-Caveat Lector-
http://www.washtimes.com/national/20021111-15015960.htm
SEC aide quits after leak to Chinese
By Bill Gertz
THE WASHINGTON TIMES
An employee of the Securities and Exchange Commission was
forced to resign after it was discovered she had sent sensitive data
on American computer companies to China in what U.S. officials
say may be a case of economic espionage, The Washington Times
has learned.
Mylene Chan, a computer and online-service analyst with the
SEC for 10 months, left the commission in July after co-workers
discovered she had compromised sensitive information by sending it
to Shanghai, said U.S. government officials close to the case.
"She was clearly expropriating things from the commission that
weren't hers — things that were not public information and that
would cause competitive harm to the companies involved," one
official close to the case said.
The case was covered up by the SEC and never reported to the
FBI as a case of economic espionage, the officials said.
"We have not seen anything on this," an FBI official said.
Numerous U.S. companies whose proprietary information was
handled by Miss Chan also were never informed that their
information may have been compromised, the officials said.
Miss Chan stated in an e-mail to The Times that she was not
dismissed but resigned before the end of the one-year probationary
period of her employment at the SEC.
"Part of my responsibilities at the SEC was to work with
representatives of the China and [Hong Kong] securities
commission and to assist to educate them about how the SEC
functions and, in the course of that, I provided a small number of
SEC materials mistakenly, all of which were retrieved as soon as I
learned of the mistake," Miss Chan stated.
Miss Chan also said, "I did not send CTRs to China."
Within the commission, a CTR is a confidential-treatment
request, secret reports provided by U.S. companies to SEC that
contain proprietary and other sensitive information that companies
do not want disclosed to the public or to competitors.
The disclosure that the SEC shared sensitive corporate data with
China is the latest problem for the commission that is charged with
monitoring the securities industry.
Chairman Harvey Pitt was forced to resign last week after it was
disclosed that he had appointed former FBI Director William
Webster to an SEC oversight panel. Mr. Pitt did not disclose to the
White House that Mr. Webster was on a corporate audit board of a
company under SEC investigation.
Mr. Pitt was under fire from critics over contacts with companies
under SEC investigation. He also was criticized by the conservative
Center for Security Policy for ignoring the activities in U.S. capital
markets of companies that have corporate operations in terrorist-
sponsoring states.
U.S. officials view the China data case as either economic
espionage or state-sponsored espionage involving China.
An internal SEC document obtained by The Times shows that
Miss Chan had access to sensitive information from more than 15
high-tech companies, including several involved in cutting-edge
software development.
The document shows that Miss Chan also processed numerous
confidential-treatment requests.
Several of the companies whose data were compromised are
engaged in security-related work and are contractors for U.S.
defense and intelligence agencies.
One company whose internal data were handled by Miss Chan is
Veridian, a computer-system designer in Arlington that, according to
the company, specializes in "mission-critical national security
programs for the national intelligence community, the Department of
Defense, and government agencies involved in homeland security."
A spokeswoman for Veridian said the company has sent
confidential, proprietary information to the SEC but has heard
nothing from the commission about any compromise of the data.
Nothing in the SEC filings contained any information about the
company's clients, the spokeswoman said.
Officials said Miss Chan is a Chinese national who graduated
from Yale University in 1996 and George Washington University
Law School last year before being hired by the SEC.
In an e-mail to several former co-workers, Miss Chan stated July
2, that "for personal reasons, I am leaving SEC and will be returning
to Hong Kong. I resigned yesterday."
Miss Chan said in the note that she planned to settle in Hong
Kong "for good" in September. "Thanks a great deal for all your
help," she wrote. "You all have been very kind to me. You are
extremely generous with your time and knowledge, for which I am
grateful."
Miss Chan has filed requests for information from the SEC under
the Freedom of Information Act in an effort to find out who within the
commission was responsible for her forced resignation, officials
said.
SEC spokesman John Heine declined to comment on the
circumstances surrounding Miss Chan's employment or whether the
case is under investigation.
Mr. Heine confirmed that Miss Chan, 28, left the SEC in July after
10 months in the SEC's corporate finance division.
U.S. officials familiar with the case said Miss Chan worked in the
Office of Computers and Online Services. She was escorted from
the SEC building by security guards and her office sealed off July 1,
the officials said.
The dismissal was triggered by co-workers who discovered that
Miss Chan had accessed a commercial database used by SEC to
screen companies.
A co-worker in the computer office discovered that database files
had been corrupted and that several e-mails to Miss Chan from
China were discovered in a computer after she had used the
database service. Miss Chan also was found to have sent sensitive
material via e-mail to an address in Shanghai.
Miss Chan also worked on the SEC investigation of the merger
between computer giants Hewlett-Packard and Compaq.
According to SEC documents, the number of confidential
treatment requests handled by the commission grew from about 540
in 1992 to more than 1,000 in 1996. The confidential information
contained in the reports includes financial data and other information
about a public company's financial status and operations.
The confidential-treatment requests that Miss Chan handled
during her employment included sensitive data from Acclaim
Entertainment, which makes video-game software for Sony,
Nintendo and Sega, and Interplay Entertainment, another major
gaming-software producer.
Miss Chan also had access to security-related companies,
including Verint Systems, which produces analytic software "for
communications interception, digital video security and surveillance,
and enterprise business intelligence," according to the Verint Web
site.
She also had access to data were from Citadel Security
Software, which produces "security and privacy software" for
computer networks, and Ion Networks, another computer-security
firm that does business with the government.
Security specialists said sensitive information about the
companies would be useful to competitors or to foreign
governments.
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