Naturalised American Xuehua Peng, who passed on secrets as undeclared Chinese agent, is jailed for 4 years and fined US$30,000

Mark Magnier

A naturalised American citizen of Chinese descent was sentenced to four years in prison and fined US$30,000 for failing to report working as an agent of the Chinese government, the Department of Justice said on Tuesday.

Xuehua Peng, who also used the name Edward Peng, was caught passing on classified information and leaving money behind in hotel rooms in California for a source in a “dead drop” operation.

According to Peng’s November 2019 guilty plea, the 56-year-old US citizen living in Hayward, California, acted at the direction and under the control of Ministry of State Security officials in China. He was sentenced in the US District Court for the Northern District of California on Monday on one count of acting as an agent of a foreign government.

Undercover video released by the Federal Bureau of Investigation following his arrest last September showed Peng taping cash and secure digital computer cards to the underside of a chest of drawers in a hotel room for his source to retrieve.

A screen grab from footage provided by the US Justice Department as evidence in Xuehua Peng's case. Photo: SCMP Pictures

Peng reportedly had a degree in mechanical engineering and was trained in traditional Chinese medicine but worked most recently as a guide for Chinese tourists visiting California.

“This case exposed one of the ways that Chinese intelligence officers work to collect classified information from the United States without having to step foot in this country,” Assistant Attorney General for National Security John C. Demers said in a statement.

“This case is but one example of the Chinese government’s multifaceted espionage efforts.”

The Chinese embassy in Washington did not immediate respond to a request for comment.

According to the guilty plea, Peng admitted that while on a business trip to China he was introduced to a Chinese official who asked him to help with “matters of interest” to the Chinese government. Peng eventually realised the official was employed by an intelligence or security service but nevertheless agreed to help out, the agency said.

US Attorney David L. Anderson holds an SD memory card during a news conference in September after Xuehua Peng, also known as Edward Peng, was charged with acting as an illegal foreign agent. Photo: Reuters

According to the documents, in March 2015, Peng was trained in using dead drops to leave cash and retrieve digital secrets that he was to hand-deliver to Beijing.

Peng told investigators the Chinese security official instructed him to locate and reserve hotel rooms where he would leave money, depart for several hours and then return and retrieve storage devices the source had left for him.

Peng was further told to fly to China and deliver the retrieved computer storage devices to the official, the agency said. It added that Peng never met the source who left the computer storage devices and was told not to look at them.

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“This day of reckoning comes from Peng’s decision to execute dead drops, deliver payments and personally carry to Beijing,” said US Attorney David L. Anderson for the Northern District of California. “Peng will now spend years in prison for compromising the security of the United States.”

Peng faced up to 10 years in prison and a US$250,000 fine. It was not immediately clear if he retained a lawyer.

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