Chinese Army Unit Is Seen as Tied to Hacking Against U.S.
By David E. Sanger, David Barboza and Nicole Perlroth, NY Times, February 18, 2013
On the outskirts of Shanghai, in a run-down neighborhood dominated by a 12-story white office tower, sits a People’s Liberation Army base for China’s growing corps of cyberwarriors.
The building off Datong Road, surrounded by restaurants, massage parlors and a wine importer, is the headquarters of P.L.A. Unit 61398. A growing body of digital forensic evidence—confirmed by American intelligence officials who say they have tapped into the activity of the army unit for years—leaves little doubt that an overwhelming percentage of the attacks on American corporations, organizations and government agencies originate in and around the white tower.
An unusually detailed 60-page study, to be released Tuesday by Mandiant, an American computer security firm, tracks for the first time individual members of the most sophisticated of the Chinese hacking groups—known to many of its victims in the United States as “Comment Crew” or “Shanghai Group”—to the doorstep of the military unit’s headquarters. The firm was not able to place the hackers inside the 12-story building, but makes a case there is no other plausible explanation for why so many attacks come out of one comparatively small area.
“Either they are coming from inside Unit 61398,” said Kevin Mandia, the founder and chief executive of Mandiant, in an interview last week, “or the people who run the most-controlled, most-monitored Internet networks in the world are clueless about thousands of people generating attacks from this one neighborhood.”
Other security firms that have tracked “Comment Crew” say they also believe the group is state-sponsored, and a recent classified National Intelligence Estimate, issued as a consensus document for all 16 of the United States intelligence agencies, makes a strong case that many of these hacking groups are either run by army officers or are contractors working for commands like Unit 61398, according to officials with knowledge of its classified content.
Mandiant provided an advance copy of its report to The New York Times, saying it hoped to “bring visibility to the issues addressed in the report.” Times reporters then tested the conclusions with other experts, both inside and outside government, who have examined links between the hacking groups and the army (Mandiant was hired by The New York Times Company to investigate a sophisticated Chinese-origin attack on its news operations, but concluded it was not the work of Comment Crew, but another Chinese group.)
While Comment Crew has drained terabytes of data from companies like Coca-Cola, increasingly its focus is on companies involved in the critical infrastructure of the United States—its electrical power grid, gas lines and waterworks. According to the security researchers, one target was a company with remote access to more than 60 percent of oil and gas pipelines in North America. The unit was also among those that attacked the computer security firm RSA, whose computer codes protect confidential corporate and government databases.
Contacted Monday, officials at the Chinese embassy in Washington again insisted that their government does not engage in computer hacking, and that such activity is illegal. They describe China itself as a victim of computer hacking, and point out, accurately, that there are many hacking groups inside the United States. But in recent years the Chinese attacks have grown significantly, security researchers say. Mandiant has detected more than 140 Comment Crew intrusions since 2006. American intelligence agencies and private security firms that track many of the 20 or so other Chinese groups every day say those groups appear to be contractors with links to the unit.
While the unit’s existence and operations are considered a Chinese state secret, Representative Mike Rogers of Michigan, the Republican chairman of the House Intelligence Committee, said in an interview that the Mandiant report was “completely consistent with the type of activity the Intelligence Committee has been seeing for some time.”
Obama administration officials say they are planning to tell China’s new leaders in coming weeks that the volume and sophistication of the attacks have become so intense that they threaten the fundamental relationship between Washington and Beijing.
The United States government also has cyberwarriors. Working with Israel, the United States has used malicious software called Stuxnet to disrupt Iran’s uranium enrichment program. But government officials insist they operate under strict, if classified, rules that bar using offensive weapons for nonmilitary purposes or stealing corporate data.
The United States finds itself in something of an asymmetrical digital war with China. “In the cold war, we were focused every day on the nuclear command centers around Moscow,” one senior defense official said recently. “Today, it’s fair to say that we worry as much about the computer servers in Shanghai.”
Unit 61398—formally, the 2nd Bureau of the People’s Liberation Army’s General Staff Department’s 3rd Department—exists almost nowhere in official Chinese military descriptions. Yet intelligence analysts who have studied the group say it is the central element of Chinese computer espionage. The unit was described in 2011 as the “premier entity targeting the United States and Canada, most likely focusing on political, economic, and military-related intelligence” by the Project 2049 Institute, a nongovernmental organization in Virginia that studies security and policy issues in Asia.
