espionage as “one of the top strategic issues” facing Canada. “That’s a lot of money we’re losing because of a lack of awareness and preparation to defend ourselves.” Others agree: “Corporate espionage is on the rise,” says forensic and cyber intelligence expert Daniel
38 | CPA MAGAZINE | MARCH 2017
In 2014, the chair of the US House Intelligence Committee described the theft of information and intellectual property as “the largest transfer of wealth in the world’s history”
Tobok, CEO of Toronto-based Cytelligence. “Globally, it’s tripled over the past five years.” Nor is it just giant corporations that are exposed. Indeed,
small and medium-sized businesses are especially vulnerable, experts say. “In the last five years,” notes a recent global security study by Symantec, “we have observed a steady increase in attacks targeting businesses with fewer than 250 employees, with 43% of all attacks targeted at small businesses in 2015.” These firms don’t devote adequate resources to protecting their own intellectual property from theſt and may be seen by hackers or foreign governments as ways to access the large corporate players with which they do business. SMEs, says lawyer Dominic Jaar, who leads KPMG Canada’s national forensic technology team, “become one of the weakest links in the network.” The long narrative of competitive capitalism is punctuated by countless tales of brazen corporate espionage, as well as more accepted practices, such as “competitive intelligence” opera- tions run by firms that meticulously reverse-engineer rivals’ products with an eye to selling variations under their own brands. In the mid-1800s, a Scot named Robert Fortune was dis-
patched to China by the East India Co., where he donned a dis- guise and set to work stealing the techniques for growing and manufacturing tea, explains Sarah Rose in For All the Tea in China: How England Stole the World’s Favorite Drink and Changed History. Almost 170 years later, in 2014, two people swiped the chemi-
cal formula for a secret whitening agent invented by DuPont and used, among other things, in the filling of Oreo cookies. Unlike the East India Co.’s tea heist, this was an inside job, as one of the co-conspirators had worked as an engineer for DuPont for 35 years. The formula found its way to a shell company that had signed contracts with Chinese state-owned entities, generating almost US$30 million in illegal profits. The firm’s principal, Walter Lian-Heen Liew, was convicted of conspiracy to commit economic espionage and sentenced to 15 years in prison. Other cases involve entrenched players locked in a bitter fight
for market dominance. In the early 2000s, a top Procter & Gamble director discovered that outside contractors hired by
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