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U.S. business losing heavily to economic spies

January 12, 1998

WASHINGTON (AP) _ U.S.-based businesses may have lost at least $300 billion worth of intellectual property to foreign and domestic spies last year, according to a new survey.

More than 1,100 documented incidents of economic espionage and 550 suspected incidents were reported by major companies in a survey conducted by the American Society for Industrial Security.

High-tech companies were the most frequent targets of foreign spies, followed by manufacturing and service industries, according to the survey. The spies targeted research and development strategies, manufacturing and marketing plans and customer lists.

Surveys by the society are used by the federal government to estimate the potential damage from economic espionage, and FBI Director Louis J. Freeh has cited them in congressional testimony. Details of the survey, which is scheduled to be released Feb. 1., were published Monday by the Los Angeles Times.

The survey ranked the United States, China, Japan, France and the United Kingdom as major offenders in economic espionage. Former and current employees, temporary staff, vendors and consultants were cited as most likely culprits.

The FBI doesn’t identify governments it suspects of such spying, but a recent article in the industry magazine Public Administration Review listed France, Germany, Israel, China and South Korea as major offenders.

The article, by FBI agent and criminal justice professor Edwin Fraumann, said more than 700 investigations involving economic espionage by foreign governments are pending before the bureau. The FBI confirmed the figure.

FBI officials said economic spying by friends and adversaries of the United States has been increasing, despite passage of a 1996 law making theft of proprietary information a felony punishable by a $10 million fine and 15-year prison sentence.

In one of the few cases the FBI has brought to court under the act, a retired Eastman Kodak manager pleaded guilty in November to stealing Kodak’s formulas and drawings and passing them along to China.

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