Chinese National Sentenced To Federal Prison For Illegally Exporting To China Radiation-Hardened Computer Circuits Used In Satellite Communications

DENVER – Philip Chaohui HE, aka Philip Hope, who was residing in Oakland, California, at the time of his arrest, was sentenced yesterday, by Senior U.S. District Court Judge Wiley Y. Daniel to serve 36 months in federal prison for conspiracy to violate the Arms Export Control Act and to Smuggle Goods from the United States, United States Attorney John Walsh and U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) Special Agent in Charge Kumar C. Kibble announced.  Following his prison sentence, HE was ordered to serve 3 years on supervised release.  HE was already in custody prior to the sentencing hearing, and was remanded at the hearing’s conclusion.

HE was indicted by a federal grand jury in Denver on December 15, 2011.  He pled guilty before Senior Judge Daniel on September 3, 2013.  He was sentenced yesterday, December 18, 2013.

According to court documents, including the stipulated facts contained in the plea agreement, HE attempted to illegally export to China radiation‑hardened computer memory circuits used in satellite communications with a value of almost $550,000. HE, the only employee of Oakland, California‑based Sierra Electronic Instruments (SEI), purchased 312 radiation‑hardened circuits from a Colorado manufacturer.  The circuits purchased by HE are categorized as defense articles within the International Trafficking in Arms Regulations (ITAR).  Lawfully exporting defense articles requires licensing from the U.S. State Department’s Directorate of Defense Trade Controls.

On April 28, 2011, an unindicted co‑conspirator caused two wire transfers totaling about $489,720 to be sent to HE’s bank account in California.  On or about May 9, 2011, HE provided payment in full, $549,654, at the time HE placed the order with the Colorado manufacturer.  According to the indictment, on or about May 17, 2011, HE provided false certification to the Colorado manufacturer that his company was purchasing the integrated circuits for end‑use in the United States only, and HE further acknowledged that the items were controlled by U.S. Export Laws and could not be transferred, transshipped or otherwise disposed of in any other country, without the prior written approval of the U.S. Department of State.

On December 11, 2011, HE drove to the Port of Long Beach, California, and met with two men in front of a docked ship bearing a Chinese flag.  The Chinese‑flagged ship was registered to Zhenhua Port Machinery Company LTD, a subsidiary of the China state‑owned corporation China Communications Construction.  The ship had recently arrived from Shanghai, China, and was scheduled to return on December 15, 2011.

HE concealed 200 integrated circuits in several plastic infant formula containers placed inside five boxes which were sealed and labeled as "milk powder" written in Chinese.  HE transported the boxes in the trunk compartment of his vehicle.  Neither HE, nor his company SEI had a license to export defense articles of any description.

“Exporting sensitive technology to foreign powers in violation of laws and regulations designed to protect our national security is a serious federal crime,” said U.S. Attorney John Walsh.  “As in this aggravated case, illegal export of restricted technology can and will result in prison sentences.”

“This sentence represents the results of an extensive two-year HSI Investigation, following the solid lead we received from a responsible Colorado company,” said Kumar C. Kibble, special agent in charge of HSI Denver.  “U.S. national security depends on every American’s diligence.  If you see something, say something.”

The Defense Security Service (DSS) and the Defense Criminal Investigative Service (DCIS) provided critical assistance to HSI with this investigation.  Assistance was also provided by the U.S. Attorneys Offices located in the Northern and Central Districts of California.

HE was prosecuted by Assistant U.S. Attorney Matthew Kirsch and Special Assistant U.S. Attorney John Canedy.

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