Did China Steal Canada’s Edge in 5G from Nortel? (The original headline of the Bloomberg piece, now changed.)
Starting in the late 1990s, the Canadian Security Intelligence Service, the country’s version of the CIA, became aware of “unusual traffic,” suggesting that hackers in China were stealing data and documents from Ottawa. “We went to Nortel in Ottawa, and we told the executives, ‘They’re sucking your intellectual property out,’ ” says Michel Juneau-Katsuya, who headed the agency’s Asia-Pacific unit at the time. “They didn’t do anything.”
By 2004 the hackers had breached Nortel’s uppermost ranks. The person who sent the roughly 800 documents to China appeared to be none other than Frank Dunn, Nortel’s embattled chief executive officer. Four days before Dunn was fired—fallout from an accounting scandal on his watch that forced the company to restate its financial results—someone using his login had relayed the PowerPoints and other sensitive files to an IP address registered to Shanghai Faxian Corp. It appeared to be a front company with no known business dealings with Nortel.
The thief wasn’t Dunn, of course. Hackers had stolen his password and those of six others from Nortel’s prized optical unit, in which the company had invested billions of dollars. Using a script called Il.browse, the intruders swept up entire categories from Nortel’s systems: Product Development, Research and Development, Design Documents & Minutes, and more. “They were taking the whole contents of a folder—it was like a vacuum cleaner approach,” says Brian Shields, who was then a senior adviser on systems security and part of the five-person team that investigated the breach.
Years later, Shields would look at the hack, and Nortel’s failure to adequately respond to it, as the beginning of the end of the company. […]
No one knows who managed to hack Nortel or where that data went in China. But Shields, and many others who’ve looked into the case, have a strong suspicion it was the Chinese government, which weakened a key Western rival as it promoted its own technology champions, including Huawei Technologies Co., the big telecom equipment manufacturer. Huawei says it wasn’t aware of the Nortel hack at the time, nor involved in it. It also says it never received any information from Nortel. “Any allegations of Huawei’s awareness of or involvement in espionage are entirely false,” the company says in a statement. “None of Huawei’s products or technologies have been developed through improper or nefarious means.”
What isn’t in dispute is that the Nortel hack coincided with a separate offensive by Huawei. This one was totally legal and arguably even more damaging. While Nortel struggled, Huawei thrived thanks to its unique structure — it was privately held, enjoyed generous credit lines from state-owned banks, and had an ability to absorb losses for years before making money on its products. It poached Nortel’s biggest customers and, eventually, hired away the researchers who would give it the lead in 5G networks. “This is plain and simple: Economic espionage did in Nortel,” Shields says. “And all you have to do is look at what entity in the world took over No. 1 and how quickly they did it.”
It’s behind a paywall, though accessible if you haven’t used all your “free” visits.
