FBI Employee Pleads Guilty to Acting in the United States as an Agent of the Chinese

Defendant Collected and Caused Sensitive FBI Information to be Provided to the Chinese Government

Kun Shan Chun, a native of the People’s Republic of China and a naturalized U.S. citizen, pleaded guilty today to a criminal information charging him with acting in the United States as an agent of China without providing prior notice to the Attorney General. 

Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Preet Bharara of the Southern District of New York and Assistant Director in Charge Diego P. Rodriguez of the FBI’s New York Field Office made the announcement.

Chun, aka Joey Chun, 46, pleaded guilty before U.S. Magistrate Judge James C. Francis IV of the Southern District of New York.  He was an employee of the FBI until his arrest on March 16, 2016.

“Kun Shan Chun violated our nation’s trust by exploiting his official U.S. Government position to provide restricted and sensitive FBI information to the Chinese Government,” said Assistant Attorney General Carlin.  “Holding accountable those who work as illegal foreign agents to the detriment of the United States is among the highest priorities of the National Security Division.”

“Americans who act as unauthorized foreign agents commit a federal offense that betrays our nation and threatens our security,” said U.S. Attorney Bharara.  “And when the perpetrator is an FBI employee, like Kun Shan Chun, the threat is all the more serious and the betrayal all the more duplicitous.  Thanks to the excellent investigative work of the FBI’s Counterintelligence Division, the FBI succeeded in identifying and rooting out this criminal misconduct from within its own ranks.”

“No one is above the law, to include employees of the FBI,” said Assistant Director in Charge Rodriguez.  “We understand as an agency we are trusted by the public to protect our nation’s most sensitive information, and we have to do everything in our power to uphold that trust.”  

According to the complaint, the information and statements made during today’s court proceeding:

In approximately 1997, Chun began working at the FBI’s New York Field Office as an electronics technician assigned to the Computerized Central Monitoring Facility of the FBI’s Technical Branch.  In approximately 1998, and in connection with his employment, the FBI granted Chun a Top Secret security clearance and his duties included accessing sensitive, and in some instances classified, information.  In connection with a progressive recruitment process, Chun received and responded to taskings from Chinese nationals and at least one Chinese government official (Chinese Official-1), some, if not all, of whom were aware that Chun worked at the FBI.  On multiple occasions prior to his arrest in March 2016, at the direction of Chinese government officials, Chun collected sensitive FBI information and caused it to be transmitted to Chinese Official-1 and others, while at the same time engaging in a prolonged and concerted effort to conceal from the FBI his illicit relationships with these individuals.

Beginning in 2006, Chun and some of his relatives maintained relationships with Chinese nationals purporting to be affiliated with a company in China named Zhuhai Kolion Technology Company Ltd. (Kolion).  Chun maintained an indirect financial interest in Kolion, including through a previous investment by one of his parents.  In connection with these relationships, Chinese nationals asked Chun to perform research and consulting tasks in the United States, purportedly for the benefit of Kolion, in exchange for financial benefits, including partial compensation for international trips.     

Between 2006 and 2010, Chun’s communications and other evidence reflect inquiries from purported employees of Kolion to Chun while he was in the United States, as well as efforts by the defendant to collect, among other things, information regarding solid-state hard drives.

In approximately 2011, during a trip to Italy and France partially paid for by the Chinese nationals, Chun was introduced to Chinese Official-1, who indicated that he worked for the Chinese government and that he knew Chun worked for the FBI.  During subsequent private meetings conducted abroad between the two, Chinese Official-1 asked questions regarding sensitive, non-public FBI information.  During those meetings, Chun disclosed, among other things, the identity and potential travel patterns of an FBI Special Agent.

In approximately 2012, the FBI conducted a routine investigation relating to Chun’s Top Secret security clearance.  In an effort to conceal his relationships with Chinese Official-1 and the other Chinese nationals purporting to be affiliated with Kolion, Chun made a series of false statements on a standardized FBI form related to the investigation.  Between 2000 and March 16, 2016, Chun was required by FBI policy to disclose anticipated and actual contact with foreign nationals during his international travel, but he lied on numerous pre- and post-trip FBI debriefing forms by omitting his contacts with Chinese Official-1, other Chinese nationals and Kolion.

On multiple occasions, Chinese Official-1 asked Chun for information regarding the FBI’s internal structure.  In approximately March 2013, Chun downloaded an FBI organizational chart from his FBI computer in Manhattan.  Chun later admitted to the FBI that, after editing the chart to remove the names of FBI personnel, he saved the document on a piece of digital media and caused it to be transported to Chinese Official-1 in China. 

Chinese Official-1 also asked Chun for information regarding technology used by the FBI.  In approximately January 2015, Chun took photos of documents displayed in a restricted area of the FBI’s New York Field Office, which summarized sensitive details regarding multiple surveillance technologies used by the FBI.  Chun sent the photographs to his personal cell phone and later admitted to the FBI that he caused the photographs to be transported to Chinese Official-1 in China.

