China espionage
Chinese military intelligence collectors scored a recent coup in stealing valuable U.S. simulation technology that will boost Beijing's combat training.

Xiaodong Sheldon Meng, 42, a former Beijing resident, pleaded guilty Aug. 1 in California to illegally providing China's military with embargoed software used in air force and navy training.

Meng also pleaded guilty to stealing proprietary corporate technology known as "Mantis" while working for the San Jose-based Quantum3D Inc., and attempting to sell it to China's Navy Research Center.

Prosecutors said Meng violated arms export control laws by selling China's military what is called "viXsen" source code, a Quantum3D product controlled for export as a defense article. The software is used in "visual simulation software program used for training military fighter pilots."

Meng also illegally installed a copy of Quantum3D's "Mantis" simulation software on a Chinese navy site and altered the code to make it appear as though it belonged to a competitor. The software was part of a sales demonstration project for the Chinese produced by Meng.

"This conviction, the first in the nation for illegal exports of military-related source code, demonstrates the importance of safeguarding our nation's military secrets and should serve notice to others who would compromise our national security for profit," said Kenneth L. Wainstein, assistant attorney general for national security. "This case is the latest evidence of the department's enhanced investigative and prosecutorial efforts to keep America's critical technology from falling into the wrong hands."

Investigators said Meng stole software that is "designed for precision training of military fighter pilots in night vision scenarios, among other applications."

U.S. officials said the compromise could be more extensive than outlined by prosecutors because Quantum3D produces mainly military products, including day and night combat training simulators, and advanced infrared, electro-optical and night vision goggle devices.

"The software stolen by Meng will improve the PLA's ability to achieve more sophisticated military simulation for training and mission planning purposes, that is, to help them to better kill us," said Richard Fisher, a specialist at the International Assessment and Strategy Center, referring to the acronym for China's People's Liberation Army.

The software acquisition is part of a large-scale Chinese military technology collection program targeting the United States. China is in the process of building up its military forces with the goal of challenging the United States in any conflict over Taiwan. The buildup includes acquisition of advanced Russian fighter bombers as well as new indigenous J-10 fighters.

The Pentagon's annual report on China's military power said such illegal software acquisitions are part of China's "aggressive and wide-ranging espionage" that poses "the leading threat to U.S. technology." The technology is "vital for the [Chinese military's] transformation into an information-based, network-centric force," the report stated, noting more than 400 U.S. investigations related to China since 2000.

NRO director candidate
Defense sources say a leading candidate to be the next director of the National Reconnaissance Office (NRO), the secret intelligence agency that builds and operates the nation's constellation of spy satellites, is former CIA official Carol Staubach.

The likely appointment is raising questions among some in Congress and the intelligence community about the close associations of several current and former intelligence officials with Booz Allen Hamilton, a leading intelligence agency consultant.

Ms. Staubach is currently a vice president at Booz Allen involved in "the NRO market," according to the company's Web site.

The director of national intelligence (DNI), retired Navy Vice Adm. Michael McConnell, also worked for Booz Allen before taking his position, and former NRO Director Keith Hall works for Booz Allen.

"When everyone asked the question, how will Mike McConnell's association with Booz Allen affect how he makes decisions, it's apparent that he is demonstrating loyalty to his former company," said one intelligence source who is skeptical of Ms. Staubach's leadership skills.

Ms. Staubach is a 33-year CIA veteran who spent 15 years on detail to NRO. From August 2001 to July 2003, she was director of NRO's Imagery Systems Acquisitions and Operations and in charge of buying and operating classified spy satellites. That post put her in charge of budgeting billions of dollars in satellite programs.

The NRO director post is open as a result of the current Director Richard Kerr's appointment as deputy director of national intelligence.

Ellen Cioccio, a spokeswoman for Mr. McConnell, said Mr. Kerr remains at NRO and thus "it would be premature to comment on a replacement" while the Senate considers his nomination.

"That said, when and if a new NRO director is appointed, he or she will be appointed by the secretary of defense with the concurrence of the DNI" as required by intelligence reform law, she said.

Iraq situation report
A senior military officer posted in Baghdad said in an interview that some progress is being made in talks between a special subcommittee of U.S., Iraqi and Iranian officials aimed at stopping Tehran's backing for insurgents and terrorists.

"The key point is that we are talking and that we are working all venues from diplomatic and military within Iraq to counter the external influences of foreign fighters coming into Iraq," the officer said.

This third round of talks was held Monday in Baghdad.

On the surge efforts, the officer said, U.S. and allied forces have "pretty much cleared Baqouba" of insurgents. The city, located about 30 miles northeast of Baghdad just outside the notorious Sunni Triangle, was once among the most dangerous terrorist and insurgent operating zones.

"Food and other essential services are flowing in via Iraqi convoys," the officer said. "We are working with the city council and provincial authorities to get other things moving as far as water, power and all the other reconstruction efforts now that the city has been cleared out."

Marines in northeast Anbar province are continuing to go after al Qaeda terrorists near Lake Thar, the officer said. "We are going to try and drive a stake in the heart of al Qaeda in Iraq there as they have been using that area as a staging area to launch attacks against Baghdad," the officers said.

Military operations against insurgents in Arab Jabour, at the southern belt of Baghdad, also are going well. "The Sunni sheiks are now supporting our efforts and recruiting for the [Iraqi Security Forces] and local neighborhood watch is going on," the officer said.

Also, the Iraqi government is stepping up efforts to take on the problem of the Shi'ite militias and have not blocked U.S. forces from going after them.