While the Obama administration has never publicly discussed the Chinese unit’s activities, a secret State Department cable written the day before Barack Obama was elected president in November 2008 described at length American concerns about the group’s attacks on government sites. (At the time American intelligence agencies called the unit “Byzantine Candor,” a code word dropped after the cable was published by WikiLeaks.)
The Defense Department and the State Department were particular targets, the cable said, describing how the group’s intruders send e-mails, called “spearphishing” attacks, that placed malware on target computers once the recipient clicked on them. From there, they were inside the systems.
Mandiant believes Unit 61398 conducted sporadic attacks on American corporate and government computer networks; the earliest it found was in 2006. Two years ago the numbers spiked. Mandiant discovered some of the intrusions were long-running. On average the group would stay inside a network, stealing data and passwords, for a year; in one case it had access for four years and 10 months.
Mandiant has watched the group as it has stolen technology blueprints, manufacturing processes, clinical trial results, pricing documents, negotiation strategies and other proprietary information from more than 100 of its clients, mostly in the United States. Mandiant identified attacks on 20 industries, from military contractors to chemical plants, mining companies and satellite and telecommunications corporations.
Mandiant’s report does not name the victims, who usually insist on anonymity. A 2009 attack on Coca-Cola coincided with the beverage giant’s failed attempt to acquire the China Huiyuan Juice Group for $2.4 billion, according to people with knowledge of the results of the company’s investigation.
As Coca-Cola executives were negotiating what would have been the largest foreign purchase of a Chinese company, Comment Crew was busy rummaging through their computers in an apparent effort to learn more about Coca-Cola’s negotiation strategy.
The attack on Coca-Cola began, like hundreds before it, with a seemingly innocuous e-mail to an executive that was, in fact, a spearphishing attack. When the executive clicked on a malicious link in the e-mail, it gave the attackers a foothold inside Coca-Cola’s network. From inside, they sent confidential company files through a maze of computers back to Shanghai, on a weekly basis, unnoticed.
Two years later, Comment Crew was one of at least three Chinese-based groups to mount a similar attack on RSA, the computer security company owned by EMC, a large technology company. It is best known for its SecurID token, carried by employees at United States intelligence agencies, military contractors and many major companies. (The New York Times also uses the firm’s tokens to allow access to its e-mail and production systems remotely.) RSA has offered to replace SecurID tokens for customers and said it had added new layers of security to its products.
As in the Coca-Cola case, the attack began with a targeted, cleverly fashioned poisoned e-mail to an RSA employee. Two months later, hackers breached Lockheed Martin, the nation’s largest defense contractor, partly by using the information they gleaned from the RSA attack.
What most worries American investigators is that the latest set of attacks believed coming from Unit 61398 focus not just on stealing information, but obtaining the ability to manipulate American critical infrastructure: the power grids and other utilities.
Staff at Digital Bond, a small security firm that specializes in those industrial-control computers, said that last June Comment Crew unsuccessfully attacked it. A part-time employee at Digital Bond received an e-mail that appeared to come from his boss, Dale Peterson. The e-mail, in perfect English, discussed security weaknesses in critical infrastructure systems, and asked the employee to click a link to a document for more information. Mr. Peterson caught the e-mail and shared it with other researchers, who found the link contained a remote-access tool that would have given the attackers control over the employee’s computer and potentially given them a front-row seat to confidential information about Digital Bond’s clients, which include a major water project, a power plant and a mining company.
Jaime Blasco, a security researcher at AlienVault, analyzed the computer servers used in the attack, which led him to other victims, including the Chertoff Group. That firm, headed by the former secretary of the Department of Homeland Security, Michael Chertoff, has run simulations of an extensive digital attack on the United States. Other attacks were made on a contractor for the National Geospatial-Intelligence Agency, and the National Electrical Manufacturers Association, a lobbying group that represents companies that make components for power grids. Those organizations confirmed they were attacked but have said they prevented attackers from gaining access to their network.
But the most troubling attack to date, security experts say, was a successful invasion of the Canadian arm of Telvent. The company, now owned by Schneider Electric, designs software that gives oil and gas pipeline companies and power grid operators remote access to valves, switches and security systems.
Telvent keeps detailed blueprints on more than half of all the oil and gas pipelines in North and South America, and has access to their systems. In September, Telvent Canada told customers that attackers had broken into its systems and taken project files. That access was immediately cut, so that the intruders could not take command of the systems.
Mr. Obama faces a vexing choice: In a sprawling, vital relationship with China, is it worth a major confrontation between the world’s largest and second largest economy over computer hacking?