Paul Blount started small. When he set up a semiconductor chip company in his basement in 2006, he was the only employee. He had spent a decade at the chip behemoth Hittite Microwave Corporation, and he saw room in the market for a boutique design outfit.
About a decade later, a man named Haoyang Yu did almost exactly the same thing, setting up his own lean chip company, Tricon, in Lexington, Massachusetts, just 30 miles from Blount’s home. A tipster, whom Blount would later acknowledge was linked to his company, went to the Federal Bureau of Investigation, writing that their new competitor “smells a bit fishy.”
The tipster said it was suspicious that no one in their orbit had heard of Yu. “None of us here know this person or this company and there is 100% no way that they could come up with this product line in 6 months,” wrote the tipster. Both Yu and Blount marketed tiny, mass-produced chips called monolithic microwave integrated circuits, or MMICS, which can be used in everything from cellphones to military radar systems. Some MMICs are under export controls, which means that they can only be sent to certain end users and destinations with a license from the Commerce Department. Without evidence, the tipster hinted that Tricon might be violating export control regulations. “They are most likely reselling someone else’s part and what makes me nervous is that at least one is 3A001.b.2.d part,” the tipster wrote, referring to an export control classification number covering certain MMIC chips.
Yu, who also goes by Jack, was in fact no stranger to the industry. He had moved to Amherst in 2002 to study engineering at the University of Massachusetts Amherst. After graduation he stayed in New England, eventually settling in Lexington with his wife and two young children. He worked at Hittite after Blount left, staying on after the company was acquired by Analog Devices in 2014. The year Yu started Tricon, he left Analog to work as a software engineer at a company that counts MMIC makers among its clients. At one point, he had even visited Blount’s company, Custom MMIC, to demonstrate software to a group that included Blount.
Nonetheless, the tip to the FBI set off a cascade of events that would upturn Yu’s world. Investigators came to see him as a national security threat, zeroing in on what they imagined were unsavory links to China, where Yu, now a U.S. citizen, was born. They mounted a secret camera on a pole outside his house and enlisted the local trash company to set aside his family’s garbage after collecting it so agents could covertly rifle through it. In May, after spending five nights in jail, three months with a clunky ankle bracelet tracking his movements, and over two and a half years in legal limbo, he stood trial for a slew of felonies, including export control violations, immigration fraud, and wire fraud. Prosecutors also accused Yu’s wife, Yanzhi Chen, of wire fraud after she refused to cooperate.
Then, just as quickly as it had come together, the case against the couple seemed to unravel. The U.S. government largely failed to convince a Boston jury, which in June acquitted Yu on 18 of 19 counts. Shortly after the trial, U.S. Attorney for the District of Massachusetts Rachael Rollins dropped all charges against Chen, saying in a statement that the decision was a result of a “continuing assessment of the evidence.”
Court documents reveal a series of missteps, including a confounding export control classification and a failed sting operation. The lone charge of which Yu was ultimately convicted, possessing stolen trade secrets, had no connection to China.
“There were so many mistakes,” Chen told The Intercept recently. “We have had three very dark years.”
What prosecutors did have was evidence that Yu had transferred prototype chip design files onto his Google Drive while working at Analog Devices, naming two of the files Pikachu and Dragonair after Pokémon characters. Analog later abandoned the prototypes, some of which Yu had worked with while at the company, and in all but one case, the jury was unconvinced that the designs constituted trade secrets.
Yu’s lawyers contend that such a case would have normally been dealt with through a low-stakes civil lawsuit filed by Analog Devices. That didn’t happen, they argue, because of Yu’s ethnicity. “Yes, he had some files on his computer that should have been deleted,” said Yu’s attorney William Fick of Fick & Mark in his closing statement at trial. But for the U.S. government, “[i]f you are a hammer, everything looks like a nail.”
“The root problem behind a specific set of cases remains: the way that our own government still sees foreignness as a threat.”
