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By BBC World News
02 February 2013
Google Chairman Eric Schmidt uses a new book to call China an Internet menace that backs cyber-crime for economic and political gain, reports say.
The New Digital Age - due for release in April - reportedly brands China "the world's most active and enthusiastic filterer of information".
China is "the most sophisticated and prolific" hacker of foreign companies, according to a review obtained by the Wall Street Journal (WSJ).
China denies allegations of hacking.
Beijing has been accused by several governments, foreign companies and organisations of carrying out extensive cyber espionage for many years, seeking to gather information and to control China's image.
The New Digital Age analyses how China is dangerously exploiting an Internet that now permeates politics, business, culture and other aspects of life, the WSJ says.
It quotes the book as saying: "The disparity between American and Chinese firms and their tactics will put both the government and the companies of the United States at a distinct disadvantage."
This, it says, is because Washington "will not take the same path of digital corporate espionage, as its laws are much stricter (and better enforced) and because illicit competition violates the American sense of fair play".
The book argues that Western governments could do more to follow China's lead and develop stronger relationships between the state and technology companies.
States will benefit if they use software and technology made by trusted companies, it suggests.
"Where Huawei gains market share, the influence and reach of China grow as well," the WSJ quoted the authors as writing.
The WSJ this week said its computer systems had been hacked by specialists in China who were trying to monitor its China coverage.
It was the second reported attack on a major US news outlet in days, as the New York Times reported earlier that Chinese hackers had "persistently" penetrated its systems for the last four months.
China's foreign ministry dismissed the New York Times' accusations as "groundless" and "totally irresponsible".
Alleged China-based hacks
- China was widely believed to be the source of major cyber attacks between 2006 and 2011 targeting 72 organisations including the International Olympic Committee, the UN and security firms
- In 2011, Google said hackers based in Jinan province had compromised personal email accounts of hundreds of top US officials, military personnel and journalists
- South Korea blamed Chinese hackers for stealing data from 35 million accounts on a popular social network in July last year
- Chinese-based computers seized "full functional control" of computers at Nasa in 2011, the US body said
- In 2011 US media reported that Chinese-based hackers were suspected of a "significant" cyber attack on defence firm Lockheed Martin.
- Coca-cola says its systems were breached in 2009 by Beijing-backed hackers, while it was trying to buy China's Huiyuan Juice Group
- The US Pentagon said it was hacked by the Chinese military in 2007
- China says hacking is illegal under its laws and that it is a victim of such attacks itself
By Nicole Perlroth | The New York Times
31 January 2013
For the last four months, Chinese hackers have persistently attacked The New York Times, infiltrating its computer systems and getting passwords for its reporters and other employees.
After surreptitiously tracking the intruders to study their movements and help erect better defenses to block them, The Times and computer security experts have expelled the attackers and kept them from breaking back in.
The timing of the attacks coincided with the reporting for a Times investigation, published online on Oct. 25, that found that the relatives of Wen Jiabao, China's prime minister, had accumulated a fortune worth several billion dollars through business dealings.
Security experts hired by The Times to detect and block the computer attacks gathered digital evidence that Chinese hackers, using methods that some consultants have associated with the Chinese military in the past, breached The Times's network. They broke into the e-mail accounts of its Shanghai bureau chief, David Barboza, who wrote the reports on Mr. Wen's relatives, and Jim Yardley, The Times's South Asia bureau chief in India, who previously worked as bureau chief in Beijing.
"Computer security experts found no evidence that sensitive e-mails or files from the reporting of our articles about the Wen family were accessed, downloaded or copied," said Jill Abramson, executive editor of The Times.
The hackers tried to cloak the source of the attacks on The Times by first penetrating computers at United States universities and routing the attacks through them, said computer security experts at Mandiant, the company hired by The Times. This matches the subterfuge used in many other attacks that Mandiant has tracked to China.
The attackers first installed malware -- malicious software -- that enabled them to gain entry to any computer on The Times's network. The malware was identified by computer security experts as a specific strain associated with computer attacks originating in China. More evidence of the source, experts said, is that the attacks started from the same university computers used by the Chinese military to attack United States military contractors in the past.
Security experts found evidence that the hackers stole the corporate passwords for every Times employee and used those to gain access to the personal computers of 53 employees, most of them outside The Times's newsroom. Experts found no evidence that the intruders used the passwords to seek information that was not related to the reporting on the Wen family.
No customer data was stolen from The Times, security experts said.
Asked about evidence that indicated the hacking originated in China, and possibly with the military, China's Ministry of National Defense said, "Chinese laws prohibit any action including hacking that damages Internet security." It added that "to accuse the Chinese military of launching cyberattacks without solid proof is unprofessional and baseless."
