For almost two hours, as his wife, Rebecca, stood behind him and government sleuths looked on, Mak copied onto compact disks technical information that he had taken from his office at Power Paragon, a California defense contractor. At 11:13 a.m., when Mak climbed into his brown 1988 Oldsmobile sedan to take the disks to the nearby home of his brother, Tai, the G-men tailed him.

Five days later, as neighbors were preparing for bed, local police and FBI agents swarmed Chi Mak's single-story wood-frame house in a Los Angeles suburb, arresting him and his wife. Another team of agents pulled Tai Mak and his wife, Fuk Li, out of a security line at Los Angeles International Airport, 25 miles to the west, where they were waiting to board a midnight flight to China. Hidden in their luggage was a disk containing encrypted copies of the unclassified U.S. Navy research Chi Mak had given his brother.

The government, which detailed its surveillance of the Mak family in court documents, would eventually claim the material he disclosed would enable an enemy to track and kill American sailors.

The Oct. 28, 2005, arrests capped a 20-month probe that illuminated the difficulty of combating what government officials say is an aggressive Chinese espionage campaign that vacuums up advanced U.S. technology secrets from defense and civilian companies alike.

"The Chinese are putting on a full-court press in this area. … They are trying to flatten out the world as fast as possible," says Joel Brenner, national counterintelligence executive. "One of the ways they accelerate that process is economic espionage. If you can steal something rather than figure it out yourself, you save years. You gain an advantage."

Brenner, who directs the United States' counterspy efforts in the office of the director of national intelligence, says China's technology thieving is "the norm" among industrial nations. But if China is not unique, it does stand out — along with Russia, Cuba and Iran — as among the most active nations, Brenner says.

Beijing's goals aren't limited to traditional national security interests. The world's fastest-growing economy operates a shadowy technology bazaar where individuals offering trade secrets find a ready buyer. About one-third of all economic espionage investigations are linked to Chinese government agencies, research institutes or businesses, according to Bruce Carlson of the FBI's counterintelligence division, who leads the bureau's efforts to combat Chinese spying. Since 2001, the number of FBI investigations of suspected Chinese economic espionage cases increased 12%. "The basis for the whole program is money. People (in the USA) are looking to make a buck. China has money to spend," says Carlson.

China's technology-targeting differs from classic Cold War-era spying, which pitted American intelligence agents against their KGB counterparts. Along with using intelligence professionals, China seeks to capitalize on some of the thousands of Chinese and Chinese-American engineers, researchers, scientists and students who fill key positions in U.S. industry and academia, say current and former U.S. counterintelligence officials.

"This is not some 'yellow peril' witch hunt. … The counterintelligence environment in terms of China right now is just white-hot," says James Mulvenon, director of the Center for Intelligence Research and Analysis, a Washington, D.C., think tank that advises U.S. intelligence agencies.

Long-running spy plot

In some cases, individuals stealing trade secrets execute Beijing's orders. That's what the Justice Department says occurred with Chi Mak, 66, who was born in Guangzhou, was educated in Shanghai and became a naturalized U.S. citizen in 1985. He obtained a "secret"-level security clearance in 1996.

FBI agents found four Chinese-language "tasking lists" in Mak's trash, which they say itemized specific technologies that China covets, such as "aircraft carrier electronic systems" and "submarine propulsion technology." One of the lists also directed Mak, a senior engineer working on power systems for Navy submarines, to join professional associations and attend advanced research seminars.

The Justice Department presented other evidence that alleged Chinese government involvement. An FBI wiretap, for example, heard Tai Mak, 57, nine days before he was arrested, call a man in Guangzhou and identify himself as being from "Red Flower of North America."

On the other end of the line was Pu Pei Liang, a researcher at Zhongshan University's Chinese Center for Asia Pacific Studies, which the prosecution said performs "operational research" for China's People's Liberation Army. Chinese intelligence operations routinely use the names of flowers, such as "winter chrysanthemum" and "autumn orchid," prosecutors said.

Especially damaging to Mak were four letters from another Chinese official, Gu Weihao, a relative of his wife's and a senior engineer at the Ministry of Aviation Industry. Written in the late 1980s, three of the letters were discovered in Mak's home; the fourth was found in the home of Greg Chung, an engineer for Boeing (BA).

