Electrical Engineer Convicted of Conspiring to Illegally Export to China Semiconductor Chips with Missile Guidance Applications

July 2, 2019 – An electrical engineer has been found guilty of multiple federal criminal charges, including engaging in a scheme to illegally obtain integrated circuits with military applications that later were exported to China without the required export license. Assistant Attorney General for National Security John C. Demers, U.S. Attorney Nicola T. Hanna for the Central District of California and Assistant Director in Charge Paul Delacourt of the FBI’s Los Angeles Field Office made the announcement.

After a six-week trial, Yi-Chi Shih, 64, a part-time Los Angeles resident, was found guilty on June 26 of conspiracy to violate the International Emergency Economic Powers Act (IEEPA), a federal law that makes illegal, among other things, certain unauthorized exports. The jury also found Shih guilty of mail fraud, wire fraud, subscribing to a false tax return, making false statements to a government agency and conspiracy to gain unauthorized access to a protected computer to obtain information. Shih was convicted of all 18 counts in a federal grand jury indictment.

United States District Judge Kronstadt, who presided over a trial that spanned seven weeks in Los Angeles, California, decided on Monday that he will later consider the forfeiture allegations in the indictment, where the government is seeking that Shih should forfeit hundreds of thousands of dollars. Judge Kronstadt discharged the jury that previously had been scheduled today to consider forfeiture allegations against Shih.

United States District Judge John A. Kronstadt will also schedule a sentencing hearing, where Shih faces a statutory maximum sentence of 219 years in federal prison.

“The Department’s China Initiative is focused on preventing and prosecuting thefts of American technology and intellectual property for the benefit of China,” said Assistant Attorney General Demers. “The defendant has been found guilty of conspiring to export sensitive semiconductor chips with military applications to China. I would like to thank the prosecutors and agents, including those from the Royal Canadian Mounted Police, for theirs efforts in this successful investigation and prosecution.”

“This defendant schemed to export to China semiconductors with military and civilian uses, then he lied about it to federal authorities and failed to report income generated by the scheme on his tax returns,” said United States Attorney Nick Hanna. “My office will enforce laws that protect our nation’s intellectual property from being used to benefit foreign adversaries who may compromise our national security.”

“The FBI is committed to protecting institutions from adversaries who seek to steal sensitive American technology under the guise of research,” said Assistant Director in Charge Delacourt. “We will continue to work collaboratively with our federal partners to identify and hold accountable individuals who plunder our research or intellectual property at the expense of the American people and our national security.”

According to the evidence presented at trial, Shih and co-defendant Kiet Ahn Mai, 65, of Pasadena, California, conspired to illegally provide Shih with unauthorized access to a protected computer of a United States company that manufactured wide-band, high-power semiconductor chips known as monolithic microwave integrated circuits (MMICs).

Shih defrauded the U.S. company out of its proprietary, export-controlled items, including its design services for MMICs, according to trial evidence. As part of the scheme, Shih accessed the victim company’s computer systems via its web portal after Mai obtained that access by posing as a domestic customer seeking to obtain custom-designed MMICs that would be used solely in the United States. Shih and Mai concealed Shih’s true intent to transfer the U.S. company’s products to the People’s Republic of China. The MMICs that Shih sent to China required a license from the Commerce Department before being exported to China, and a license was never sought or obtained for this export.

The victim company’s semiconductor chips have a number of commercial and military applications, and its customers include the Air Force, Navy and the Defense Advanced Research Projects Agency. MMICs are used in missiles, missile guidance systems, fighter jets, electronic warfare, electronic warfare countermeasures and radar applications.

The semiconductor chips at the heart of this case were shipped to Chengdu GaStone Technology Company (CGTC), a Chinese company that was building a MMIC manufacturing facility in Chengdu. Shih was the president of CGTC, which in 2014 was placed on the Commerce Department’s Entity List, according to court documents, “due to its involvement in activities contrary to the national security and foreign policy interest of the United States – specifically, that it had been involved in the illicit procurement of commodities and items for unauthorized military end use in China.”

Shih used a Hollywood Hills-based company he controlled – Pullman Lane Productions LLC – to funnel funds provided by Chinese entities to finance the manufacturing of MMICs by the victim company. Pullman Lane received financing from a Beijing-based company that was placed on the Entity List the same day as CGTC “on the basis of its involvement in activities contrary to the national security and foreign policy interests of the United States,” according to court documents.

Shih and Mai were indicted in this case in January 2018. Mai pleaded guilty in December 2018 to one felony count of smuggling and is scheduled to be sentenced on September 19, at which time he will face a statutory maximum sentence of 10 years in federal prison.

This case was investigated by the Federal Bureau of Investigation; the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement; and IRS Criminal Investigation, with assistance from the Royal Canadian Mounted Police.

The matter is being prosecuted by Assistant United States Attorneys Judith A. Heinz, Melanie Sartoris, Khaldoun Shobaki and William Rollins of the National Security Division, Assistant United States Attorney James C. Hughes of the Major Frauds Section, Assistant United States Attorney John J. Kucera of the Asset Forfeiture Section, and Trial Attorney Matthew Walczewski of the Department of Justice’s National Security Division.