The attacks appear to be part of a broader computer espionage campaign against American news media companies that have reported on Chinese leaders and corporations.
Last year, Bloomberg News was targeted by Chinese hackers, and some employees' computers were infected, according to a person with knowledge of the company's internal investigation, after Bloomberg published an article on June 29 about the wealth accumulated by relatives of Xi Jinping, China's vice president at the time. Mr. Xi became general secretary of the Communist Party in November and is expected to become president in March. Ty Trippet, a spokesman for Bloomberg, confirmed that hackers had made attempts but said that "no computer systems or computers were compromised."
Signs of a Campaign
The mounting number of attacks that have been traced back to China suggest that hackers there are behind a far-reaching spying campaign aimed at an expanding set of targets including corporations, government agencies, activist groups and media organizations inside the United States. The intelligence-gathering campaign, foreign policy experts and computer security researchers say, is as much about trying to control China's public image, domestically and abroad, as it is about stealing trade secrets.
Security experts said that beginning in 2008, Chinese hackers began targeting Western journalists as part of an effort to identify and intimidate their sources and contacts, and to anticipate stories that might damage the reputations of Chinese leaders.
In a December intelligence report for clients, Mandiant said that over the course of several investigations it found evidence that Chinese hackers had stolen e-mails, contacts and files from more than 30 journalists and executives at Western news organizations, and had maintained a "short list" of journalists whose accounts they repeatedly attack.
While computer security experts say China is most active and persistent, it is not alone in using computer attacks for a variety of national purposes, including corporate espionage. The United States, Israel, Russia and Iran, among others, are suspected of developing and deploying cyberweapons.
The United States and Israel have never publicly acknowledged it, but evidence indicates they released a sophisticated computer worm starting around 2008 that attacked and later caused damage at Iran's main nuclear enrichment plant. Iran is believed to have responded with computer attacks on targets in the United States, including American banks and foreign oil companies.
Russia is suspected of having used computer attacks during its war with Georgia in 2008.
The following account of the attack on The Times -- which is based on interviews with Times executives, reporters and security experts -- provides a glimpse into one such spy campaign.
After The Times learned of warnings from Chinese government officials that its investigation of the wealth of Mr. Wen's relatives would "have consequences," executives on Oct. 24 asked AT&T, which monitors The Times's computer network, to watch for unusual activity.
On Oct. 25, the day the article was published online, AT&T informed The Times that it had noticed behavior that was consistent with other attacks believed to have been perpetrated by the Chinese military.
The Times notified and voluntarily briefed the Federal Bureau of Investigation on the attacks and then -- not initially recognizing the extent of the infiltration of its computers -- worked with AT&T to track the attackers even as it tried to eliminate them from its systems.
But on Nov. 7, when it became clear that attackers were still inside its systems despite efforts to expel them, The Times hired Mandiant, which specializes in responding to security breaches. Since learning of the attacks, The Times -- first with AT&T and then with Mandiant -- has monitored attackers as they have moved around its systems.
Hacker teams regularly began work, for the most part, at 8 a.m. Beijing time. Usually they continued for a standard work day, but sometimes the hacking persisted until midnight. Occasionally, the attacks stopped for two-week periods, Mandiant said, though the reason was not clear.
Investigators still do not know how hackers initially broke into The Times's systems. They suspect the hackers used a so-called spear-phishing attack, in which they send e-mails to employees that contain malicious links or attachments. All it takes is one click on the e-mail by an employee for hackers to install "remote access tools" -- or RATs. Those tools can siphon off oceans of data -- passwords, keystrokes, screen images, documents and, in some cases, recordings from computers' microphones and Web cameras -- and send the information back to the attackers' Web servers.
Michael Higgins, chief security officer at The Times, said: "Attackers no longer go after our firewall. They go after individuals. They send a malicious piece of code to your e-mail account and you're opening it and letting them in."
Lying in Wait
Once hackers get in, it can be hard to get them out. In the case of a 2011 breach at the United States Chamber of Commerce, for instance, the trade group worked closely with the F.B.I. to seal its systems, according to chamber employees. But months later, the chamber discovered that Internet-connected devices -- a thermostat in one of its corporate apartments and a printer in its offices -- were still communicating with computers in China.
In part to prevent that from happening, The Times allowed hackers to spin a digital web for four months to identify every digital back door the hackers used. It then replaced every compromised computer and set up new defenses in hopes of keeping hackers out.
