By Marilyn Gerlach
BERLIN (Reuters) - Every time he goes into a meeting or discusses anything sensitive with colleagues, Andreas Blume places his mobile phone inside a small tin container. Blume, 38, an expert in intellectual property security at Evonik, a specialty chemicals maker in central Germany, has put the tins in every meeting room at the company's main research centre.
"You just need a suitable biscuit tin to counter eavesdropping measures. About 50 percent of freely available tins act as a perfect faraday cage," explains Blume. "No one can activate the microphone of your mobile and listen in to what you say." Not every company in Germany is so careful. While Evonik and other German firms with expensive R&D labs routinely guard against corporate or industrial espionage, the vast majority of German companies - and certainly most of the small and mid-sized "Mittelstand" firms which form the backbone of Europe's largest economy - give little thought to corporate spying. Such complacency exists in companies from Detroit to Dijon.
But security officials and corporate executives say it is far more common in Germany because of an almost visceral distrust of security and spy agencies, rooted in memories of the Nazi Gestapo and Communist Stasi spy agencies. Most Germans, they say, shy away from any kind of surveillance and would rather keep quiet than report suspicions to an official. That leaves German companies particularly exposed to economic espionage, says the Bundesamt fuer Verfassungsschutz (BfV), Germany's equivalent of the U.S. Federal Bureau of Investigation. It is worried that Russian and Chinese intelligence services target German corporations. The problem, according to the German interior ministry, could cost the country 20-50 billion euros ($26-66 billion) a year.
CHINA MOVES IN
Even when a German company does discover a problem, most "won't usually squeal to a spy agency," said Berthold Stoppelkamp, head of the Working Group for Economic Security (ASW), a security think tank set up by the Federation of German Industries (BDI). For example, a German on business in China who loses a work memory stick wouldn't tend to think of informing the government about it: "It is not part of our value system."
The contrast with companies from the United States is telling. Only a third of German companies surveyed in a 2009 PriceWaterhouseCoopers study had a whistle-blowing system in place, compared with 61 percent of German subsidiaries of U.S. companies. "More and more whistle-blowing systems have been set up since 2005 but skepticism among several companies is still huge," the PWC report said. Only 10 percent intended to set up such a system in the next two years while 76 percent said they were unlikely to do so. The most common reason to oppose one was concern it could promote a culture of fear and spying.
Stoppelkamp's working group has begun teaching German companies about the potential threats - everything from a spy posing as an apprentice to a USB stick that could be used to smuggle out information. So far interest is poor. At a seminar on the topic for German high-tech firms last year, fewer than 10 percent of those invited showed up. Participants were told about threats from Chinese and Russian state intelligence networks as well as specific instances of Chinese spying backed by state agencies.
They were given basic practical tips about business travel: pointers like take a different laptop, and don't be seduced. Some executives said they were stunned that their companies could be at risk. Of course, Western rivals could be snooping on German companies, but Berlin is particularly concerned about Russia and China. German intelligence agencies have discovered several cases in the past few years that had Chinese involvement, say security officials, adding that while the Russian focus is on strategic information, the Chinese are mostly interested in collecting product information. In one 2010 case, a Chinese national who had worked in a manufacturing plant "gathered information and then later burned this data on CDs," said a security official who is actively involved in ferreting out economic spies. "He also used USB sticks to siphon off data." The official believes that data ended up in China, although German intelligence can't prove anything: "The suspect said he took the information to enhance his career prospects."
Chinese intelligence services prefer not to send people to Germany, but to tap Chinese nationals already in the country, the official added. Another government security official, who has dealings with companies on how to beef up their security, said China had become more "aggressive" in spying than Russia in the past few years. The person detailed another recent case of suspicious behavior. A German research institute conducted a phone interview with a job applicant in China.
The potential employee gave a great interview and showed deep knowledge of his field. But when he arrived in Germany he performed terribly. Institute officials concluded they must have interviewed a different person from the one who arrived - one targeting the research institute for its know-how. "There are many of these suspicious cases involving the Chinese," according to the person. "When we speak to the (German) companies and tell them some of the methods used, then these companies afterwards would say, ‘Oh yes, that's right - that's exactly what happened to us.'"
THE EUROCOPTER SCANDAL
China may be more aggressive, but Moscow still packs a punch. Evidence of that came to light last year in one of the most spectacular industrial espionage cases in Germany since World War Two. The case focused on an Austrian army helicopter mechanic. Known as Harald S., he was accused of working as an agent for Russia's secret service between 1997 and 2002.
German prosecutors alleged that he passed documents on civilian helicopter technology to Russia's foreign spy agency, SVR. The helicopter was made by Eurocopter, a division of European aerospace group EADS. Prosecutors also said S. facilitated contact between Russian diplomat Vladimir Woschschow, who worked as a trade attache at Russia's embassy in Vienna, and Werner G., a German engineer at Eurocopter's plant in Ottobrunn, southeast of Munich. S. had met G. in 1997 and the men discovered they had a few things in common, including a passion for flying and for rescue dogs.
Testifying in Munich's High District Court last year, G. said the Austrian had asked him for some harmless documents. Because they were freely available on the internet anyway, the German harbored no special suspicions about the request. But the Russian became more demanding, asking G. for details on the NH90, a multi-purpose military helicopter designed for the NATO countries, and the anti-tank helicopter Tiger, one of the most advanced combat helicopters. Suspicious, G. approached the BfV and was later involved in a sting to catch the diplomat and S. The Austrian, whose lawyer said at the trial that knew "he made a huge mistake", received a suspended sentence and was fined 4,139 euros. G. had received a suspended sentence in 2008. Woschschow was not prosecuted because he had diplomatic immunity. A spokeswoman for Eurocopter said at the time the case had caused no damage to the company.
Cracking such cases can be difficult in Germany because the country's intelligence network was deliberately set up to avoid the creation of a single monolithic agency like the Nazi Gestapo or the Stasi in Communist East Germany. "It's all because of history ... There is no strong centralized command," said Stoppelkamp. That means the national BfV must work with 16 agencies - one in every federal state. They all coordinate with each other but also protect their own turf. States in the former West Germany have a tradition of swapping information between companies, industry bodies and the state's intelligence agency; those in the former East Germany are less inclined to share.
Three years ago the BfV expanded its economic espionage unit, realizing that catching corporate spies is just as important as chasing terrorists. Mueller Weingarten, a unit of Schuler AG in 2008, was one of few firms that reported to police about one of its Chinese employees. Mueller Weingarten makes pressing, stamping and cutting technology products for the automotive industry. It fired a Chinese national in early 2008 after noticing he was frequently and surreptitiously downloading blueprints for trucks.
Christine Weiss, spokeswoman for the State Prosecutor's Office in Ravensburg, said the case was temporarily suspended in December 2008 "because we don't know his whereabouts". Schuler declined to comment. Another company which acted, the official who works with companies said, was a Berlin-based architecture firm which had won contracts from various government agencies, including buildings of interest to foreign intelligence agencies. Last year the firm caught a Chinese intern stealing building plans.
The firm, which the sources declined to name, went to the police, who prosecuted the man. "It would have been better if the company had turned to us," the security official said. "We could then use our intelligence gathering resources to find out if the intern was working for a foreign intelligence agency."
(Editing by Simon Robinson and Sara Ledwith)