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Chinese Nationals Admit to Smuggling Microchips, U.S. Says

Two Chinese businessmen admitted to conspiring to smuggle radiation-hardened microchips used in the military and aerospace industries in violation of U.S. export laws.

Hong Wei Xian, 32, president of Beijing Starcreates Space Science & Technology Development Co., and Li Li, 33, the company’s vice president, pleaded guilty in federal court in Alexandria, Virginia, today to attempted export of defense items. Starcreates sells programmable read-only memory microchips to government-controlled China Aerospace Science & Technology Corp., according to their indictment.

The pleas are related to other prosecutions involving attempts by China to obtain U.S. technology and information for economic and military advantage, U.S. Attorney Neil MacBride said on a conference call. The U.S. has had an embargo on the export of “defense articles” to China since 1990, according to Xian and Li’s indictment.

“Today’s convictions represent another example of the threat posed by those who illegally seek to obtain advanced American military technology for the benefit of PRC, both economically and militarily,” MacBride said.

In April 2009, Xian, also known as Harry Zan, contacted a Virginia company that manufactures programmable microchips used in satellite systems and other space-based applications, prosecutors charged in the indictment.

The company reported the contact to the government, which set up a sting operation with an undercover agent.

Xian and Lin eventually worked out a deal through the agent for the purchase of 40 microchips for $64,500. The two were arrested in September in Hungary, where they expected microchips to be shipped. They were transferred to the custody of U.S. marshals on April 1, according to prosecutors.

Prosecutors declined to identify the company.

Xian and Li pleaded to one count of conspiring to violate the Arms Export Control Act. They face a maximum penalty of five years in prison and a $250,000 fine when they are sentenced on Aug. 26. The men must also forfeit almost $49,000 in alleged proceeds, said Peter Carr, a spokesman for MacBride.

The case is U.S. v. Xian, 10-cr-00207, U.S. District Court, Eastern District of Virginia (Alexandria).

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