Chinese Hackers Infiltrate U.S. Military Contractors

Chinese-backed hackers infiltrated the computer networks of airline, shipping and information technology companies responsible for transporting personnel and weapons for the U.S. military, a Senate investigation found.

There were 20 such breaches from June 2012 to May 2013, giving the hackers insight into military logistics and a foothold that could be used to disrupt operations, according to a report today by the Senate Armed Services Committee.

While public attention has focused on the hacking of companies like JPMorgan Chase & Co. and Home Depot Inc., the U.S. Defense Department confronts persistent digital incursions aimed at stealing military secrets and potentially disrupting vital computer networks. Private airlines provide more than 90 percent of Defense Department personnel movement and more than one-third of bulk cargo capability, according to the report.

The committee doesn’t know if hackers from China or other governments are still rooting around within the networks of military transportation contractors, Senator Carl Levin, a Michigan Democrat and chairman of the panel, told reporters in Washington today.

“Do I have confidence that the Chinese are stopping? No,” Levin said. “Do we have determination that we’re going to take steps to defend ourselves against these intrusions? Yes.”

The Defense Department said in a statement that it takes the findings “very seriously” and that it’s addressing “gaps” identified in the report. “This is a very high priority for the department,” according to the statement.

Top Companies

About 12 contractors were found to have been breached during the committee’s investigation. The report didn’t identify any or reveal whether any information was stolen.

Military transportation contractors “are under sustained pressure by cyberthreats originating from the Chinese government,” Levin said. “Our ability to project power is critical to our national security,” he said.

The top five companies, based on contracts awarded since 2010 by Transportation Command for shipping and transport services, are: FedEx Corp., Evergreen Holdings Inc., A.P. Moeller-Maersk A/S, United Parcel Service Inc. and Neptune Orient Lines Ltd., according to data compiled by Bloomberg Intelligence.

Blocking Access

FedEx has protections throughout its computer systems to prevent unauthorized access and removal of information, a company spokeswoman, Melissa Charbonneau, said in an e-mail.

“We have a dedicated group of information security professionals whose sole responsibility is to protect our systems and the information contained in them,” she said. “We are confident in the integrity and safety of our systems, including those supportive of our government contracts.”

Hacking risks are growing and top the list of global threats, Director of National Intelligence James Clapper told the Senate’s intelligence committee in January. It was the second year in a row that hacking threats were the top concern.

“Peacetime cyber compromises of the networks of operationally critical contractors could prove valuable to foreign governments as a source of intelligence about network operations or to establish a foothold in contractor networks, either of which could be exploited in a contingency,” the committee said.

Chinese Links

There were 50 successful intrusions or other types of attacks targeting contractors of the Transportation Command during the one-year period reviewed by the Senate committee. At least 20 of those attacks were thought to be carried out by hackers from the Chinese government, according to the report.

Transportation Command was made aware of only two of the Chinese attacks, which is “a troubling finding given the potential impact of cyber intrusions on defense information and operations,” the committee wrote.

In response to the committee’s investigation as well as concerns within the Pentagon, companies that believe they have been hacked now have a contractual obligation to report it, Air Force General Paul Selva, who heads Transportation Command, said in an interview.

Command officials take the information to determine “how deep the penetration goes, if there was information stolen that was of national importance and then we react to that,” Selva said.

Mutual Trust

Geng Shuang, a spokesman for the Chinese embassy in Washington, disputed the committee’s findings and said Chinese law prohibits cybercrimes of all forms.

“Judging from past experience, those kinds of reports and allegations are usually based on fabricated facts and groundless,” Shuang said in an e-mail.

The accusations aren’t constructive and don’t contribute to solutions, he said. Hacking attacks are a global concern and can only be addressed by international cooperation “based on mutual trust and mutual respect,” he said.

Chinese military doctrine advocates targeting logistics networks to hinder the Pentagon’s ability to operate during conflict, the committee said.

The report identified systematic problems in the command’s awareness of cybersecurity vulnerabilities and the sharing of information between agencies.

Many cyber intrusions weren’t reported to the command due to “a lack of common understanding” between it and the contractors about what needed to be flagged, the committee said. Additionally, other offices within the Defense Department, as well as the Federal Bureau of Investigation, were “frequently unaware that companies they had identified as victims of cyber intrusions were TRANSCOM contractors,” the committee said.

“These shortcomings left TRANSCOM uninformed about the overwhelming majority of cyber intrusions affecting contractor networks,” the committee said.

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