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Former Bay Area Tour Operator Pleads Guilty In Chinese Spying Case

OAKLAND (CBS SF/AP) -- Former Hayward tour operator Xuehua Edward Peng will spend the next four years in federal prison after pleading guilty to acting as an agent for China, taking money in exchange for classified national security information on small electronic storage devices.

Peng appeared before U.S. District Judge Haywood S. Gilliam Jr. in an Oakland federal courtroom on Monday. He was dressed in red inmate garb and spoke through a Mandarin interpreter. He told the judge that he understood the terms of a plea agreement and that he was guilty.

The plea agreement will send Peng to federal prison for four years and require him to pay a $30,000 fine.

Peng, 57, a naturalized U.S. citizen, has been in federal custody since late September, when he was arrested at his Hayward residence to the surprise of neighbors, who knew him as a nice person with a taste for luxury cars.

Prosecutors said Peng, under orders from a handler in China, left cash in hotel rooms in exchange for classified national security information on small electronic storage devices.

The U.S. was never at risk since the information left for Peng was provided by an FBI double agent who had also been approached for spy-work by the Chinese government but decided to inform the U.S. government instead, prosecutors have said.

In the plea agreement, Peng said he was approached by a state security official with China during a business trip in 2015 and agreed to collect and deliver information. He made six trips between 2015 and 2018, leaving as much as $20,000 in envelopes at a time.

"I was never informed of the contents of these devices and at no time learned what information was stored on them," Peng said in the plea agreement.

Peng was paid "at least $30,000 for the acts" he performed as a courier, according to the agreement. Communications were done by telephone at first and then by the encrypted chat platform WeChat.

A seventh drop scheduled for August 2019 was delayed. Peng was arrested the next month.

Daniel Olmos, one of Peng's attorneys, declined to comment after the hearing. "The plea speaks for itself," he said.

Investigators described him as a sightseeing operator in the Bay Area for Chinese visitors and students. Public records list Peng as president of U.S. Tour and Travel in San Francisco, but no website for the company was found.

Peng entered the country in 2001 on a temporary business visa. He became a lawful permanent resident in 2006 following his marriage and was naturalized in September 2012.

He has a background in mechanical engineering and is licensed in California as an acupuncturist.

A magistrate judge denied his earlier request for a free federal lawyer, saying he had too many assets, and refused to let him out on bail given that he had an apartment and a mistress in China.

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