Federal prosecutors, working closely with the FBI and large corporations, have brought dozens of cases over the last decade involving alleged technology theft by China. In 2018, amid rising tensions with Beijing, then-Attorney General Jeff Sessions gave the crackdown a name: the China Initiative. The initiative was scrapped earlier this year, following concerns from the American Civil Liberties Union and Asian American advocacy groups that it entailed racial profiling, but the biases that contributed to the program’s downfall endure, activists say. “The root problem behind a specific set of cases remains: the way that our own government still sees foreignness as a threat,” said Aryani Ong, co-founder of Asian American Federal Employees for Nondiscrimination. FBI Director Christopher Wray said in January that the bureau has over 2,000 open investigations involving China and technology. And perhaps no technology is more pivotal to geopolitical strategy than semiconductor chips, which are essential components of electronic devices and important to breakthroughs in computing.
“MMICs have cutting-edge military applications ranging from electronic warfare to signals intelligence to military communications,” said Emily de La Bruyère, a co-founder of Horizon Advisory, a consulting firm focused on China. “China and the U.S. are locked in a battle — not just for advanced semiconductor technology, but also for influence over the global semiconductor value chain.” In just the past few months, President Joe Biden signed into law the CHIPS Act, which is aimed at strengthening domestic semiconductor chip manufacturing, and the Commerce Department unveiled unprecedented new restrictions on the sale of semiconductor technology to entities within China. Last week, Reuters reported that the Chinese government was readying an infusion of 1 trillion yuan ($143 billion) into its semiconductor industry.
Convictions in China Initiative and related cases have led to years of prison time. But many cases have fallen apart because prosecutors made inappropriate leaps, activists say.
“We are deeply concerned that the Yu case is yet another continuation of biased targeting policies and practices,” said Jeremy Wu, founder of APA Justice Task Force, a group formed in the wake of several botched prosecutions of Chinese American scientists. “His case exemplifies another tragic ordeal.”
For Yu and Chen, the ordeal is not yet over. For his sole conviction, Yu now faces up to 10 years in prison and a $250,000 fine. His lawyers are trying to get the charge thrown out ahead of sentencing, arguing that prosecutors inflated a workplace dispute into a national security threat and that the entire investigation was tainted by bias. A judge will soon rule on whether the government is selectively enforcing the law by targeting Yu for his ethnicity, in violation of the U.S. Constitution.
Yu, his lawyers, and a spokesperson for the U.S. attorney’s office in Boston declined to comment for this story, citing ongoing legal proceedings. When asked about the case by phone, Blount declined to comment and quickly hung up.
“We Make Business”
Chen and Yu met online in the early aughts, when they were students pursuing graduate degrees in different parts of the United States. He was from the north of China, and she was from the south. He struck her as whip-smart and diligent, and after dating long-distance for a year, they married and settled in New England. They had two kids, and Chen stayed home to raise them while Yu worked as an engineer.
In 2013, they moved to Lexington for its excellent public schools, buying a house on a quiet street near the town’s Great Meadow. They grew to love the historic Boston suburb, which two and a half centuries after the outbreak of the Revolutionary War is now a wealthy bedroom community with a large Asian American population. Chen volunteered at her kids’ school and for local groups, and at her urging, Yu ran unsuccessfully for a seat on Lexington’s Town Meeting.
Initially, Chen told The Intercept, Yu’s goals for Tricon were modest. Yu registered the company in Chen’s name — a structure sometimes used to protect assets — and listed a box at a nearby UPS Store as the company’s mailing address. Business was slow. Chen advised him to focus on recouping his investment, not turning a profit. Since Yu was happiest when he was busy, she said she recommended the Town Meeting candidacy partly as a distraction.
“I never expected it to bring so much trouble,” she said of Tricon.
