Now, from the FBI: Japanscam

By Charles Alexander

Hitachi and Mitsubishi fall into a cloak-and-data trap

To all outward appearances, it was a routine business transaction involving a foreign corporation and a Stateside consulting firm. In fact, it turned out to be part of a transcontinental sting operation that snared some of the world's biggest electronics companies.

The climax of the affair came last week after a group of eager, albeit edgy employees of Hitachi Ltd., Japan's fourth largest computer maker, arranged to wire $495,000 into the bank account of Glenmar Associates, a Santa Clara, Calif., electronics consulting firm. The money was actually intended as a clandestine payment for confidential information on some of the newest and most powerful computers made by International Business Machines, Hitachi's chief American rival (Hitachi had $1.4 billion in computer revenues last year, IBM $24 billion). But when Hitachi Senior Engineer Kenji Hayashi and two colleagues showed up at Glenmar's six-room suite in a Santa Clara office building to collect the secret documents, they found themselves surrounded by a squad of FBI agents, who handcuffed them and charged them with conspiracy to transport stolen property in foreign commerce.

Later that day Customs agents, tipped off by the FBI, boarded a Japan Air Lines jumbo jet about to take off for Tokyo from San Francisco and arrested Tomizoh Kimura, an engineer for another Japanese firm, the Mitsubishi Electric Corp. (1981 computer revenues: $350 million). When the agents examined his luggage, they found confidential IBM computer tapes, which had also been provided, courtesy of Glenmar, for some $26,000.

So culminated a cloak-and-data caper extraordinaire, the FBI's most ambitious sting since Operation Abscam netted seven Congressmen for taking bribes two years ago. Glenmar was an FBI front operation set up to deal with the problem of industrial espionage in the fast-track microelectronics industry. Winding up investigations that lasted eight months, the

FBI charged that a total of twelve Hitachi and five Mitsubishi employees took part in separate conspiracies to transport stolen IBM property to Japan. The bureau arrested five of these suspects, but the rest were in Japan last week. Among those accused are several high-ranking officials who allegedly approved the scheme, including Kisaburo Nakazawa, general manager of Hitachi's main computer manufacturing plant at Kanagawa.

In Tokyo, Hitachi and Mitsubishi executives grudgingly admitted that their companies had made payments to FBI agents for IBM documents. They argued, however, that their employees considered Glenmar to be a legitimate research firm, selling information obtained through legal channels. Said a statement from Mitsubishi: "These accusations appear to have arisen out of a terrible mistake by U.S. Government authorities."

Coming at a time of rising trade tensions between Japan and the U.S., the charges created a furor in the Japanese press. Complained the country's second biggest daily, Asahi Shimbun (circ. 12.2 million), in a front-page story: "Even among some Americans there can be heard voices saying that this was a highly political action against Japan." Commentators denounced the FBI's undercover methods as entrapment. Several newspapers reported that Prime Minister Zenko Suzuki had tentatively decided that the defendants should not be extradited.

Ethical or not, the investigation produced a devastating mass of evidence against the suspects. The sting began last fall when the FBI formed Glenmar Associates and billed it as a consulting firm with information to sell about computers. Glenmar's headquarters were in the heart of Northern California's so-called Silicon Valley, a center of American electronics manufacturing and a hotbed of industrial intelligence gathering. FBI Agent Alan Garretson, using the name Al Harrison, posed as Glenmar's president.

By January, representatives of both Hitachi and Mitsubishi had approached the fake firm, seeking data on IBM's newest computers. IBM, concerned about its vulnerability to industrial spies, agreed to cooperate with the FBI by providing its Glenmar front with some confidential documents as bait. Among the items offered: design information for IBM's top-of-the-line Model 3081 computer.

According to the FBI, the Japanese firms took the bait. Agent Garretson soon began an odyssey that took him, among other places, to San Jose, Calif., Las Vegas and Honolulu for secret meetings with various Hitachi and Mitsubishi employees. Perhaps most bizarre of all was a 5 a.m. rendezvous between Garretson and Hitachi Engineer Jun Naruse at a hotel in Hartford, Conn. Garretson had arranged for Naruse to see a new IBM 3380 data-storage device on a computer at the nearby Pratt & Whitney Aircraft Group. Flashing false identification badges that had been supplied by P & W officials, who were in on the ruse, Garretson escorted Naruse past security guards into the deserted computer room; there Naruse quickly began photographing the IBM unit. That night, in the first of several payments from Hitachi, Naruse handed Garretson $3,000 in $100 bills.

The FBI insists that the Japanese knew what they were doing was illegal. In an affidavit filed in federal court, the bureau says that it taped a telephone conversation in which Naruse admitted that if anything went wrong with the deal, there could be "real trouble for Hitachi." There could also be real trouble for Naruse and the other defendants. If convicted on the charges, they face fines of $10,000 and U.S. prison sentences of up to five years on each count.

--By Charles Alexander. Reported by Bob Buderi/San Francisco

With reporting by Bob Buderi

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