"Attackers target companies for a reason -- even if you kick them out, they will try to get back in," said Nick Bennett, the security consultant who has managed Mandiant's investigation. "We wanted to make sure we had full grasp of the extent of their access so that the next time they try to come in, we can respond quickly."
Based on a forensic analysis going back months, it appears the hackers broke into The Times computers on Sept. 13, when the reporting for the Wen articles was nearing completion. They set up at least three back doors into users' machines that they used as a digital base camp. From there they snooped around The Times's systems for at least two weeks before they identified the domain controller that contains user names and hashed, or scrambled, passwords for every Times employee.
While hashes make hackers' break-ins more difficult, hashed passwords can easily be cracked using so-called rainbow tables -- readily available databases of hash values for nearly every alphanumeric character combination, up to a certain length. Some hacker Web sites publish as many as 50 billion hash values.
Investigators found evidence that the attackers cracked the passwords and used them to gain access to a number of computers. They created custom software that allowed them to search for and grab Mr. Barboza's and Mr. Yardley's e-mails and documents from a Times e-mail server.
Over the course of three months, attackers installed 45 pieces of custom malware. The Times -- which uses antivirus products made by Symantec -- found only one instance in which Symantec identified an attacker's software as malicious and quarantined it, according to Mandiant.
A Symantec spokesman said that, as a matter of policy, the company does not comment on its customers.
The attackers were particularly active in the period after the Oct. 25 publication of The Times article about Mr. Wen's relatives, especially on the evening of the Nov. 6 presidential election. That raised concerns among Times senior editors who had been informed of the attacks that the hackers might try to shut down the newspaper's electronic or print publishing system. But the attackers' movements suggested that the primary target remained Mr. Barboza's e-mail correspondence.
"They could have wreaked havoc on our systems," said Marc Frons, the Times's chief information officer. "But that was not what they were after."
What they appeared to be looking for were the names of people who might have provided information to Mr. Barboza.
Mr. Barboza's research on the stories, as reported previously in The Times, was based on public records, including thousands of corporate documents through China's State Administration for Industry and Commerce. Those documents -- which are available to lawyers and consulting firms for a nominal fee -- were used to trace the business interests of relatives of Mr. Wen.
A Tricky Search
Tracking the source of an attack to one group or country can be difficult because hackers usually try to cloak their identities and whereabouts.
To run their Times spying campaign, the attackers used a number of compromised computer systems registered to universities in North Carolina, Arizona, Wisconsin and New Mexico, as well as smaller companies and Internet service providers across the United States, according to Mandiant's investigators.
The hackers also continually switched from one I.P. address to another; an I.P. address, for Internet protocol, is a unique number identifying each Internet-connected device from the billions around the globe, so that messages and other information sent by one device are correctly routed to the ones meant to get them.
Using university computers as proxies and switching I.P. addresses were simply efforts to hide the source of the attacks, which investigators say is China. The pattern that Mandiant's experts detected closely matched the pattern of earlier attacks traced to China. After Google was attacked in 2010 and the Gmail accounts of Chinese human rights activists were opened, for example, investigators were able to trace the source to two educational institutions in China, including one with ties to the Chinese military.
Security experts say that by routing attacks through servers in other countries and outsourcing attacks to skilled hackers, the Chinese military maintains plausible deniability.
"If you look at each attack in isolation, you can't say, 'This is the Chinese military,' " said Richard Bejtlich, Mandiant's chief security officer.
But when the techniques and patterns of the hackers are similar, it is a sign that the hackers are the same or affiliated.
"When you see the same group steal data on Chinese dissidents and Tibetan activists, then attack an aerospace company, it starts to push you in the right direction," he said.
Mandiant has been tracking about 20 groups that are spying on organizations inside the United States and around the globe. Its investigators said that based on the evidence -- the malware used, the command and control centers compromised and the hackers' techniques -- The Times was attacked by a group of Chinese hackers that Mandiant refers to internally as "A.P.T. Number 12."
A.P.T. stands for Advanced Persistent Threat, a term that computer security experts and government officials use to describe a targeted attack and that many say has become synonymous with attacks done by China. AT&T and the F.B.I. have been tracking the same group, which they have also traced to China, but they use their own internal designations.
Mandiant said the group had been "very active" and had broken into hundreds of other Western organizations, including several American military contractors.
To get rid of the hackers, The Times blocked the compromised outside computers, removed every back door into its network, changed every employee password and wrapped additional security around its systems.
For now, that appears to have worked, but investigators and Times executives say they anticipate more efforts by hackers.
"This is not the end of the story," said Mr. Bejtlich of Mandiant. "Once they take a liking to a victim, they tend to come back. It's not like a digital crime case where the intruders steal stuff and then they're gone. This requires an internal vigilance model."
