Physicist charged with selling technology free on bond

NORFOLK

A local physicist charged with selling space rocket technology to the Chinese was granted a bond on Monday and allowed to return to his Newport News home as long as he remains connected to a GPS monitoring device.

The U.S. Attorney's Office withdrew its insistence that Quan-Sheng Shu remain locked up until the outcome of his case in federal court, as long as certain conditions are met. He will remain in jail until the GPS system is connected.

The FBI arrested the 68-year-old scientist last week after a lengthy investigation. He is charged with violating the Arms Export Control Act by selling his rocket technology to China through an unidentified French company.

Also Monday, Assistant U.S. Attorney Alan M. Salsbury was prepared to hold a preliminary hearing in U.S. District Court, but Shu, through his attorney, waived the hearing. The case will now go to a grand jury.

Shu's attorney, James Broccoletti, declined to comment. Shu's wife, daughter and a family friend also declined to comment Monday after the court proceeding.

To meet the court's bond conditions, Shu agreed to post $100,000 cash, surrender his passport and be monitored around the clock.

In agreeing with the bond, Magistrate Judge F. Bradford Stillman noted that Shu has a company to run and a mortgage to pay. Shu operates Amac International in Newport News.

The United States has had an arms embargo against China since the 1989 Tiananmen Square massacre.

Shu, who was born in Shanghai and became a naturalized U.S. citizen in 1998, is accused of assisting China in developing a sophisticated rocket launch facility.

The FBI considers the case so vital that it listed it as its No. 1 most important news story of last week.

The FBI would not say how long it has been investigating Shu, but court papers indicate it's been at least 2-1/2 years. Agents acknowledged using a variety of techniques, including searching Shu's trash and eavesdropping on his conversations.

Agents had to obtain the eavesdropping warrants through the government's secret Foreign Intelligence Surveillance Court. Court records filed by an FBI agent first quote Shu in a telephone conversation on Feb. 3, 2006, in which he said about China, "We have to make deal with them."

The FBI and the U.S. Attorney's Office filed a 16-page affidavit outlining the case against Shu, including details of the wiretaps and seized e-mails.

In 2003, Shu signed a contract with an unidentified French company "to facilitate the procurement effort, provide technical expertise and negotiate price and contract terms" with the Chinese government, the affidavit said.

Shu is an expert in cryogenics and developed an improved system for the production, transfer and storage of liquefied hydrogen, the propellant to be used in space rockets at China's new facility in the southern island province of Hainan, the affidavit said. His technology can extend space missions, save cryogenic fuel and reduce launch mass.

In January 2003, Shu traveled from Norfolk to China carrying a CD containing a Power Point presentation that outlined the cryogenic technology he and his company developed, the affidavit said. China then invited Shu to bid on the project, which he did later that year, and in his bid, the court papers say, he included 50 pages of technical details and drawings of the project.

For more than three years after that, Shu negotiated to win the contract but was up against competing firms in Europe, the FBI affidavit said.

In one recorded conversation, Shu is heard explaining the project to an official in Beijing, saying "it is for the lunar mission launch facility on Hainan Island," the affidavit said.

As U.S. officials got wind of Shu's alleged business deal, he was issued a warning. Officials with the Department of Commerce notified Shu in the summer of 2006 that brokering a deal with China through a third party country is illegal.

He is later recorded as telling an Amac employee in the company's Beijing office to falsify records, the affidavit said.

"Everybody hides it," the affidavit quoted Shu as telling the employee.

The FBI also seized Shu's e-mails. In one, from August 2007, he described the "many meetings" he has had with space agency officials in Beijing, the affidavit said.

"Amac would like to make our contribution to this project," Shu wrote in the e-mail, according to the affidavit.

Shu ultimately won the deal, but not before offering bribes of $40,000 each to two officials in Beijing, the affidavit said.

Shu was to be paid $425,000 through the French company. To date, he has received $253,952, the FBI said.

Tim McGlone, (757) 446-2343, tim.mcglone@pilotonline.com