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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