On Friday September 27, 2019, U.S. citizen Xuehua “Edward” Peng was arrested in Hayward, California for providing classified U.S. security information to the Chinese government. Peng allegedly conferred at least four secure digital cards (SD) to China’s Ministry of State Security (MSS) in Beijing.
The Department of Justice filed the complaint against Peng on September 24, following a lengthy FBI investigation of Peng’s activities. A statement by the Department of Justice (DOJ) claimed Peng made at least six “dead drops” between June 2015 and June 2018.
While Peng received an empty package in the first dead drop, he retrieved a package with an SD card from the front desk of a hotel in Newark, California in the second. In the following four dead drops, Peng retrieved SD cards from hotel rooms he had booked in advance. In each of these drops, he left envelopes of cash in the hotel room, in exchange for an SD card left by his source. Two of the six dead drops took place in Newark, California, one in Oakland, California, and three in Columbus, Georgia. Four of the six dead drops resulted in Peng transporting the SD cards to the MSS in Beijing.
“The conduct charged in this case alleges a combination of age-old spy craft and modern technology,” said U.S. Attorney David L. Anderson for the Northern District of California.
The FBI employed a “double agent operation” in their investigation of Peng. An informant for the FBI exchanged an SD card for payment in at least one of the dead drops conducted by Peng.
Assistant Director John Brown of the FBI’s Counterintelligence Division said, “This case should serve as a warning to the government of China as well as any other foreign adversary looking to replicate this activity. The FBI, and our intelligence and law enforcement partners, will not waiver. We will bring all of our resources to bear to defeat hostile foreign intelligence services and protect our nation’s security.”
What’s Next for Peng
Peng, 56, is a resident of Hayward, California. Peng entered the U.S. on a temporary business visitor visa in 2001 and become a lawful permanent resident in 2006 upon marrying his then-wife. Peng was fully naturalized in 2012.
During Peng’s first court appearance on September 27, U.S. Magistrate Judge Joseph C. Spero declined to release Peng on bail, stating Peng was a flight risk. On October 2, Peng appeared before U.S. Magistrate Judge Jacqueline Corley for a detention hearing and identification of counsel. Judge Corley ordered Peng to hire a personal attorney, saying Peng’s significant financial assets disqualified him from being assigned a public defender.
The Special Prosecutions Section of the United States Attorney’s Office for the Northern District of California, as well as the Counterintelligence and Export Control Section of the DOJ, National Security Division, are prosecutors for the case.
Peng is accused of violating 18 U.S. Code § 951. This code states, “Whoever, other than a diplomatic or consular officer or attaché, acts in the United States as an agent of a foreign government without prior notification to the Attorney General if required in subsection (b), shall be fined under this title or imprisoned not more than ten years, or both.” The maximum punishment Peng faces is 10 years imprisonment with a $250,000 fine.
The Larger Threat of Espionage
There have been at least six incidences in the past three years in which the Department of Justice has prosecuted a U.S. citizen for Chinese espionage. Three former U.S. intelligence officers, and one other, have been convicted on these charges.
Assistant Attorney General of National Security John C. Demers said of Peng’s arrest, “Coming on top of our many recent Chinese espionage cases—involving both national defense and intellectual property information—this case illustrates the seriousness of Chinese espionage efforts and the determination of the United States to thwart them.”
The charges against Peng confirm the concerns of many U.S. officials that China poses a growing threat to the West. U.S. Attorney Anderson said, “The charges announced today provide a rare glimpse into the secret efforts of the People’s Republic of China to obtain classified national security information from the United States and the battle being waged by our intelligence and law-enforcement communities to protect our people, our ideas, and our national defense.”