2 guilty in code machine export bid

Men convicted of scheme to ship encryption equipment to China

May 01, 2002|By Gail Gibson | Gail Gibson,SUN STAFF

A federal jury in Baltimore convicted two U.S. businessmen yesterday on charges that they violated arms export laws by attempting to ship tightly controlled military encryption equipment, in disguise, to China.

The transaction was blocked by a sting operation in which a U.S. Customs Service agent posed as a salesman for the Maryland-based manufacturer and even mailed two units - stripped of all electronic parts - to one defendant's California shipping business.

Attorneys for Eugene You-Tsai Hsu, 60, of Blue Springs, Mo., and David Tzu Wvi Yang, 49, of Los Angeles argued during a two-week trial in U.S. District Court in Baltimore that the undercover investigation amounted to entrapment.

But federal prosecutors said Hsu and Yang were responsible for devising the scheme, which held potentially grave consequences for national security.

"This is serious stuff," Assistant U.S. Attorney Kathleen O. Gavin told jurors in closing arguments yesterday. "The choice here, ladies and gentlemen, was not the agent's. The choice here was David Yang's and Mr. Hsu's ... to say, `I'm not going to do it.'"

Jurors deliberated for seven hours before finding both defendants guilty of conspiring to and attempting to violate U.S. arms export laws. U.S. District Judge Andre M. Davis scheduled sentencing for Nov. 8.

Investigators said Hsu and Yang planned to buy two KIV-7HS encryption devices from Mykotronx Inc. in Columbia and ship them, though intermediaries in Singapore, to China.

The units are relatively inexpensive - about $8,000 each - but their sales are closely regulated by U.S. security officials. The federal government and U.S. allies use the devices to transmit secret information by telephone or fax, and all sales of the equipment must be approved by the National Security Agency.

Investigators began looking at Hsu a year ago, after he made an initial inquiry to Mykotronx. A Customs agent, posing as a sales representative, responded to Hsu's inquiry and warned him that exporting such equipment requires a State Department license, but also suggested that he would be willing to work with Hsu and Yang.

The agent eventually arranged through Hsu to ship the devices to Yang's shipping business, Dyna Freight Inc., in Compton, Calif. From there, the devices were to be repackaged and relabeled before being sent to the Singapore buyer, identified in court papers as Charlson Ho of Wei Soon Loong Private Ltd.

Ho was named in the original indictment, but has not been formally charged because he is in Singapore.

Both Hsu and Yang are naturalized U.S. citizens who have lived in the country for years. Defense attorneys portrayed both men during trial as honest, hardworking businessmen who were duped into the illegal arrangement by following the lead of the undercover agent and their overseas customer.

Richard M. Steingard, a Los Angeles attorney who represented Yang, urged jurors yesterday to "please end this nightmare for Mr. Yang."

Yang did not testify in his case. But Hsu, who did testify in his own defense, told jurors that he was horrified when federal agents searched his Missouri home late last summer.

"That was just like a nightmare," Hsu testified. "I was so frightened. I've never had the police come to my home."

Defense attorneys for Hsu suggested he had been unwittingly caught up in an illegal transaction, in part because they said he has a limited ability to understand English.

Government attorneys introduced evidence that Hsu had lived in the United States for two decades and earned graduate degrees from American universities.

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