New Questions Raised About Silicon Valley’s Ties to Terror Regimes

A report from a Canadian research organization has again raised the uncomfortable question of whether Silicon Valley’s technology is being used by terrorist states to repress their citizens.

On Tuesday, the University of Toronto’s Citizen Lab released a report that focused on Blue Coat Systems, and how its technology apparently is still part of Syria’s state-sponsored telecommunications networks, and is being used in Sudan and Iran.

Cuba, Iran, Sudan and Syria have been labeled by the State Department as state sponsors of terrorism, and are subject to U.S. economic sanctions and export controls. Trade is restricted to these countries, but not completely illegal. Companies can get limited import-export exemptions.

The Citizen Lab report put the spotlight on Blue Coat, but the issue has spread throughout Silicon Valley. With the fastest growth in overseas markets, tech companies have turned to a wide variety of local information technology vendors to sell their products. But keeping close tabs on where and how all those vendors sell their products has become difficult.

As a result, various federal agencies have been stepping up enforcement in recent years.

A glimpse of these efforts can be seen in an ongoing series of letters between the U.S. Securities and Exchange Commission and various companies. In 2005, Congress directed the SEC to create the Office of Global Security Risk, which has been sending letters asking companies to detail their relationship with the four countries.

In just the last year, the SEC has sent letters to a long list of tech companies regarding potential use of their products in the four countries. Recipients included Oracle Corp., Hewlett-Packard Co., EMC Corp., NetApp Inc., Motorola Mobility and Infosys.

In one such letter, to Teledyne Technologies Inc. of Thousand Oaks, Calif., the SEC noted that the company has paid “$30,385 to settle allegations of violations of the Sudanese Sanction Regulations.” Teledyne officials said they had discovered that a vendor had resold some of their equipment and that the company had self-reported the problem.

VeriFone Systems Inc. of San Jose, Calif. faced questions about whether some of its point-of-sale technology was being used in Iran. The company said it did not believe it was. But the company did write: “In early 2012, in connection with a routine internal audit review, we discovered the following instances of unauthorized contacts and activities involving the referenced countries.” The details of those findings were confidential and not in the letter.

NetApp had been the subject of previous news stories alleging that its equipment was being used by the Syrian government as part of a nationwide surveillance system. The SEC asked NetApp for a response to those reports. As of April 2012, the company said it had not been able to verify the reports, and the matter was eventually closed.

Motorola Mobility noted that although the Future Information Technology Co. in Iran claims to distribute its products in that country, that is not the case. Motorola has been trying to get the Iranian company to remove the claims from its website.

Many other tech companies were caught up recently in a larger probe involving allegations that China-based Huawei Technologies and ZTE Corp. were reselling various technology from U.S. companies to places like Iran.

In the case of Blue Coat, the Sunnyvale, Calif. company makes technology that enables monitoring of computer network activity. Although it can be used to help secure networks, it can also be used to keep tabs on the activities of users.

News of ties between Syria and Blue Coat are not new. Citizen Lab has reported on them previously. And in April, the Office of Export Enforcement of the Bureau of Industry and Security, or BIS, and the U.S. Department of Commerce settled with a third-party vendor for $2.8 million for its role in selling Blue Coat technology to Syria.

In a statement, David Murphy, chief operating officer of Blue Coat, said the company couldn’t comment on the latest report. But he repeated the company’s support for trade restrictions and embargoes to such countries.

“We take reports about the presence of Blue Coat technology in embargoed countries very seriously,” Murphy said in the statement. “We have been aware of the presence of our appliances in Syria and have been actively cooperating with the U.S. government since 2011 as part of its investigation into the illegal transfer of our products to Syria by third parties.”