The Mercury News

Hayward man charged with spying for China

56-year-old accused of making ‘dead drops’ in Newark, Oakland

- By Fiona Kelliher fkelliher@bayareanew­sgroup.com

A Hayward resident passed American intelligen­ce to Chinese security officials for years in an operation that combined both old-school and modern espionage, federal authoritie­s said Monday.

Xuehua Peng, also known as Edward Peng, has been arrested and charged with spying for China. Federal authoritie­s say Peng, 56, paid for and ferried classified informatio­n to Chinese officials using socalled dead drops in Newark and Oakland, and in Columbus, Georgia.

Peng, who was the registered owner of the now-defunct U.S. Tour and Travel in San Francisco, allegedly paid a human source up to $20,000 for secure digital cards containing American intelligen­ce, authoritie­s said in a 23-page complaint unsealed Monday.

In five instances from 2015 to 2018, Peng booked a hotel room and left the key at the front desk for the source, as well as an envelope of cash inside the room. He later picked up the SD cards seemingly in exchange for

the cash.

Authoritie­s allege that Peng conducted the dead drops under orders from a China Ministry of State Security (MSS) handler who mandated the logistics of each drop, including Peng’s trips to China to deliver the SD cards after he retrieved them.

The FBI filmed the dead drops and intercepte­d the communicat­ions between

Peng and the MSS, according to the complaint.

A naturalize­d U.S. citizen, Peng first arrived in the U.S. in 2001 with a background in both mechanical engineerin­g and traditiona­l Chinese medicine, authoritie­s said. Public records show he was licensed as an acupunctur­ist for several years and was associated with U.S. Tour and Travel from 2010 to 2014, when the business dissolved.

Peng was arrested at his Hayward home Friday and held without bond in San Francisco. If convicted, he could receive up to 10 years in prison, plus a $250,000 fine for acting as an agent of a foreign government without notifying the U.S. Attorney General.

The Special Prosecutio­ns Section of the U.S. Attorney’s Office for the Northern District of California and the Counterint­elligence and Export Control Section of the Department of Justice, National Security Division, will prosecute the case.

Peng’s next hearing was scheduled for Wednesday.

 ?? JUSTIN SULLIVAN — GETTY IMAGES ?? U.S. Attorney David L. Anderson holds an SD memory card Monday in San Francisco. SD cards containing U.S. intelligen­ce were delivered to China, federal authoritie­s say.
JUSTIN SULLIVAN — GETTY IMAGES U.S. Attorney David L. Anderson holds an SD memory card Monday in San Francisco. SD cards containing U.S. intelligen­ce were delivered to China, federal authoritie­s say.

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