LOS ANGELES – Federal authorities this morning arrested two local men on federal charges that allege a scheme to illegally obtain technology and integrated circuits with military applications that were exported to a Chinese company without the required export license.

Yi-Chi Shih, 62, an electrical engineer who is a part-time Los Angeles resident, and Kiet Ahn Mai, 63, of Pasadena, were arrested this morning without incident by federal agents.

Shih and Mai, who previously worked together at two different companies, are named in a criminal complaint unsealed this morning that charges them with conspiracy. Shih is also charged with violating the International Emergency Economic Powers Act (IEEPA), a federal law that makes illegal, among other things, certain unauthorized exports.

The complaint alleges that Shih and Mai conspired to illegally provide Shih with unauthorized access to a protected computer of a United States company that manufactured specialized, high-speed computer chips known as monolithic microwave integrated circuits (MMICs). The conspiracy count also alleges that the two men engaged in mail fraud, wire fraud and international money laundering to further the scheme.

According to the affidavit in support of the criminal complaint, Shih and Mai executed a scheme to defraud the U.S. company out of its proprietary, export-controlled items, including technology associated with its design services for MMICs. As part of the scheme, Shih and Mai accessed the victim company’s computer systems via its web portal after Mai obtained that access by posing as a domestic customer seeking to obtain custom-designed MMICs that would be used solely in the United States. Shih and Mail allegedly concealed Shih’s true intent to transfer the U.S. company’s technology and products to the People’s Republic of China.

“This case outlines a scheme to secure proprietary technology, some of which was allegedly sent to China, where it could be used to provide companies there with significant advantages that would compromise U.S. business interests,” said United States Attorney Nicola T. Hanna. “The very sensitive information would also benefit foreign adversaries who could use the technology to further or develop military applications that would be detrimental to our national security.”

“According to the complaint, the defendants allegedly schemed to illegally export semiconductors having military and civilian applications to a Chinese company,” said Acting Assistant Attorney General Boente. “Protecting this type of technology and preventing its illegal acquisition by our adversaries remains a key priority in preserving our national security.”

The victim company’s proprietary semiconductor technology has a number of commercial and military applications, and its customers include the Air Force, Navy and the Defense Advanced Research Projects Agency. MMICs are used in electronic warfare, electronic warfare countermeasures and radar applications.

“The FBI, working jointly with our law enforcement partners, remains committed to bringing to justice those who seek to illegally export some of our nation’s most sensitive technologies to the detriment of our national security and hard-working United States companies,” said Paul Delacourt, Assistant Director in Charge of the FBI’s Los Angeles Field Office. “Rest assured, the FBI will continue to diligently pursue any and all leads that involve the illegal exportation of U.S. technology which will cause harm to our long-term national security interests.”

The computer chips at the heart of this case allegedly were shipped to Chengdu GaStone Technology Company (CGTC), a Chinese company that established a MMIC manufacturing facility in Chengdu. Shih was the president of CGTC, which in 2014 was placed on the Commerce Department’s Entity List, according to the affidavit, “due to its involvement in activities contrary to the national security and foreign policy interest of the United States – specifically, that it had been involved in the illicit procurement of commodities and technologies for unauthorized military end use in China.” Because it was on the Entity List, a license from the Commerce Department was required to export U.S.-origin MMICs to CGTC, and there was a “presumption of denial” of a license.

The complaint outlines a scheme in which Shih used a Los Angeles-based company he controlled – Pullman Lane Productions, LLC – to funnel funds provided by Chinese entities to finance the manufacturing of MMICs by the victim company. The complaint affidavit alleges that Pullman Lane received financing from a Beijing-based company that was placed on the Entity List the same day as CGTC “on the basis of its involvement in activities contrary to the national security and foreign policy interests of the United States.”

Mai acted as the middleman by using his Los Angeles company – MicroEx Engineering – to pose as a legitimate domestic customer that ordered and paid for the manufacturing of MMICs that Shih illegally exported to CGTC in China, according to the complaint. It is the export of the MMICs that forms the basis of the IEEPA violation alleged against Shih. The specific exported MMICs also required a license from the Commerce Department before being exported to China, and a license was never sought or obtained for this export.

“Today’s actions serve as a reminder that the government will hold individuals accountable who fraudulently procure and export unlawfully protected United States technology and attempt to conceal their criminal activity through international money laundering,” stated Special Agent in Charge R. Damon Rowe with IRS Criminal Investigation. “The IRS plays an important role in tracing illicit funds through both domestic and international financial intuitions. The IRS is proud to partner with the FBI and Department of Commerce and share its world-renowned financial investigative expertise in this investigation.”

“Today’s arrests demonstrate the Office of Export Enforcement’s strong commitment to enforcing our nation’s export control and public safety laws,” said Richard Weir, Special Agent in Charge of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, Los Angeles Field Office. “We will continue to work with our law enforcement partners to identify, deter, and keep the most sensitive U.S. origin goods and technology out of the most dangerous hands.”

Shih and Mai are expected to make their first court appearances this afternoon in United States District Court in downtown Los Angeles.

A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

If they were to be convicted of the charges in the criminal complaint, Mai would face a statutory maximum sentence of five years in federal prison, and Shih could be sentenced to as much as 25 years in prison.

This case is being investigated by the Federal Bureau of Investigation; the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement; and IRS Criminal Investigation.

The case against Shih and Mai is being prosecuted by Assistant United States Attorneys Judith A. Heinz, Melanie Sartoris and Khaldoun Shobaki of the National Security Division, and Trial Attorney Matthew Walczewski of the Department of Justice’s National Security Division.