In approximately February 2015, the FBI caused an undercover employee (UCE) to be introduced to Chun.  The UCE purported to be a U.S. citizen who was born in China and working as a consultant to several firms, including an independent contractor for the Department of Defense, among other entities.

During a recorded meeting in March 2015, Chun told the UCE about his relationship with Kolion and Chinese nationals and later explained to the UCE that Kolion had “government backing,” and that approximately five years prior a relative met a “section chief” whom Chun believed was associated with the Chinese government. 

In another recorded meeting in June 2015, Chun told the UCE that he had informed his Chinese associates that the UCE was a consultant who might be in a position to assist them.  Chun said that he wished to act as a “sub-consultant” to the UCE and wanted the UCE to “pay” him “a little bit.”   In July 2015, after coordinating travel to meet Chun’s Chinese associates, Chun met with the UCE in Hungary twice.  During one of the meetings, Chun stated that he knew “firsthand” that the Chinese government was actively recruiting individuals who could provide assistance and that the Chinese government was willing to provide immigration benefits and other compensation in exchange for such assistance.  The UCE told Chun that he had access to sensitive information from the U.S. government.  Chun responded that his Chinese associates would be interested in that type of information and that Chun expected a “cut” of any payment that the UCE received for providing information to the Chinese government.

The count of acting in the United States as an agent of China without providing notice to the Attorney General carries a maximum sentence of 10 years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

The FBI’s Counterintelligence Division investigated the case.  The prosecution is being handled by Assistant U.S. Attorneys Emil J. Bove III and Andrea L. Surratt of the Southern District of New York’s Terrorism and International Narcotics Unit, with assistance provided by Trial Attorneys Thea D. R. Kendler and David C. Recker of the National Security Division’s Counterintelligence and Export Control Section.  

Apple Has a Great Chinese Opportunity

By Michael Douglas Carlin

Wanda has emerged as the preeminent company building out a chain of movie theaters in China and acquiring AMC that operates a chain of movie theaters. They built their strategy on the old adage it is about butts in seats. Their success in leveraging their Chinese strategy into a brisk American strategy led them to acquire Legendary – a reliable producer of content. But Legendary isn't capable of producing all of the content required by the AMC/Wanda Pipeline. They still need outside relationships. But other Chinese companies are also rising to fill the gaps.

Independent producers and major studios constantly attract new investment into untested films to fuel the spirit of the entertainment industry in China and America. Franchise films with track records rarely need outside investment. There are lots of players in the world of film finance including government incentives, presales, equity investors and others. Chinese money has become one of the jewels in film finance. For every real investor there are hundreds of pretenders.

I have been sitting on the fringe of a Chinese deal in Hollywood for the past 2 ½ years. There have been contracts signed by multiple investors but the money never seems to move. I also sat with a former CEO of a major agency who arrogantly said to me that he had China wired. When it was time for his announced deal to actually fund there was a blow-up, the funds evaporated, and so did most of his agency. But Chinese deals are too lucrative to ignore so they still get pursued at great cost. What if there was a way to take the movement of funds as an issue off of the table?

Apple may be uniquely situated to facilitate investment funds moving out of China. Apple’s iTunes figures to play a key role in the future of digital platforms. Apple has a continued need for product to fuel this digital platform and they could acquire this product by facilitating investment funds flowing out of China. You see, Apple operates a brisk consumer business in China and they are sitting on lots of RMB at any given moment. That consumer business also is a customer base of screens that can view films - eyeballs on screens. Apple also operates a manufacturing operation in China and they ship billions of dollars every year to fund the production of their phones, tablets, computers, and devices.

Apple and Hollywood already enjoy a close relationship. There are many Apple ties into Pixar that was formerly an Apple affiliate. Apple already gets content from many studios and independent producers for their platform. Apple already has the relationship with the Chinese Government. They sit in a unique position to help facilitate investments flowing into Hollywood to develop and produce Hollywood content. But Apple also sits in a unique position to help China build out their movie industry. They have the strategic positioning and relationships to make this happen. The smart production company negotiating with investors in China would begin reaching out to Apple to forge an alliance. The right relationship with Apple takes the movement of money off of the table on announced deals that face delays and eventually fail to fund. As the business model shifts from butts in seats to eyeballs on screens Apple figures to play a key role. The only question is: Will Wanda get to Apple first?

UPDATE: A few days after this article appeared Apple was banned by the Chinese Government. Their movie and iBook apps have been removed from all of their devices in China. That means a tremendous opportunity for the company in China that gets Chinese Government approval to stream movies and partners with Apple. It will be interesting to watch the developing landscape of Chinese movies.

