When one thinks of Houston’s tony Memorial neighborhood, things like huge lots, tall trees, and fancy houses typically come to mind. But now, another association might need to be added to that list: Russian agent.
On Wednesday, FBI agents arrested eight Russians in Houston and descended on the Arc Electronics office in the Westchase district. A federal indictment alleges that since 2008, Alexander Fishenko, the company’s owner and a Memorial resident, and his co-conspirators had been “engaged in a surreptitious and systematic conspiracy” to procure and export sophisticated microelectronics to the Russian military and intelligence agencies.
“The defendants spun an elaborate web of lies to evade the laws that protect our national security,” United States Attorney Loretta E. Lynch said in a statement. “The defendants tried to take advantage of America’s free markets to steal American technologies for the Russian government.”
Fishenko and six others were formally charged in federal court in Houston Thursday morning. (An eighth defendant had his first court appearance Wednesday, the AP reported.) Three other people also indicted are thought to be abroad. According to RIA Novosti, Russia’s state-run news agency, in addition to the arrests, the FBI “also executed search warrants at seven residences and business locations and seized assets from five bank accounts.”
Fishenko, a 46-year-old naturalized U.S. citizen born in the Soviet Republic of Kazakhstan, founded Arc Electronics in 1998. Since 2002, his company has made $50 million in gross revenue off exporting microelectronics to Russia, according to federal prosecutors, but the company has never obtained proper export licenses from the U.S. Department of Commerce or Department of State for the items.
“The microelectronics, which included microcontrollers, microprocessors, static random access memory chips and analog-to- digital converters, have applications in a wide array of military systems, including radar and surveillance systems, missile guidance systems and detonation triggers,” prosecutors wrote in a letter to U.S. Magistrate Judge George C. Hanks, Jr. of the Southern District of Texas.
Why would Russia want these electronics? Well, according to prosecutors, “[t]he Russian military is currently undergoing a large-scale modernization campaign, and many of the sophisticated electronics necessary for electronic weapons systems, including those exported by the defendants, cannot be purchased in Russia and often can only be purchased from United States-based companies.” And some of the chips and microprocessors Arc exported may have made their way into Russian missiles and MiG fighter jets and.
Russia’s Deputy Foreign Minister Sergei Ryabkov denied that Arc Electronic was connected to Russian intelligence agencies and expressed concern over the arrests. “A lot is unclear in the story, and it raises serious concerns. We expect the rights and interests of Russian citizens who remain under arrest … to be protected by U.S. authorities,” Ryabkov told reporters Thursday, according to RIA Novosti.
According to the AP, Foreign Ministry spokesman Alexander Lukashevich chided the U.S. for not telling the Russian government about the impending arrests. And a statement from the foreign ministry pointed out that the defendants had not been charged with espionage.
Fishenko, a graduate of the Leningrad Electro-Technical Institute, immigrated to the U.S. in 1994 and began working at a Houston-area Circuit City. When Fishenko applied for asylum he claimed never to have served in the Soviet military. But, federal prosecutors say that he had since “claimed elsewhere that he served in a Soviet military intelligence unit in Berlin in the 1980s.” And photos of him in a Soviet army uniform have since surfaced on his profile on the Russian social networking site Odnoklassniki.
(Fishenko, wearing a hat, can be seen in the center of the bottom row of the above photo during his days in the Soviet Army.)
In their two-year investigation, the feds obtained warrants to monitor the defendants’ phones and email accounts. Prosecutors dubbed the evidence against Fishenko “devastating.” “Fishenko has made many statements indicating his intent to evade U.S. export controls and to obfuscate the true end use and end users of the microelectronics he exported,” they wrote, offering the following as an example:
On September 24, 2009, Fishenko engaged in an email exchange with an employee of a Russian procurement firm. Fishenko requested that the employee get an end user document from a Russian factory “in a more presentable format.” The next day, the employee responded and attached a new end user statement, explaining, “This letter is pure forgery. I made it using a copy machine.”
In another exchange about falsifying information, Fishenko allegedly wrote that “if you are making it up, make it up pretty, correctly, and make sure it looks good.”
Federal prosecutors also have said that, in a phone conversation last October, Fishenko referred to a business associate using a “Russian colloquialism for ‘spy’ or ‘secret agent'” and called him “our type of person.”
Prosecutors argue that Fishenko—who has retained his Russian citizenship—is a flight risk because of his extensive ties abroad. He maintains a bank account in Singapore and has traveled to Russia and Europe 26 times since 1996. He returned to Houston from his last trip to Russia on September 24.
Fishenko has hired Eric Reed, a former U.S. attorney specializing in white collar crime, to represent him. Reed told the Houston Chronicle‘s Dane Schiller that his client was arrested Wednesday morning after dropping his child off at daycare.
“Those are fairly dramatic allegations that we will certainly take a hard look at to see if there is any evidence to support them,” Reed said. “We are going to take the charges very seriously and examine the charges very critically.”
Fishenko’s wife Viktoria, who is a co-owner of Arc Electronics but was not charged, declined comment to the AP Wednesday. “I will speak when I know what’s going on,” she said.
So far in this espionage scandal, a glamorous figure like Anna Chapman has yet to emerge. Hopefully Fishenko’s neighbors in Memorial will offer a quote as rich as this one, which a fifteen-year-old neighbor said to the New York Times about her neighbors Richard and Cynthia Murphy, two of the eleven spies arrested in the last Russian espionage scandal in 2010. “They couldn’t have been spies,” Jessie Gugig said jokingly. “Look what she did with the hydrangeas.”