In the first years of World War II, German submarines in possession of encoded messages transmitted through Engima decimated the U.S. fleet and sent countless merchant marine vessels to the bottom of the Atlantic. When Turing's team finally broke the German code Engima had been churning out so relentlessly, Allied forces gained an advantage most historians contend was pivotal to their final victory.

The KIV-7HS unit is this nation's 21st century Engima, a "type 1," 6 x 8 inch encryption device weighing only three pounds and selling for just over $3,000. The device may be small and relatively inexpensive, but its size, weight, and cost don't begin to reflect its value to our national security.

Export of the KIV-7HS is more strictly controlled than most of the items on the United States Munitions list -- an enemy who secured the three pound device would have access to classified information that, in the wrong hands, could compromise U.S. security and, in a crisis or during wartime, trigger a substantial loss of military resources and troops. When a purchase request does come in for a KIV-7HS, the sale must be approved by both the State Department and the National Security Agency.

When risk outweighs reward
When Eugene You-Tsai Hsu, a naturalized citizen and businessman operating out of Blue Springs, Mo., contacted Mykotronx, Inc., a U.S. defense manufacturer, and asked for information about the KIV-7HS, it set off alarms. Mykotronx's parent company, Rainbow Technologies, Inc., has regional in Taiwan and China, and it was the company's Web site that first provided Hsu with information about the KIV-7HS.

After Hsu telephoned Mykotronx, Inc. and suggested to a company representative that he might have a buyer for two KIV-7HS encryption devices, the defense firm contacted U.S. Customs to report what they viewed as a suspicious inquiry.

Plans for an undercover investigation materialized quickly, and within days, an undercover customs agent, Dan Supnick, retired, posing as a sales "intermediary" for Mykotronx, Inc. returned Hsu's call. Supnick told Hsu his name was "Dan Stevenson," and that he worked out of Baltimore, Md..

Supnick began carefully taping his conversations with Hsu, and repeatedly warning the businessman that exporting the KIV-7HS required State Department approval. He told Hsu he'd be willing to work with the businessman only if he could guarantee neither Mykotronx, Inc. nor its sales agent "would get burned."

According to court documents, Hsu said "he understood," that everyone "would just keep their mouths shut," and no one would be implicated. When Supnick expressed doubt -- a ploy to garner more information -- Hsu told him the name of the KIV-7HS units could easily be changed before they left U.S. docks. Hsu sounded upbeat, confident, and ready to do business.

The final nail...
The investigation was moving forward. In ensuing conversations with Hsu, Supnick again expressed concerns, this time about Hsu's ability to find a freight forwarder willing to participate in the unauthorized shipment of classified technology.

Hsu assured the agent it wouldn't be a problem. Determined to keep the sale alive, Hsu sent a fax to the undercover agent identifying Wing Chung Ho, aka Charlson Ho, as the buyer of the KIV-7HS units and asked Supnick to send a price quote and brochures to Wei Soon Loong Private Limited in Singapore. Hsu suggested payment for the units be made in cash, "so there's no evidence at all."

Meanwhile, Ho, the buyer in Singapore, sent his own fax to Supnick, requesting information on the "two sets of KIV-7HS." The agent kept pressing for information on the freight-forwarder the men intended to use--it was critical to identify everyone involved in the scheme.

A few days later, Ho telephoned the undercover agent from Singapore and reassured him they already had a freight-forwarder lined up, a fellow Ho said he'd worked with before -- David Tzuwei Yang of Dyna Freight Inc, in California.

Ho told the undercover agent Yang would handle the shipment/export from the U.S. in Singapore, then Ho would transfer the units and other electronic technology to the People's Republic of China.

Bingo.

Endgame
Three months after Hsu's first contact with Supnick, Wing Chung Ho transferred $4,125 into an account at the Bank of America that he believed belonged to a sales rep named Dan Stevenson. In reality, the undercover account belonged to U.S. Customs.

A few days later, David Tzuwei Yang called Supnick to assure the undercover agent he "understood the whole situation," and that he had agreed to "move the merchandise" for Hsu and Ho. Yang told the Customs agent he'd "been in the business for more than 20 years, and knew how to handle these problems."

Three days later, Yang called the agent again from California and provided him with the air waybill number for tracking the KIV-7HS units that Yang said he was shipping from Los Angeles, Calif., through Taipei to Singapore.

The game was over, and "Stevenson," the "nervous sales rep" that Hsu, Ho, and Yang had gone to such lengths to reassure, had won. Every conversation was on tape, and the evidence that these three had conspired to violate the Export Control Act and to commit espionage was incontrovertible.

Almost two years after the undercover Customs investigation began, access to the nation's most sensitive encryption technology remains secure. Allan Doody, in charge of the undercover operation that netted Hsu and Yang, and Dan Supnick who made it happen will tell you it was all the result of hard work, a reflection of Customs commitment to enforcing U.S. arms export laws. But it's something else as well -- testimony to the wisdom of a federal jury in Baltimore that, on May 1, 2002, convicted Hsu and Yang on charges of violating U.S. law by attempting to ship tightly controlled military encryption equipment, in disguise, to China.