By Mark McDonald - International Herald Tribune - The Global Edition of the New York Times
October 18, 2012
China was at the center of one of the harshest exchanges during the U.S. presidential debate on Tuesday night, with President Barack Obama and his Republican challenger, Mitt Romney, both flashing their tough-on-Beijing credentials. But the politician who really knows about China was not on the stage, although he had tried to be.
Jon M. Huntsman Jr., who campaigned for the Republican nomination, has solid connections to both candidates: He served as the U.S. ambassador to China under Mr. Obama until April 2011, and when Mr. Huntsman abandoned his campaign in January, he immediately endorsed Mr. Romney.
As they prep and do role playing for their final debate, both candidates might do well to recruit Mr. Huntsman for a lay of the land on China. The debate, set for Monday in Boca Raton, Florida, will focus on foreign policy issues, with China one of the selected topics.
In a fascinating new interview with Isaac Stone Fish of Foreign Policy magazine, Mr. Huntsman was asked about the differences between the two candidates in their approach to China.
"Well, they differ in some senses in the levers of power that are being pulled," he said. "I think Obama has chosen more the soft levers of power, and Romney is at least articulating some of the hard levers of power, where in reality, we need a combination of both.
"During campaign season, you never want to talk about anything except the hard levers of power. But we're also trying to get over 10 years of war in the Middle East that have set us back enormously economically and diplomatically, and in terms of loss of life. And that's a reality that we're not having a conversation about."
Beijing canceled Mr. Huntsman's visa last month, he told Mr. Stone Fish, as he was preparing to travel to China to make a speech. (This probably has not happened very often in peacetime diplomacy, a country refusing entry to a former ambassador, especially for fear that he would give a speech.)
"Why? Because I talk too much about human rights and American values, and they know that," said Mr. Huntsman, who speaks Mandarin. "And at a time of leadership realignment, the biggest deal in 10 years for them, they didn't want the former U.S. ambassador saying stuff that might create a narrative that they would have to fight. I understand that.
"But when the transition is done, the crazy American ambassador will be let back in, and I can say whatever I want. As they used to tell me when I was over there was 'Women zhongguo ye you zhengzhi' -- 'We have politics too in China.' "
Mr. Huntsman said he was subsequently approved for entry -- to attend a board meeting. No speechmaking.
A condensed excerpt from Mr. Stone Fish's interview:
Put yourself in the shoes of the moderator at the upcoming foreign-policy debate on Oct. 22. What do you think he should ask about China?
What are the core philosophical drivers that inform the thinking of the candidates? What are our national interests at play? How do we maximize our position in the Asia-Pacific region, understanding that China is the centerpiece geographically. And fourth, given that it is the relationship of the 21st century, how do we intend to sustain the cyclicality that is inherent in a large, complicated relationship?
Are you surprised that China hasn't become a bigger issue in the campaign?
Beyond it being used as a political tool rhetorically, we've had very little talk of China at a time when we ought to be having a substantive conversation, because it is the relationship that will matter the most in the 21st century.
What's your understanding of what Chinese officials think about all this rhetoric and what's behind it? Do they see this as one of the downsides of democracy, or of Americans playing into the fears of American decline?
I think it's happened for so long that they've grown to expect it during the election season. I think it affected them more in the earlier years, but now they've grown accustomed to the political cycle, just as we've grown accustomed to the leadership cycles in China, where they do the same thing to us. We just have a bigger megaphone. And they tend to be a little more sensitive, because face still matters a whole lot in terms of human interaction.
The current U.S. ambassador to China, Gary F. Locke, revealed Wednesday that he had traveled last month to a Tibetan area of western China where "dozens of Tibetans disaffected with Chinese rule have set themselves on fire," as my colleague Edward Wong reported.
Mr. Locke visited two Tibetan Buddhist monasteries in Aba Prefecture of Sichuan Province. He went there, he told The Times, "to see it for myself."
The visit, which came during a wider trip to Chongqing, was noteworthy if only for the fact that Beijing permitted it. The area is tightly controlled by Chinese security forces and the issue of Tibetan autonomy and Buddhist activism is a highly sensitive one for Beijing.
Mr. Locke only revealed his trip on Wednesday. And for those belonging to the there-are-no-coincidences-in-politics school of thought, it was five years ago on Wednesday -- Oct. 17, 2007 -- that the Dalai Lama received the Congressional Gold Medal in Washington.
The award was met with fury and outrage from Beijing, and one senior official called it a "farce." The Dalai Lama, the Tibetan spiritual leader who has lived in exile since 1959, is particularly reviled by the leadership in Beijing.