The investigation into Yu began in earnest a month after the complaint linked to Blount, when the Defense Counterintelligence and Security Agency received a second tip about Tricon. A DCSA agent compiled an internal report, which was later entered into the court record, describing the second tipster as a government contractor with a security clearance. The contractor speculated that Yu “could be using” the contractor’s “products pictures and datasheets to market for HIS own company.” The agent labeled the report as involving foreign intelligence, China, and a “person reasonably believed to be an officer or employee of, or otherwise acting on behalf of, a foreign power” — presumably, Yu.
MMIC is often pronounced “mimic,” and copying competitors’ products is common in the chip industry, as are allegations of theft. Shortly before the tipster went to the FBI, Yu’s previous employer Analog Devices had accused three former employees of taking proprietary material upon leaving the company. That case took the form of a lawsuit against the former employees’ new workplace, Macom, and the matter was handled in civil court, with Analog paying its own legal fees. It quickly ended in a settlement.
But Yu’s case was different. Because the U.S. government alleged that it involved a potential national security threat, four federal intelligence agencies conducted the sprawling 18-month investigation. And while Analog Devices provided information, federal prosecutors ultimately decided which charges to press, and U.S. taxpayers covered the ballooning investigative and legal costs.
Agents from the FBI, Department of Homeland Security, Commerce Department, and U.S. Navy worked together to bring down a man they envisioned as a sophisticated technological spy.
Agents from the FBI, Department of Homeland Security, Commerce Department, and U.S. Navy worked together to bring down a man they envisioned as a sophisticated technological spy. In addition to putting Yu under surveillance, they followed Chen around town as she drove their kids to and from sports practices and obtained a search warrant to comb through Yu’s email accounts.
From the start, the U.S. government’s investigation didn’t go quite as planned. Early on, an undercover agent with DHS’s Homeland Security Investigations force wrote to Yu, posing as representative of a potential buyer named “XY Atallah” from Jordan. The agent asked about a chip with specifications close to those that fall under export controls. “If good price, we can make business,” he wrote. The agent repeated the stereotypical phrase in a follow-up email the next day: “We make business.”
Yu suggested lower-frequency chips that could be legally exported to Jordan without a license. When the undercover agent posing as Atallah declined, insisting on the higher-frequency chip and saying he could pay upfront, Yu walked away from the deal. Agents also found emails that Yu had exchanged with a potential buyer in Spain. After the buyer asked about controlled chips, Yu noted that he did not have an export license for the products and asked if the buyer had a licensed representative in the United States — a legal way of moving the product overseas, provided that Spain was the final destination. That deal didn’t go through, either.
Nor did the investigation uncover solid evidence of crimes involving China. In March 2019, an HSI agent alleged in an internal report that Yu had stolen designs and technical data from his former employer to produce his own MMIC chips and sell them to entities in China in violation of export control regulations. The agent also contended that Yu had consulted for a Chinese company, claiming that the payment was evidence of “additional export violations to China.” Eventually, though, the government dropped both allegations.
The HSI agent also claimed that Tricon had illegally exported one chip without seeking an export license. But a semiconductor industry expert hired by Yu’s lawyers would later show that the relevant export control classification had only been issued at the request of an investigator after Yu came under scrutiny.
Companies that suspect their technology or designs have been taken generally “want to set an example for their own employees,” said Matthew Brazil, a former export controls official and resident fellow at the Jamestown Foundation focused on Chinese intelligence operations, after reviewing some of the court documents in Yu’s case. “That’s often a corporate response. But it’s not clear where the espionage component was in this case.” (Yu was never charged with espionage, but the U.S. government has in the past charged export control violations in cases alleged to involve spying or technology transfer.)
“It backfired because they turned non-criminal cases into criminal cases. And that never ends well.”
