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Nortel turned to RCMP about hacking in 2004, ex-employee says

Norm Betts/Bloomberg News/Norm Betts/Bloomberg News

Nortel Networks Corp. approached the RCMP about Chinese industrial espionage in 2004 but got no help from Canadian law enforcement or intelligence agencies, according to a former employee concerned about the theft of valuable intellectual property.

Brian Shields, a 19-year Nortel veteran who served as a senior systems security adviser, told The Globe and Mail that the company received little help from security agencies and was only approached by the Canadian Security Intelligence Service shortly before Nortel filed for bankruptcy in 2009.

"This is a side of the story that, in Canada, needs to be told – the lack of support from Canadian law enforcement, who we went to in 2004," Mr. Shields said. "We went to the RCMP and turned everything over … There was no help. CSIS came to us in 2009, finally, five years later, to offer to help just before the bankruptcy announcement … Like, where have you guys been?"

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The Royal Canadian Mounted Police said that it found no record of the Nortel computer hacking complaint but that it would likely have been "purged" from internal records if the case did not result in charges. CSIS declined to comment.

But a former CSIS official said the agency had approached Nortel in the mid-1990s with concerns about possible industrial espionage, and found that management, preoccupied with booming telecom growth in China, was not overly concerned.

"At that time we noticed there was quite a lot of activity around Nortel, and we tried to approach Nortel, but we were brushed off," said Michel Juneau-Katsuya, former chief of Asia-Pacific at CSIS and now chief executive officer of the Northgate Group, an Ottawa-based corporate cyber-security firm.

Reports of hacking at Nortel have refocused attention on industrial espionage, possibly from China, and comes shortly after Chinese telecom giant Huawei Technologies inked two network deals with Canadian wireless carriers BCE Inc. and Telus Corp. during Prime Minister Stephen Harper's trade mission to China.

Mr. Shields said an internal investigation showed that for almost a decade, hackers from China downloaded "volumes" of internal Nortel documents, from top-secret R&D to business plans.

The company discovered in 2004 that the hackers had accessed internal networks reaching all the way to former CEO Mike Zafirovsky's office, he said.

Mr. Shields said that when he told senior management that Mr. Zafirovsky's computer had been compromised and suggested drastic action, he was met with indifference.

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Nortel, which has been broken apart and sold off in recent years, did not respond to a request for comment.

Cyber security experts have some doubts about the validity of Mr. Shields' claims, saying a hack of that magnitude is unlikely.

But Mr. Juneau-Katsuya said the account could be true. He noted the RCMP would be unlikely to throw vast resources at a complicated industrial espionage case involving China, given the small chances of making an arrest.

"At that time we noticed there was quite a lot of activity around Nortel, and we tried to approach Nortel, but we were brushed off," said Mr. Juneau-Katsuya. "I think they basically didn't want to hear about it. They were with the Chinese and China was a fantastic opportunity."

Most people trace the downfall of Nortel, once Canada's biggest company, to an acquisition binge during the dot-com bubble. But others have also raised the possibility that stolen intellectual property may have played a part.

Huawei, now the world's second-biggest network equipment maker, on Wednesday said "this unseemly speculation is unfortunate."

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But one telecom industry veteran said that around 2004, it was clear to many that Huawei was copying Nortel's telecom hardware, and even its instruction manuals.

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