President George W. Bush attended the elaborate ceremony in the Capitol Rotunda and called the Dalai Lama "a man of faith and sincerity and peace."
By BBC World News
September 06, 2012
Two Indian air force pilots who flew the visiting Chinese defence minister from Mumbai to Delhi were given 100,000 rupees ($1,788; £1,124) as "tips".
The pilots were given envelopes containing the money by General Liang Guanglie who returned to China on Thursday after a four-day India visit.
Surprised by the "unusual gift", the pilots informed their superiors.
Officials said the money would be deposited in the government gift chest along with other official gifts.
Reports said Gen Liang was "pleased" with the way the pilots handled the flight in the stormy monsoon weather.
Officials said the Chinese minister was possibly not briefed properly on Indian protocol and customs which forbid government officials from accepting money as gifts.
Gen Liang, the first Chinese defence minister to visit Delhi in eight years, also did some sightseeing during his tour.
He met Indian Defence Minister AK Antony after which the two countries announced plans to resume joint military exercises after a gap of four years.
Relations between India and China have been uneasy - the two countries dispute several Himalayan border areas and fought a brief war in 1962.
By Michael Luo, Neil Gough and Edward Wong | The New York Times
August 13, 2012
When Sheldon Adelson, the casino magnate, needed something done in China, he often turned to his company's "chief Beijing representative," a mysterious businessman named Yang Saixin.
Mr. Yang arranged meetings for Mr. Adelson with senior Chinese officials; acted as a frontman on several ambitious projects for Mr. Adelson's company, the Las Vegas Sands Corporation; and intervened on the Sands's behalf with Chinese regulators. Mr. Yang even had his daughter take Mr. Adelson's wife, Miriam, shopping when she was in Beijing.
"Adelson and I had a good relationship," Mr. Yang said in a recent interview in Hong Kong. "He should thank me."
Mr. Yang joined the Sands in 2007 as the company worked to protect its interests in Macau, where its gambling revenues were mushrooming, and pressed ahead with plans for a resort in mainland China. Boasting of ties to the People's Liberation Army and China's security apparatus, Mr. Yang was hired for his guanxi, that mixture of relationships and favors that is critical to opening doors in China, according to former executives.
But today, Mr. Yang, along with tens of millions of dollars in payments the Sands made through him in China, is a focus of a wide-ranging federal investigation into potential bribery of foreign officials and other matters in China and Macau, according to people with direct knowledge of the inquiries.
The investigations are unfolding as Mr. Adelson has become an increasing presence in this year's presidential election, contributing at least $35 million to Republican groups. On Tuesday, Mitt Romney's running mate, Representative Paul D. Ryan, is to appear at a fund-raiser at the Sands's Venetian casino in Las Vegas; Mr. Adelson is likely to attend, a person close to him said.
In the political arena, Mr. Adelson is perhaps best known as a hawkish defender of Israel. But whatever the outcome of the inquiries involving his businesses in China, an examination of those activities suggests a keen interest in Washington's China policy and highlights the degree to which politics and profits are often intertwined for Mr. Adelson.
The Sands has faced a conundrum in China as a casino company whose fortunes are heavily dependent on its operations in a country where gambling is illegal, except in Macau. The company relies on the good will of Chinese officials, who mete out approvals and have the power to curtail the flow of mainland visitors. As a result, Mr. Adelson has sought to use financial clout and connections to exert political influence at the highest levels of government.
On the front lines of those efforts was Mr. Yang, who was paid $30,000 a month by the company before he was fired in 2009, he said. At times, he acted as Mr. Adelson's personal guide to the Chinese establishment. Among the dignitaries he took Mr. Adelson to see was Wan Jifei, a leading international trade official whose father had been vice premier. That led to a lunch with other trade officials at the Great Hall of the People on Tiananmen Square.
The Sands later hired Mr. Wan's daughter, Bao Bao, a socialite and jewelry designer, to do public relations. And the trade agency Mr. Wan ran became a partner in the Sands's biggest venture, the Adelson Center for U.S.-China Enterprise.
Mr. Yang denies resorting to bribery and says he actually lost money on his dealings with the Sands.
"I'm really being bullied because I helped Venetian and Adelson do so many things," he said. "I'm in the middle, and on both sides everybody's pointing at me."
The broad outlines of the mainland China investigation were reported last week by The Wall Street Journal. But a review of more than a thousand pages of corporate records in China, as well as interviews with former Sands executives and others, provides a more detailed picture.