One reason that investigators pressed the national security angle may have to do with timing. In November 2018, less than a year after Yu came under investigation, Sessions announced the China Initiative. Yu’s name does not appear on a list of sample initiative cases released by the Justice Department and last updated in November 2021, but the effort was clearly important for Andrew Lelling, the U.S. attorney in Boston at the time. He was one of a handful of federal prosecutors on the initiative’s steering committee. Lelling, who is now in private practice, declined to comment on this and several other issues.
“If your name is tied to it, then you want to see it succeed,” said Robert Fisher, an attorney with Nixon Peabody in Boston who successfully defended a China Initiative case brought by Lelling’s office. The priority placed on China-related cases led to an uptick in flimsy charges around the country, Fisher said. “It backfired because they turned non-criminal cases into criminal cases. And that never ends well.”
“You Lied to Us”
Early one morning in June 2019, shortly before Yu’s family was scheduled to fly back to China to see relatives, Chen returned home from dropping off their children at school to find cars lining the street. Their house was swarming with agents and local police, around 20 officers in all.
Agents from the Commerce Department and Homeland Security approached and asked her to get inside their vehicle, she said. In the car, according to a transcript of the interview, they drilled her about Tricon.
Chen told the agents that her husband was an uptight engineer, always doing everything by the book. Although the business was in her name, she said that he only let her do basic tasks for the company, not because he had anything to hide but because he wanted them done perfectly. “He’s a control freak,” she said, adding that she had helped him mail chips to sites in Europe and the United States but that he insisted on packing all the materials himself. She said that she didn’t really understand MMIC technology.
“Yeah, neither do I,” one of the agents admitted.
Later in the interview, the other agent accused her of lying. “I don’t want to see you get in trouble for anything, you know, that you lied to us about,” he said.
“I was so confused,” Chen told The Intercept. While she didn’t understand the technology he worked with, she did know that her husband’s business was little more than a side project.
Meanwhile, inside their house, agents were rummaging through the family’s belongings as another pair of investigators from the Commerce Department and Homeland Security questioned Yu. When he asked whether he needed a lawyer, they brushed off the question. Over the course of the interview, Yu mentioned an attorney five more times. But instead of stopping so that he could contact one, the agents kept questioning him.
When Yu declined to answer a query, musing that his remarks could be misinterpreted, one agent launched into a heated speech. “I appreciate that you want to try to protect yourself, but Haoyang, we’re past that. The question now is, are you willing to do the right thing?” The agent offered a sample confession: “Like, ‘Yes, I did it. I’m ashamed. I’m embarrassed. I shouldn’t have done it. I had financial problems and I was trying to do the best thing I could for my family and this is the way that I saw to get out of that. It was a terrible choice.’ Like — whatever.”
But Yu stayed quiet.
Inside the agents’ vehicle, Chen said she watched, stunned, as he was led away in handcuffs. “I didn’t know why they took my husband away,” she said. “It is a really weird feeling.”
After the street cleared out, she walked into her house and surveyed the aftermath. The agents had taken their computers, cellphones, and papers printed with Chinese characters that had no connection to Yu’s business, she said, including notes on potential travel destinations and the addresses of her college classmates. In the kitchen, a chipmunk scurried across the floor. The back door had been left open during the raid, and the animal had found its way inside. She shooed it out and sat down to cry. Then she forced herself to get up and put the house in order before her kids arrived home from school.
Later that day, Lelling’s office issued a press release describing Yu as “a Chinese born naturalized US citizen.” “Theft of trade secrets from American companies is a pervasive economic and national security threat,” Lelling was quoted as saying. The press release continued: “Yu is charged with a massive theft of proprietary trade secret information.”
As the couple’s cases moved toward trial, Yu’s defense team hired a semiconductor expert, Manfred Schindler, a consultant who had worked with several leading chip companies. Schindler wrote in an affidavit that small outfits like Tricon were common in the MMIC industry, and that companies commonly reverse engineer one another’s chips. “[M]ultiple manufacturers commonly sell individual items with very similar or even identical designs and performance characteristics,” he wrote. (Schindler declined to comment, citing a confidentiality agreement with Yu’s lawyers.)