In a May 2, 1987, letter, Gu introduces Mak to Chung and discusses the latter's upcoming trip to China: "You can discuss the time and route of your trip to China with Mr. Mak in person. … You may use 'traveling to Hong Kong' or 'visiting relatives in China' as reasons for traveling abroad. … Normally, if you have any information, you can also pass it on to me through Mr. Mak. This channel is much safer than the others."

Assistant U.S. Attorney Greg Staples argued that documents found in Mak's home dealing with the F-16 fighter and NASA's space shuttle were from programs that Chung had worked on at Boeing. There is an active grand jury investigation concerning Chung, according to a recent prosecution court filing.

Last month, after a six-week trial, a federal jury convicted Mak — who denied spying and insisted the technical material at issue was publicly available — of conspiracy, two counts of attempting to violate export control laws and failing to register as a foreign agent. The convictions, which carry a potential prison term of up to 45 years, followed guilty pleas by the four other relatives involved in what prosecutors say was a long-running spy plot.

Some driven by greed

Beijing often capitalizes on what might be called espionage entrepreneurs: engineers or executives who exploit their positions in U.S. companies to pilfer corporate data they know will be welcomed in a China that is eager to catch up with the West. "In the vast majority of cases, it's the almighty dollar," says Mulvenon. "It's just pure greed."

Next month in San Jose, Calif., two men who pleaded guilty in December to two counts each of economic espionage for stealing trade secrets from Sun Microsystems (SUNW) and semiconductor maker Transmeta (TMTA) are scheduled to be sentenced in U.S. District Court. They each face up to 30 years in jail.

Fei Ye and Ming Zhong, former co-workers at Transmeta, based in Santa Clara, Calif., admitted to stealing secrets to produce computer chips for a firm they had established in Hangzhou, about 100 miles southwest of Shanghai. Theirs were the first convictions under the 1996 Economic Espionage Act, which made the theft of trade secrets a federal crime.

Their new company, called Supervision, expected funding from the Hangzhou municipal government and the provincial government of Zhejiang province, renowned as China's capitalist heartland. The men were working with a professor at Zhejiang University who planned to help them secure additional funding from a national technology research program, according to their plea agreements.

Supervision would "raise China's ability to develop superintegrated circuit design and form a powerful capability to compete with worldwide leaders' core development technology and products in the field of integrated circuit design," according to a corporate charter found at Ye's home.

Documents discovered after the men were arrested at San Francisco International Airport on Nov. 23, 2001, demonstrate that the Supervision project was highly regarded by Chinese officials. "The project will be extremely useful to the development of China's integrated circuit industry," said a Chinese panel of experts, which recommended that "every level of government offer their support toward the implementation of this project."

Kyle Waldinger, the assistant U.S. Attorney handling the case, declined to comment, as did attorneys for the two men. Much of the case record remains under court-ordered seal. Several paragraphs in the men's plea agreements, which have been made public, were blacked out for security reasons.

Unlike the Transmeta example, the Mak case illustrates the difficulties the government has had prosecuting alleged Chinese spies. In 1999, for example, Wen Ho Lee, a Los Alamos National Laboratory scientist, was arrested and accused of stealing nuclear warhead design secrets for China. After he was held in solitary confinement for 278 days, the government agreed to drop 58 of the 59 counts in the indictment. Lee pleaded guilty to one felony count of mishandling classified data and was released after the judge in the case apologized, saying of government officials, "They have embarrassed our entire nation and each of us who is a citizen of it."

The road to Mak's conviction also was anything but smooth. The government initially claimed he had purloined "classified" documents, then conceded the material was not classified, but rather was "sensitive" and barred from export. Likewise, though an FBI affidavit described the Maks as "foreign intelligence operatives," they were never charged with espionage.

"It doesn't appear to me he was guilty of the sensational charges they leaked initially. They ended up with (a conviction for being) a foreign agent. It's a far cry from espionage," says retired FBI agent I.C. Smith, a defense witness and veteran of several high-profile investigations of alleged Chinese spies.

