December 10, 2006

Spies pillage our economy

Lax laws and loopholes make this nation a favourite target for corporate espionage

By Licia Corbella

When news broke that a Russian spy was arrested at Pierre Elliott Trudeau Airport in Montreal on Nov. 14, many Canadians were undoubtedly left scratching their heads.

A friend cracked a joke that the man, using the alias William Paul Hampel, must have been the most bored spy on the planet -- after all, "what information could he possibly have stolen in Canada that would be of use to Russia?"

Michel Juneau-Katsuya, a former Canadian Security Intelligence Service agent and now CEO of the Northgate Group, an Ottawa-based security consulting firm, says that kind of "ignorance" from the general public and "wilful blindness" from Canadian officials and businesses is costing this country billions of dollars annually in stolen intellectual property.

Canada, says Juneau-Katsuya, is becoming an increasingly popular destination for corporate and economic spies because of our lax laws and knowledge-based economy.

Just how lax are our laws? Last Monday, after the man Canada accused of being an elite member of the Sluzhba Vneshney Razvedki, the successor of the dreaded Soviet KGB, admitted he was not the Canadian-born citizen he repeatedly claimed, Justice Pierre Blais of the Federal Court in Montreal, not only allowed the spy to simply be deported with no conviction but protected his real identity.

"In some countries if you're caught doing espionage, you're shot," says Juneau-Katsuya, who worked for five years as an RCMP officer before spending 17 years with CSIS as a spy-catcher, including a stint on the KGB desk in Montreal.

"In other countries, you are sent to jail for the rest of your life or for a very long time. In Canada, however, they send you home in time for Christmas and protect your identity."

In the past year alone CSIS has been conducting counter-intelligence against 25 countries and a similar number of organizations and about 150 individuals, says Juneau-Katsuya.

"The spies come to Canada to get high-tech information because if you're caught, nothing much is going to happen.

"If it wasn't for the fact that terrorism kills people I would say that by a very big margin, the greatest security issue facing this country is economic and industrial espionage," declares Juneau-Katsuya, who was reached Thursday in transit from Montreal to Ottawa.

When he was chief of the Asia-Pacific desk for CSIS in the mid-1990s, Juneau-Katsuyahe had one of his analysts research how much money Canada was losing annually to espionage conducted by other countries against the Canadian government and companies (economic espionage) and spying done by foreign corporations against corporations (corporate espionage.)

"At that time, my analyst was able to factually demonstrate that we were losing an average of $1 billion a month in Canada," says Juneau-Katsuya.

Shortly after China released its RedBerry -- a rip-off of Canada's BlackBerry handheld e-mail device made by Research in Motion -- Peter MacKay, Canada's foreign affairs minister vowed in April he would crack down on Chinese spies operating in Canada.

Just last month, Canada refused to extend the diplomatic visa of Wang Pengfei, who worked at the Chinese Embassy in Ottawa, for spying on Chinese dissidents living in Canada -- particularly practitioners of the new-age religion, Falun Gong.

Juneau-Katsuya points to what happened to Mitel, the Ottawa-based telecommunications giant, as a perfect example of how costly economic espionage is to Canada and how inadequate are our existing laws.

Back in March 1998, To Van Tran was arrested by the Ontario Provincial Police for stealing secrets from Mitel, where he worked for 16 years. The only thing Van Tran could be charged with was one count of fraud and one count of possession of stolen property over $5,000.

Court heard a front company for the communist Vietnamese government deposited $50,000 into Van Tran's bank account for his spying. In 2001, an Ontario Superior Court judge fined Van Tran $25,000. In other words, Van Tran ended up $25,000 richer but here's what happened to Mitel.

"Mitel lost intellectual property that had taken millions of dollars and years to develop, not to mention lost revenues from selling intellectual property -- which the Vietnamese produced first and more cheaply."

Juneau-Katsuya along with a CSIS official who asked to remain anonymous both agree Canada needs new laws dealing with those who steal our secrets so penalties fit the crime, as well as a widened mandate for CSIS.

The CSIS employee acknowledged while CSIS is mandated to investigate economic espionage it is barred from investigating corporate espionage.

As a result, the 25 foreign governments involved in spying in Canada often only have to incorporate a business within Canada to become exempt from official investigation.

"It's an enormous loophole," says Juneau-Katsuya.

"You could drive a Boeing-747 through it."

Minister of Public Safety and Emergency Preparedness, Stockwell Day, who criticized the former Liberal government for inaction on this file while an Opposition MP, was unavailable for comment Friday.

"Why the government hasn't responded to CSIS's call to tighten this huge loophole" adds Juneau-Katsuya, "is mindboggling."

Mindboggling and maddening.