More explosively, Schindler took issue with the export control category that the U.S. government said governed one of Tricon’s chips. At the time, three of the charges against Yu hinged on that classification. The designation was unusual, Schindler wrote, because chips with similar specifications — including the one that prosecutors alleged Yu had copied — typically do not trigger export controls. He determined that the U.S. government had introduced the designation at the request of an agent investigating Yu and had never publicized the rule. The rule seemed to have been tailor-made for Yu.
Another setback came in January of this year, when the U.S. attorney’s office in Massachusetts dropped charges in a controversial China Initiative case against Massachusetts Institute of Technology professor Gang Chen (no relation to Yanzhi Chen). He had been charged with wire fraud and accused of omitting affiliations with Chinese institutions on Department of Energy grant applications that he submitted electronically. Prosecutors abandoned the charges after determining that some of the alleged affiliations did not exist and that Chen had no obligation to declare the others. Gang Chen’s defenders alleged that he was the victim of blatant racism and bias; 170 MIT faculty members signed a statement in his defense. The Justice Department scrapped the China Initiative the following month.
Rollins had inherited both the Gang Chen and Yu cases from Lelling. Yu’s lawyers hoped to get charges thrown out in his case as well.
Instead, Rollins’s office went ahead with the prosecution. But by the time Yu stood trial, the allegations against him had changed. Prosecutors dropped the export control violation charges connected to the chip that Schindler had flagged after the Commerce Department reclassified it as not requiring a license. In a superseding indictment, they charged Yu with new export control violations, for sending two chip designs to a foundry, or chip factory, in Taiwan.
Yu’s Tricon was what’s known as “fabless,” meaning the company didn’t fabricate the chips in-house. Instead, Yu designed chips which were then manufactured in foundries. In recent years, Commerce Department officials have grown more aggressive about how they interpret regulations with regard to the export of design files, but historically, companies including Analog Devices have at times not sought licenses for similar exports. “[Fabless] suppliers often use off-shore fabs and package houses, yet most US military contractors don’t seem to care about this,” the industry publication Microwaves 101 notes in an explainer on MMIC suppliers. “Go figure!”
Using files found in Yu’s Google Drive and on devices seized from his home, prosecutors alleged that he had stolen the designs for “dozens” of chips from Analog Devices. And, in a sort of legal hall of mirrors, they tacked on charges that depended on other charges sticking. In his interview ahead of becoming a U.S. citizen in February 2017, Yu had asserted that he’d never committed or tried to commit a crime for which he had not been arrested. Prosecutors alleged that this was fraud because he had committed a crime: trade secrets theft, the crime they were charging him with.
“Why Are You Challenging Him?”
The drama began even before the trial started, when a prosecutor tried to ensure that an Asian American man was not chosen for the jury. The judge questioned the prosecutor’s motive. The potential juror, the judge noted, “is Asian; why are you challenging him? I see no reason to challenge him.”
When the prosecutor replied that the objection was based on the man’s profession, the judge asked what that was. Silence ensued. “You don’t even know what the profession is,” the judge admonished the prosecutor. (Court documents, which give only the man’s first name and last initial, reveal that he worked as a nurse and paraprofessional for a public school system.) The government ended up withdrawing the objection, and the man remained on the jury.
As the trial got underway, prosecutors returned again and again to the Pokémon characters. “[N]o one names things after Pokémon characters at work when they intend to be found out,” said Assistant U.S. Attorney Amanda Beck. They accused Yu of adopting a fake name because, in his work with Tricon, he used the English name Jack. They emphasized his use of multiple email addresses, claiming that it was a signature of criminals violating export controls. They suggested it was odd that Yu had registered Tricon in his wife’s name rather than his own and used the address of a UPS store for the business rather than his home. And they called as a witness an employee of Win Semiconductors, the Taiwanese firm that had manufactured Yu’s chips, who testified that the designs Tricon had sent the firm appeared unoriginal.
