A U.S. agent for China’s Ministry of State Security who pleaded guilty to spying charges was sentenced to four years in prison.
Peng Xuehaw, also known as Edward Peng, was handed the prison term Tuesday along with a $30,000 fine by District Court Judge Haywood S. Gilliam of the Northern District of California in Oakland, Calif.
Peng, a naturalized U.S. citizen, was arrested in September as part of an FBI counterintelligence operation involving a double agent posing as a spy for China.
Investigators say he was operating as an MSS courier since at least June 2015.
Peng was caught on videotape by the FBI passing classified information supplied by an FBI informant by taping it to the bottom of a drawer in a Georgia hotel room.
The case provided clues to how China spies in the high-technology era. Peng used small SD cards containing secrets that were placed inside a book and wrapped in a bag.
The package was then left at a Newark, California, hotel for retrieval by an MSS officer.
Court papers in the case revealed that Peng’s MSS spy handler contacted him using several telephone calls. The calls were intercepted by the FBI through electronic surveillance. Conversations involved the use of code such as “pills” for the SD cards.
Peng received tens of thousands of dollars in payments from the MSS made in cash to avoid tipping off bank monitoring systems. His plea agreement contains an admission that he knowingly worked as an MSS courier.
An FBI affidavit in the case said Peng appeared to have been trained in intelligence tradecraft and thus was not an unwitting agent.
FBI agent Spiro Fokas stated in the affidavit that, “I believe ‘Ed’ had been instructed in spycraft, practiced it, and knew that he was working for intelligence operatives of the PRC.”
“This case exposed one of the ways that Chinese intelligence officers work to collect classified information from the United States without having to step foot in this country,” said Assistant Attorney General for National Security John C. Demers in a statement.
“This case is but one example of the Chinese government’s multi-faceted espionage efforts and it both illustrates our determination to thwart those efforts and serves as a warning to other potential co-optees that we will find you and ensure you are punished,” he said.
Peng, 56, stated in a guilty plea in November that he acted at the direction of MSS officials in retrieving classified information he received from other agents and leaving money behind for a source to retrieve.
He first met Chinese intelligence in March 2015 during a business trip to China. Peng’s plea agreement states that he was instructed in 2015 how to conduct dead drops for the MSS.
In all, Peng admitted to taking part in five dead drops for the MSS where cash was left and SD cards picked up, in both California and Georgia. He pleaded guilty to one count of acting as an unregistered agent of the MSS.