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U.S. Charges China With Cyber-Spying on American Firms

Image: Press materials are displayed on a table of the Justice Department in Washington

Press materials are displayed on a table of the Justice Department in Washington, Monday, May 19, 2014, before Attorney General Eric Holder was to speak at a news conference. Holder was announcing that a U.S. grand jury has charged five Chinese hackers with economic espionage and trade secret theft, the first-of-its-kind criminal charges against Chinese military officials in an international cyber-espionage case.Charles Dharapak / AP

The Justice Department filed criminal charges against five hackers in the Chinese military Monday, accusing them of stealing American trade secrets through cyber-espionage.

The efforts were directed at six American victim companies: Westinghouse Electric, U.S. subsidiaries of SolarWorld AG, U.S. Steel, Allegheny Technologies and Alcoa. The United Steel Workers union was also targeted.

Each of the alleged hackers was hit with 31 criminal counts for a conspiracy that stretched back eight years, officials said.

“This is a case alleging economic espionage by members of the Chinese military and represents the first-ever charges against a state actor for this type of hacking,” Attorney General Eric Holder said.

"Enough is enough," Holder said at a press conference.

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FBI Director James Comey told NBC News, “For too long, the Chinese government has blatantly sought to use cyber-espionage to obtain economic advantage for its state-owned industries.”

The FBI tracked the computer attacks to Unit 61398 of the Third Department of the People's Liberation Army, headquartered in a building in Shanghai, officials said.

Authorities said what amounted to "21st century burglary" benefited the Chinese competitors of the U.S. victims, including state-run enterprises, and led to the loss of American jobs.

As one example, the hackers stole cost, pricing and strategy information from SolarWorld at the very time the company was losing market share to Chinese rivals, officials said.

Other allegations from the indictment:

  • In 2010, one of the hackers swiped specs for pipes in power plants that Westinghouse was building in China and also peeked at sensitive emails from senior company officials making decisions about other business ventures with the Chinese company.
  • While U.S. Steel was locked in trade disputes with Chinese firms in 2010, the unit used phishing emails to install malware on company computers that it used to exploit vulnerable servers.
  • The unit stole emails about internal strategy from union leaders while they were involved in disputes over Chinese trade practices.

"These victims are tired of being raided," said Assistant Attorney General John Carlin.

He said that in the past, when the U.S. has complained about the hacking to China, "they repsonded by publicly challenging us to provide hard evidence of their hacking that could cstand up in court.

"Well, today we are," Carlin said.

China's Foreign Ministry issued a strongly worded statement, saying the indictment was "made up" and would "damage Sino-American cooperation and mutual trust".

"The Chinese government's stance on the issue of Internet security is consistent and clear," said the statement from Foreign Ministry spokesman Qin Gang, which urged "immediate rectification".

"China is a staunch defender of network security, and the Chinese government, military and associated personnel have never engaged in online theft of trade secrets," the statement said.

It's unclear how the hackers would be brought to justice in the United States. In a separate case, the feds also have charged the makers of malicious software used by hackers, Holder announced at the press conference.

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In a statement, Alcoa said "no material information was compromised" during the Chinese intrusion. The United Steel Workers said, "we find the matter troubling and take it quite seriously."

"To our knowledge, no material information was compromised during this incident which occurred several years ago. Safeguarding our data is a top priority for Alcoa and we continue to invest resources to protect our systems."

The Obama administration has long considered China the most aggressive nation in obtaining industrial secrets through spying.

"Chinese actors are the world's most active and persistent perpetrators of economic espionage," said the Office of the National Counterintelligence Executive, a U.S. government agency, in a 2011 report.

A year ago, several U.S. newspapers, including The New York Times and The Wall Street Journal, said hackers traced to China attacked their newsroom computer systems.

A spokesman for China's foreign ministry called any suggestion that the Chinese were involved in those intrusions "irresponsible," though U.S. security experts said China targeted news organizations in the U.S. and overseas to try to identify the sources of news leaks within the Chinese government.

Those disclosures prompted a computer security expert and former Justice Department lawyer, Marc Zwillinger to say, "the only computers these days that are safe from Chinese government hackers are computers that are turned off, unplugged, and thrown in the back seat of your car."

Reuters contributed to this report.