The night of his arrest, Mak told agents at the FBI's Westwood office in a videotaped interrogation that he had given the disks to his brother to use in buying technical books for him in Hong Kong.

Two days later, under questioning by agents from the Naval Criminal Investigative Service (NCIS) at the Santa Ana Jail, Mak suddenly admitted to passing information to China since 1983, including on "power distribution technology" for the Navy's Aegis destroyers, according to prosecutors.

The NCIS agents, however, did not make an audio or video record of that interrogation, and Mak later denied that he had confessed.

Intensive surveillance

The FBI investigation, which began in February 2004, featured intensive government surveillance of Mak and his relatives. Along with eavesdropping on 20,000 telephone calls and intercepting his e-mails, FBI agents repeatedly went through Mak's trash and, on at least two occasions in late 2004, sneaked into his house while it was unoccupied looking for evidence that their quarry was a Chinese spy, court filings show. Just before his arrest, agents installed a closed-circuit camera in his dining room.

Post-arrest searches of Mak's home turned up more than 900 documents relating to various military programs, including proprietary material from General Dynamics' (GD) Electric Boat, Raytheon (RTN) and Northrop Grumman's (NOC) Ingalls shipbuilding division. But none of it was classified, beyond the "NOFORN" designation barring distribution to foreigners.

To the FBI, the lack of classified material was evidence of cunning. "He went right up to that line of classified information, and he stopped there," says the FBI's Carlson. "He took everything else he could get his hands on. They don't need secret documents (to) get a very good picture of our advanced military hardware."

The defense insisted that the material, which had been presented at public conferences of the American Society of Naval Engineers to audiences including foreigners, was innocuous and was used by Mak while working at home.

"He gave absolutely nothing to the Chinese. There's no way anyone would gain from this," said attorney Ronald Kaye.

Mak's work centered on the Quiet Electric Drive, a Navy program intended to outfit submarines with propulsion systems that would be quieter and thus harder to detect. His disclosures, a Navy official testified, would save the Chinese "years of wasted research."

But the absence of classified material meant that the case turned on complex questions of export control law. The U.S. Attorney initially argued that even material in the public domain could not be transferred to China because of the U.S. arms embargo imposed after the 1989 shootings of pro-democracy protestors in Tiananmen Square.

That claim drew harsh criticism from some trade lawyers, who said it implied that even universities providing Chinese students basic engineering educations or Boeing's airplane sales to Chinese airlines would breach export law, according to Clif Burns, a partner at Powell Goldstein in Washington, D.C., and an adjunct professor of law at the Georgetown University Law Center.

"The arguments were preposterously dumb. They didn't indicate even minimal efforts to investigate the legal history," says Burns.

By the time the case went to the jury, the government had abandoned that position and regrouped around the claim that since Mak had not received permission from his employer's export coordinator to present the papers in public, their disclosure to the Chinese was illegal.

The defense argued that Mak had received approval from his boss, the co-author of one of thepapers.

The jury sided with prosecutors and found that Mak, acting as a foreign agent, had engaged in a conspiracy to funnel technical information to the Chinese.

Kaye says the jury was "frightened" by Navy testimony about China's naval buildup. On June 11, arguing that prosecutors had wildly overstated the evidence and intimidated a key defense witness from testifying, Kaye sought a new trial.

Where they are now

Meanwhile, Mak, once a respected engineer, now is prisoner 29252-112 in Los Angeles' Metropolitan Detention Center. His wife, Rebecca, 63, who pleaded guilty last month to failing to register as a foreign agent, is back at the couple's Downey, Calif., home, wearing a monitoring device on her ankle and practicing the Chinese tai chi exercise routine in her yard. She is expected to be sentenced to three years in federal prison on Oct. 29.

Tai Mak, who pleaded guilty to conspiring to export defense articles, faces a maximum jail term of 10 years when he is sentenced Oct. 1.

His wife, Fuk Li, 49, is expected to receive probation for aiding and abetting the illegal exports.

Their son, Yui Mak, 27, who helped encrypt the disks his parents were carrying in their luggage, pleaded guilty to aiding and abetting and is expected to be placed on probation.

At 9:30 a.m. Aug. 1, Judge Cormac Carney will hear Mak's motion for a new trial.