The Justice Department on Monday announced espionage charges against Xuehua Peng, also known as Edward Peng, a 56-year-old resident of Hayward, California, charged with giving classified U.S. national security information to agents of the People’s Republic of China (PRC).
Assistant Attorney General of National Security John C. Demers said on Monday that Peng’s arrest “exposes and disrupts an operation” by Chinese intelligence officers to harvest classified material without setting foot on U.S. soil.
“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,” said Demers.
According to the unsealed charges, Peng used “dead drops” to obtain secure digital cards stuffed with classified information and personally delivered the cards to Chinese intelligence agents in Beijing. He obtained the classified data from an unnamed “confidential human source” who was paid for his or her efforts by Peng.
Peng allegedly tested his espionage system with a dry run in June 2015, picking up an empty package left by his source at the front desk of a hotel, before making at least five live dead drops using the hotel strategy. In each case, Peng booked a hotel room, passed a room key along to the source, and left an envelope with $10,000 or $20,000 in the room as payment. The source took the money and left an SD card full of stolen data tucked inside a book or taped to the inside of a drawer, which Peng collected and delivered to Beijing.
The indictment stated that Peng was under the control of Chinese Ministry of State Security (MSS) agents during these activities, which ran from October 2015 to June 2018. According to the indictment, Peng’s source for classified info was in fact a “double agent,” his dead drops were captured with hidden cameras, and his communications with the MSS were intercepted.
CBS News reported on Monday that Peng came to the U.S. on a business visa in 2001, got married and became a legal permanent resident in 2006, and was naturalized in 2012. He ostensibly worked as a tour guide for Chinese visitors who wanted to see San Francisco. The Justice Department described him as a trained Chinese intelligence agent. If he is convicted, the charges against him could carry up to 10 years in prison plus $250,000 in fines.
“The Chinese are the number one intelligence threat to the United States right now. No question. The Russians are up there for sure, but the Chinese are number one,” Demers told NBC News in an interview on Monday.
Demers told NBC the FBI allowed Peng to keep making his dead drops for years so they could study Chinese spycraft and track the progress of the “carefully curated” data the source passed along to the Chinese Ministry of State Security.
He said the Justice Department wanted Peng’s arrest to “send a message to anyone else who may be acting in this capacity on behalf of the Chinese government” that “you could get caught” and Chinese intelligence is putting their lives at risk.