Then, halfway through the trial, Blount, Yu’s Boston-area competitor, took the stand. In 2020, he had sold Custom MMIC for a reported $96 million. He later started a new company, Kapabl Engineering. When cross-examined by the defense, Blount admitted that he had met Yu before, though he said he did not remember the encounter. He conceded that Kapabl Engineering was, like Tricon, registered in his wife’s name. Just as Tricon had a bare-bones website, Kapabl Engineering had a site that Blount conceded was “rudimentary.” And much as Tricon had sent designs to Taiwan to be manufactured without obtaining an export license, Custom MMIC had sent designs to France without a license until 2019, the year Yu was arrested.
“Custom never got an export license to send the GDS to France?” asked Fick, Yu’s attorney, referring to a chip design file.
“We did not, no,” Blount answered.
“And is that because you were intentionally violating the law?” Fick asked.
“No,” Blount said.
Blount also admitted that he was connected to the tip to the FBI. “We brought this matter to the FBI back in 2017,” he said.
The jury deliberated for five hours. After they largely cleared Yu of the charges, Rollins’s office boasted in a press release about the single charge that had stuck, calling it “the first-ever conviction following a criminal trial of this kind in the District of Massachusetts.” Few observers saw it as a win for the government, though. The trade publication Law360 recently listed the trial among a string of losses by the U.S. attorney’s office.
“The verdict revealed this case for what it truly is: a trumped-up civil dispute between a multibillion-dollar, global technology company and its former employee concerning alleged trade secrets,” wrote Yu’s attorneys in a recent filing. “The government’s relentless pursuit of Mr. Yu was driven, at least in part, by its baseless and offensive assumption that he was a Chinese spy, secretly loyal to China and, thus, a danger to the national security of the United States.”
If Yu had been white, his attorneys contend, the trade secrets spat might have been handled through a lawsuit in civil court, without the threat of prison time.
Yu’s attorneys now argue that the law has been selectively enforced, and that the U.S. government gave too much weight to information provided by Blount and Analog Devices. If Yu had been white, they contend, the trade secrets spat might have been handled through a lawsuit in civil court, without the threat of prison time — as had happened when Analog Devices accused the three former employees of taking proprietary material to Macom. That lawsuit, in fact, involved data for several of the exact same Analog Devices products at issue in Yu’s case, with the difference that the Macom engineers were accused of stealing much more data than Yu, and that, according to Yu’s attorneys, one of them actually confessed to taking trade secrets.
Proving that Yu was singled out will be a challenge. Traditionally, the burden of proof for a selective enforcement motion rests on the defense, and no lawyer has successfully argued it in a China Initiative or related case. But in November, Judge William G. Young reversed an earlier decision on the topic, ordering the U.S. government to turn over to the defense additional evidence connected to Yu’s prosecution.
In one filing, Yu’s lawyers cited comments Lelling made to Science in 2020, in which they say he acknowledged that prosecutors were seeking out ethnic Chinese defendants. “[U]nfortunately, a lot of our targets are going to be Han Chinese,” Lelling said at the time. “If it were the French government targeting U.S. technology, we’d be looking for Frenchmen.’”
In an email to The Intercept, Lelling took issue with that interpretation. “No one was targeting people based on ethnicity — we were looking for conduct,” he wrote.
Chen’s hopes now center on the judge dismissing the case. But she is clear-eyed about Yu’s chances. “The success rate is very low,” she said, adding, “I don’t know why the government has invested so much on us. We are just normal people.”
Meanwhile, in August, Analog Devices finally filed a civil lawsuit against Yu. By the time it winds through the courts, he may be in federal prison.
The post A Competitor Put the FBI on Haoyang Yu’s Trail. The Investigation Didn’t Go as Planned. appeared first on The Intercept.