The documents show that the Sands paid out more than $70 million to companies tied to Mr. Yang for the trade center and for a Chinese basketball team the Sands sponsored. But several million dollars appear to be unaccounted for after the projects were suddenly shut down by the company, The New York Times found.
What became of any missing money and whether any of it wound up in the hands of Chinese officials are among the questions being examined by the Federal Bureau of Investigation, the Justice Department and the Securities and Exchange Commission.
Compounding the Sands's legal headaches in China, several of the company's subsidiaries came under investigation by Chinese regulators, resulting in a $1.6 million fine, according to Chinese and American corporate records. Mr. Yang said the penalty might have been much higher, but he "coordinated the matter" with the agency.
Federal investigators began looking into the Sands's China activities after the former president of the company's Macau operations filed a wrongful-termination lawsuit in 2010. The former executive, Steven C. Jacobs, charged, among other things, that he had been pressured to exercise improper leverage against government officials in Macau, and that the company had turned a blind eye to Chinese organized crime figures operating in its casinos. (The Jacobs lawsuit raised questions about payments to another well-connected local figure -- a lawyer and legislator in Macau -- that were recently explored by ProPublica and are also part of the federal bribery investigation.)
The Sands declined to respond to a detailed list of questions provided by The Times more than a week ago, saying in a statement that it was cooperating with the inquiries and was confident that once they were concluded "no current member of senior management will have been found to have been involved in wrongdoing."
'Las Vegas of the Far East'
In mid-2000, Richard Suen, a Hong Kong businessman, met with Mr. Adelson in the lobby of the Peninsula Hotel in Hong Kong to relay some urgent news. China, which had recently assumed control of Macau -- a former Portuguese colony opposite Hong Kong on the south China coast -- was ending the gambling monopoly of the tycoon Stanley Ho and would be taking bids for a limited number of gambling licenses.
Mr. Adelson peppered Mr. Suen with questions. According to testimony by Mr. Suen, who sued the Sands after his relationship with the company soured, Mr. Adelson made a bold prediction: "I can turn Macau into the Las Vegas of the Far East."
The company set out to cultivate Chinese officials. In the summer of 2001, Mr. Adelson and William P. Weidner, then the Sands's president, flew to Beijing for meetings arranged by Mr. Suen.
Chinese leaders at the time were worried about a pending House resolution condemning the country's bid for the 2008 Olympic Games because of its human rights record. According to Mr. Weidner's deposition in the Suen case, Mr. Adelson promised Beijing's mayor he would do what he could. Mr. Adelson called his friend Tom DeLay, then the House majority whip, catching him at a Fourth of July barbecue. Mr. DeLay said he would check on the bill's status. Several hours later, Mr. DeLay called and told Mr. Adelson he was in luck. The resolution was stuck behind a series of other bills.
"So you tell your mayor it can be assured that this bill will never see the light of day," Mr. DeLay said, according to Mr. Weidner.
The next morning, the Sands executives met with Qian Qichen, a Chinese vice premier, at the Purple Light Pavilion, where the government's leaders greet foreign dignitaries. Mr. Qian suggested he would ensure a limitless supply of gamblers to Macau.
In May 2004, the Sands Macau became the enclave's first foreign-owned casino. On opening day, a mob estimated at 20,000 pushed over crowd-control barriers, ripping doors off their hinges. In its first year, the casino's profits exceeded its $265 million cost.
By 2007, when the Sands opened its second casino in Macau, the $2.4 billion Venetian -- the largest casino in the world -- the formerly crime-infested backwater had become the world's undisputed gambling capital. With Macau providing two-thirds of the company's revenues, Mr. Adelson had become one of the richest men in the world.
He had wider ambitions still. The Sands was hoping for government approval for a plan to cross over into the mainland by building a 1,300-acre resort on Hengqin Island near Macau.
A Sands promotional brochure circulated in China highlighted an endorsement from Hu Jintao, China's president, as well as meetings Mr. Adelson and Mr. Weidner had with Mr. Qian, the vice premier, and other top Chinese officials. The Sands also hosted a promotional forum in late 2006, called Venetian Nights, at the Great Hall of the People.
The gambling boom, though, was stoking suspicion among Chinese officials, who feared the corrupting influence of money sloshing through Macau.
The Sands pursued a strategy of engaging Beijing. It stepped up participation in China-related programs with the U.S. Chamber of Commerce, and hired Myron Brilliant, its senior vice president for international affairs, as a consultant. He suggested establishing a trade center, to help American businesses pursue opportunities in China. Not only could the center funnel convention traffic to Macau, but it could also foster better relations with Chinese officials.
To carry out its China campaign, the Sands needed a man in Beijing. It hired Yang Saixin.