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Moving Wealth Out of China

by Michael Douglas Carlin

There are many wealthy people in China that desire to move their wealth out of China. The Chinese Government makes moving money to Europe and America very difficult. In spite of the difficulties there has been a flight of capital out of China. The old adage is, "you can follow your money, but your money can't always follow you." China is emerging as a stable country but with a weak court system and millions of angry protesters a looming possibility people who have grown significant wealth in China are diversifying their risk by getting their funds to America.

Think about any public company that can benefit from the inexpensive Chinese labor pool. The public company establishes a Chinese entity to conduct business in China. They provide a platform for the American public company to build value to their company's assets in America by using Chinese labor to enhance the those assets. Investor funds are deposited into the Chinese company and used to pay for labor and materials in China. Shares are issued in America to the Chinese investor. 

If the shares are traded on Nasdaq or the New York Stock Exchange those shares can be deposited at any brokerage house and borrowed against. Effectively the Chinese Investor has moved wealth to America.

This should all be done with attorneys to make sure it is done in full compliance with all applicable laws but the mechanism is fairly simple to use. American public companies can tap into investment from China and the Chinese can move their wealth to a country where courts uphold rights. What has made America great are situations like this where everybody wins.

Oliver Stone's Combover

by Michael Douglas Carlin

Years ago Oliver Stone admonished me to follow the story. Yesterday Oliver was the story. He was calculating as he set the table to slam China. He combed his hair 25 times on stage among some of the brightest minds in Hollywood - none of whom brought out their combs. Stone attempted to become relevant again. Slamming China could win a headline. He saw his chance and thundered away. In a few days he will fade off to irrelevance again unless he delivers a film that rivals “Gravity” directed by Alfonso Cuaron Orozco who shared the stage with him.

Alfonso couldn’t have been more respectful to the Chinese government that invited him to discuss an opening China on the subject of coproductions. Alfonso’s film stole the stage when “Gravity” defied all physical laws of filmmaking. Curon was upstaged by Stone but he wasn’t outclassed. Curon leaves China with the relationships that matter. He leaves with an open invitation to come back and make movies that can foster better relationships around the world.

China has emerged as the second largest market for entertainment. They have worked hard to produce the products that are consumed around the world and they now possess a significant amount of the global wealth. Their mountain of cash is available to invest in various segments around the world including film and television. Leaving their cash in China it becomes less valuable. Continuing to invest in U.S. Treasury Bonds is no longer profitable. They must invest in assets around the world to win and they know it. The interests of the United States and the interests of China are aligned and a true partnership is upon us. We gain more by embracing rather than alienating each other.

Rock throwing is never productive. Criticizing China for human rights abuses or censorship isn’t helpful. They have progressed so much. In my youth I would never have believed that China would open up as a place to visit or a market for U.S. goods and services. I would have never believed that China would manufacture all of the products that the United States consumes. Throwing rocks at China is really throwing rocks at the United States. Who paid for all of the products that China produces? Who paid for all of the off-shoring of pollution that the Chinese people are dealing with today? Who paid for the abuse of workers to produce cheap products? Rock throwing won’t lead to a better world. China earned every dollar they were paid and they have every right to invest those dollars as they see fit.

For ten years I have been reading about the inevitable collapse of the Chinese economy. I am in Beijing and I see nothing but a skyline filled with construction cranes. There is absolutely no evidence of an economy that is about to implode. They are the modern day miracle economy that continues to sustain growth because they are not subject to market manipulations of greedy corporations who would rather put short-term earnings ahead of the health and prosperity of the people.

While America’s economy sputters China forges ahead because hundreds of millions of people are working every day to improve the infrastructure of China. America can learn something here. What if every person in American who wants to work is given a job to improve the assets of America? Wouldn’t that lead to a better world? Wouldn’t that lead to the best America we have ever known? Welfare and aid dependency doesn’t work. Corporate welfare doesn’t work either. When hundreds of millions of people are employed to work for a better tomorrow nothing but prosperity can ensue. China may finance our coming prosperity.

Labeling China communist doesn’t really paint the picture. China has become commercialist. They value productivity. They may be polluting and overworking their people… but isn’t that the history of America? As a child in Los Angeles I sat inside on many days because of the smog. Now Los Angeles is so much cleaner. China will figure out how to be productive without polluting. It is in our best interests to embrace them and help them figure this out. As for human rights abuses? The Chinese middle class is emerging and they will move toward more rights and better conditions, as they become the most affluent consumers in the history of the planet.

Let’s put this in perspective. What if some foreign director came over to America and started criticizing George Washington? Oliver Stone can comb his hair all he wants. He can never comb back the friendship he lost on that stage or the opportunity to become truly relevant again unless he follows up his criticism with a new film that rivals the films of his peers. To Oliver Stone, who taught me to follow the story, I would reply, that he needs to let his art now speak for itself.