FBI raids suspected hi-tech front company run by 'Russian agent'

Members of alleged network face trial after claims that components were sent to military

FBI agents and police searched the premises of Arc Electronics Inc in Houston yesterday (AP)

Prosecutors in New York revealed last night that investigators had uncovered claims of a multi-million-dollar scheme by a front-company in Houston, Texas, which allegedly exported sensitive microelectronics components to Russia for use by the Russian military and intelligence services.

In dawn raids conducted on the premises of the company, Arc Electronics Inc, and elsewhere, FBI agents seized evidence while federal indictments were unsealed against 11 people the US government says were involved in the clandestine Russian procurement network. In a statement describing the charges, the FBI claims that in some cases Arc had duped US suppliers by pretending it was purchasing the components to make innocuous items like traffic lights.

The head of Arc, a naturalised American born in Kazakhstan, Alexander Fishenko, was among those charged. He and seven others named in the conspiracy are expected to be flown to New York where they will face trial. Mr Fishenko was also accused of being an unregistered agent for the Russian government working inside the United States.

While the arrests and charges represent an important success for the FBI, they may also cause some embarrassment. The men had allegedly been shipping the goods under the nose of the US and without interference for four years. The affair also threatens significantly to sour relations between Washington and Moscow at a sensitive juncture just one month before the US presidential elections.

"The ability of foreign countries to illegally acquire sensitive and sophisticated US technology poses a significant threat to both the economic and national security of our nation," FBI special agent Stephen Morris said. "While some countries may leverage our technology for financial gain, many countries hostile to the United States seek to improve their defense capabilities and to modernise their weapons systems at the expense of US taxpayers."

The US alleges that between October 2008 and today Arc has been obtaining cutting edge microelectronics from US manufacturers and suppliers and sending them to a partner procurement company in Moscow named Apex System LLC, where Mr Fishenko, 46, is also a part-owner.

Those goods, the FBI said, were suited for installation in a variety of military items, including radar and surveillance systems, weapons guidance systems and detonation triggers.

The impact of Mr Fishenko's alleged activities and those of his co-defendants may not have been small. An analysis of accounting records showed a "striking similarity between fluctuations in Arc's gross revenues and the Russian Federation's defense spending over the last several years," court papers released in New York asserted.

The courts papers stated that prosecutors will present at trial calls and emails that "constitute devastating evidence of Fishenko's illegal procurement for the Russian government". Those communications include Mr Fishenko apparently urging his partners in Moscow always to cover their tracks. In March this year, for instance, he alleged "directed an employee of a Russian procurement firm to 'make sure that our guys don't discuss extra information, such as this is for our military client,'" the papers say.

Arc claimed on its company website that it was a manufacturer of a variety of goods for use in the US and those included traffic lights. But prosecutors allege it makes nothing, however, and was solely in the business of acquiring the microelectronics and sending them to Russia and covering up what they really were to avoid having to apply for sensitive-item exports licenses.

Spy games: The enemy within

The Cold War is over, but judging by the regularity with which Russian and US spies are caught behind enemy lines, the old rivalry is not.

In 2010, 10 alleged Russian spies – among them 'femme fatale' Anna Chapman, left – were accused of trying to infiltrate US policymaking circles. The incident prompted a "spy swap" with Russia, in which a number of prisoners convicted of spying for the US were released, including Igor Sutyagin, a nuclear scientist jailed in 2004, and Alexander Zaporozhsky, a former foreign intelligence service agent.

Many of the scandals in the past two decades involved the arrest of Russian spies in the US, but the culprits are not always Russian. In 2000, US Navy codebreaker Daniel King was caught selling data to Moscow. Two years later, an FBI agent, Robert Hanssen, was found to have been selling secrets to Moscow for 15 years, and jailed for life.

Richard Hall