Release on a $200,000 bond

Programmer charged with stealing U.S. Treasury software from New York Fed

U.S. Treasury Department software used to track federal collections and payments was stolen by a government contractor's employee who worked at the Federal Reserve Bank of New York, federal prosecutors said.

Bo Zhang, 32, who worked for an unidentified technology company, was a computer programmer assigned to work on source code at the New York Fed from May until August, the U.S. said in a criminal complaint against him that was unsealed yesterday in federal court in Manhattan. Zhang is a Chinese citizen, said a person with knowledge of the matter who didn't want to be identified because the information wasn't public.

The software system relates to the "tracking of the billions of dollars that are electronically transferred every day in the U.S.'s general ledger," prosecutors said.

Zhang has been in the U.S. on a work visa since 2000, said another person familiar with the matter who also didn't want to be identified because the information isn't public. Zhang worked previously at Goldman Sachs Group Inc. and Bank of America Corp., the person said.

U.S. Magistrate Judge James Cott yesterday agreed to release Zhang on a $200,000 bond secured by a condominium located in the Flushing, Queens, section of New York City. Cott ordered that he surrender all of his travel documents and restricted his movements to parts of New York and to New Jersey, where Zhang's lawyer said his client works. Cott set the next court appearance in the case for Feb. 17.

'No compromise'

Chinese Foreign Ministry Spokesman Liu Weimin said he hadn't heard about the charges and declined to comment, when asked about the case at a regular briefing for reporters in Beijing today.

After court yesterday, Zhang's lawyer, Joseph Grob, declined to comment on the charges or whether his client is a citizen of China or a naturalized U.S. citizen.

Matt Anderson, a Treasury spokesman, said the department has worked to strengthen security procedures for Federal Reserve contractors working on Financial Management Service projects.

"There was no compromise of any transaction data, personal identifying information or federal funds," Anderson said in an e-mailed statement.

After being questioned by Federal Bureau of Investigation agents on Aug. 11, Zhang admitted he stole the proprietary software code belonging to the Treasury in July, according to the criminal complaint.

Treasury data

The Government-wide Accounting and Reporting computer program provides federal agencies with an account statement similar to a customer's bank statement, of federal agencies' account balances with the Treasury. It also covers appropriation and non-expenditure activity, payments, deposits and intra- governmental actions that affect the account balances within the Treasury.

In August, a colleague of Zhang's told supervisors at the New York Fed that Zhang had claimed to have lost an external hard drive containing the GWA code, according to court filings.

Zhang told FBI agents that he copied the code onto the hard drive of a computer in his office at the Federal Reserve and then copied it to an external hard drive. He later removed that drive from government offices without authorization and copied its contents onto a home computer and his personal laptop, the U.S. said.

Zhang told the FBI that he knew it was wrong to take the GWA source code, according to court filings.

'Private use'

"He asserted that he took it for private use and in order to ensure that it was available to him in the event that he lost his job" with the New York Fed, prosecutors said.

Zhang owns a business in which he provides training, including computer training, and showed the GWA code to one of his students, according to the complaint.

The New York Fed detected the breach through its established security procedures and referred it to law enforcement officials, Jack Gutt, a spokesman, said in an e- mailed statement.

"The New York Fed has further strengthened its already considerable protections as a result of this incident," Gutt said in the statement.

U.S. Attorney Preet Bharara in Manhattan said in a statement, "Our cyber infrastructure is vulnerable not only to cybercriminals and hackers, but also alleged thieves like Bo Zhang who used his position as a contract employee to steal government intellectual property."

The case is U.S. v. Zhang, 12-mag-00108, U.S. District Court, Southern District of New York (Manhattan).

(Published by Bloomberg - January 19, 2012)

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