Mr. Yang, 60, is a laconic, deliberative man who appears to eschew the nouveau riche lifestyle embraced by many Chinese businesspeople. He did a stint with the People's Liberation Army as a young man and, in his 30s, was involved in ventures across the country, from amusement parks to a concrete plant. Today, he carries a mainland Chinese passport and a Hong Kong identity card, and also goes by the Cantonese name Yeung Tsoi-san.
He told one Sands executive that he had won the attention of generals as a star basketball player in the army and had connections to a central government security agency. But Wu Bang, a journalist who interviewed Mr. Yang many times, said Mr. Yang was a minor athlete in the army who had headed the workers' union in a military factory, and did not seem to have any special military or security connections. In a recent interview, Mr. Yang backed away from any claims of ties to a security agency and said he was not a regular enlisted man but had been invited by an army unit to play and coach basketball.
Mr. Yang was running a soccer club in the boomtown of Shenzhen when he heard about the company's plans for nearby Hengqin Island. Looking for sponsors, he said, he contacted a Sands executive and started working with the company on a variety of projects. In summer 2007, his team wound up playing an exhibition match hosted by the Sands against Manchester United, of the English Premier League. It was around that time that Mr. Yang was formally named chief Beijing representative.
Mr. Yang said his main job was setting up meetings and making introductions. It was an introduction to the chairman of the state-owned China International Travel Service that led the Sands to find space for the Adelson Center in the travel service's building in central Beijing.
The Sands, though, could not buy the property outright, because of restrictions on foreigners buying commercial real estate. Instead, the Sands decided to "lie to the Chinese government," said Mr. Yang, using him and three associates as frontmen for a cluster of companies anchored by Beijing Chiya Trading, which bought the space with money from the Sands. "On paper and in the eyes of the law we were shareholders, but in actuality we were just like hired laborers," he said.
Another piece of the Sands's charm offensive was buying a basketball team.
Again, Mr. Yang assumed the role of intermediary. The company set its sights on the financially struggling Shaanxi Topsun, hoping to move the team to Shenzhen, not far from Macau. Fans could hop the ferry to gamble, and some games could be held in the Venetian Macau's 15,000-seat arena.
Word of a deal trickled out in Chinese press reports in the spring of 2007, alerting Li Yuanwei, then China's basketball commissioner, who wrote in a 2010 memoir that he found it "completely unacceptable" for a gambling company to be involved in basketball.
To win his approval for the purchase, Mr. Li said in the memoir and a recent interview, Mr. Yang and his Chinese associates resorted to blackmail and bribery. Mr. Li said they threatened him with a lawsuit based on a secret recording of a meeting about the sale. In June 2007, Mr. Li was invited to a dinner arranged by a sports journalist known to Mr. Yang. Mr. Li sent a colleague. Mr. Yang's aides were present, as was an artist who handed a painting of a tiger to the basketball league official as a gift. Later, Mr. Yang's associates informed Mr. Li that the painting was worth about $4,000, Mr. Li said.
"They later said to me: 'Now you're in possession of the painting, and it's worth this much. Either you have to pay us back that money, or we'll go over your head and say you took a painting worth that much,' " Mr. Li said. Mr. Yang said he was not involved in the matter, calling the painting "just a gift between friends."
Corporate filings show the Sands wound up pursuing a slightly different path. Two Sands subsidiaries paid Mr. Yang about $9.7 million for advertising, sponsorship and naming rights for the team, as opposed to outright ownership. The team name changed to Venezia Arena, or "Weilixin," a Mandarin transliteration of "Venetian."
China Projects Dropped
The Adelson Center had been scheduled to open on Aug. 8, 2008 -- an auspicious date in Chinese numerology -- in time for the Olympics. But renovations dragged on, and the project was abruptly abandoned in September 2008. The center's chief financial officer, Chu Jiangbin, said he was told suddenly one day to fire the more than 20 employees.
Around the same time, the Sands cut its ties to the Shaanxi basketball team and announced it had "indefinitely" suspended plans for Hengqin Island.
Company officials said they folded their mainland ventures for purely financial reasons. The global credit crisis had hit the company hard, and Beijing had begun clamping down on the flow of gamblers to Macau. The Sands pressed the United States Embassy in Beijing to lobby Chinese officials to change the policy, and Mr. Adelson had to put about $1 billion into the company to help it avoid defaulting on its loans.
But the China projects had also become enmeshed in legal and political complications. The first allegations about missing money surfaced when a former basketball-team employee told the Sands that Mr. Yang was double-dealing, charging the company an inflated price for the sponsorship and pocketing the difference.
In Macau, the finance executive who kept the books for the Sands's China projects also raised questions about Mr. Yang after she noticed irregularities in payments for the basketball team and the trade center, according to people familiar with the events. The executive, Yvonne Mao, left the company soon after but remained on the payroll for more than a year, for reasons that are not entirely clear. She refused to comment.
A review of corporate records shows that Mr. Yang's company, Chiya, paid 310 million renminbi, or about $41 million at the time, to buy more than 200,000 square feet of space for the Adelson Center. A pair of Sands subsidiaries in China transferred 329.77 million renminbi to Chiya in return for the rights to use the building, the records show. The Sands also spent about $19 million to renovate the center.
But after the deal fell apart, Chiya refunded only 290.82 million renminbi to the Sands, or about $6 million less than it had paid for the property alone.
An auditor's report said the Sands subsidiary that held the naming rights to the basketball team had a sharp reversal in 2008 because of "a change in the economic environment" and wrote off its entire $9.7 million investment.
Such discrepancies prompted internal inquiries by lawyers for the Sands.
In addition, some Sands subsidiaries had come under investigation by China's State Administration of Foreign Exchange for a variety of violations, including using money for business purposes other than those reported to the authorities. The Ministry of Commerce and Chinese courts froze the bank accounts and corporate registrations of some Sands subsidiaries, filings show.
Sands officials were told that the consequences of the SAFE investigation could be hefty. "Laws relating to foreign exchange and regulations promulgated by SAFE, as well as other laws (such as those relating to corrupt practices) that might be applicable, allow for criminal prosecution of those in charge of, or responsible for, violations," warned a January 2009 memo from a law firm that handled legal issues for the company in China. The Sands and its executives were in a "very dangerous situation," according to the document.
The company faced a potential fine of up to $30 million, Mr. Yang said, until he helped get it reduced to $1.6 million.
There was also growing anger toward Mr. Adelson from government officials in Beijing and Macau, according to former executives and others with direct knowledge of the matter. Mr. Adelson's mercurial personality had managed to alienate many in Macau's government. Beijing officials' ire was aroused when Mr. Adelson's 2001 private meeting with China's vice premier was revealed during the 2008 Suen trial.
The episode represented a loss of face for the Beijing leadership, and one person close to the situation said the resulting push-back indicated Mr. Adelson had worn out his welcome in China.
In September 2008, a Sands lawyer asked the United States ambassador to China, Clark T. Randt Jr., to help arrange a meeting for Mr. Adelson with Vice President Xi Jinping, according to e-mails provided to The Times. But Mr. Randt relayed that the Chinese ambassador had told him a "lawsuit involving Congress" -- apparently the Suen case -- would make it difficult.
A Messy Breakup in Beijing
The Sands's breakup with its chief Beijing representative proved messy. Mr. Yang said he was suddenly dismissed in early 2009 by the Sands's head of Asian development, Eric Chiu, who said only that the firing had been ordered from company headquarters. A dispute between the Sands and Mr. Yang over repayment of money paid for the Adelson Center was eventually settled in court in Beijing.
It is unclear what ultimately became of the internal Sands inquiry into Mr. Yang and the missing money.
"In the end, the company's hasty exit from China caused bookkeeping errors, but multiple investigations have not found evidence of corrupt payments," said Mr. Weidner, the former Sands president, who was a major driver of the China engagement strategy.
A little-noticed transaction last month in Macau hinted that Mr. Yang has become problematic for the Sands. Ms. Mao, the finance executive, had also raised concerns about a contract Mr. Yang helped arrange for the operation of Sands's ferry between Hong Kong and Macau -- another venture being looked into by federal investigators. Last month, the Sands redid the agreement, cutting out a company tied to an associate of Mr. Yang. When asked why, a ferry official said, "It's top secret."
Today in Beijing, the first floor of the building that housed the trade center is a car showroom, stocked with shiny black sedans. An employee said that he remembers a sign that was removed. It said "Adelson Center" in Chinese.
But Mr. Adelson has hardly retreated. Sands executives say a renewed strategy of engaging with Beijing has improved relations. The Sands now has four casinos in Macau, which supply about half the company's profits.
Its business continues to be vulnerable to policy machinations in Beijing over issues as narrow as visa approvals and as sweeping as currency valuation. And, to some degree, that also makes the company dependent on American policy and attitudes toward China.
As Mr. Adelson has emerged as perhaps the biggest donor in the presidential race, he has remained defiant about the legal questions swirling around his company.
Asked about them at an industry conference last year, he said, "When the smoke clears, I am absolutely -- not 100 percent, but 1,000 percent -- positive that there won't be any fire below it."