(CNN) --
On paper, it seemed like a fantastic deal.
In 2017, the Chinese government offered to spend $100 million to build an ornate Chinese garden at the National Arboretum in Washington.
Consisting of temples, pavilions and a 70-foot (21-meter) white pagoda, the project excited local officials, who hoped it would attract thousands of tourists each year.
But when US counterintelligence officials began to investigate the details, they found numerous red flags.
They noted that the pagoda would have been strategically placed on one of the highest points in the city of Washington, just 3 kilometers (2 miles) from the US Capitol, a perfect location for signals intelligence gathering, they told CNN several sources familiar with the episode.
Also alarming was that Chinese officials wanted to build the pagoda with materials shipped to the US in diplomatic bags, which US customs officials are prohibited from examining, the sources said.
Federal officials quietly quashed the project before construction began.
The canceled garden is part of a flurry of counterintelligence activity by the FBI and other federal agencies focused on what US security officials say has been a dramatic escalation of Chinese espionage on US soil over the past decade.
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Since at least 2017, federal officials have investigated Chinese land purchases near critical infrastructure, shut down a high-profile regional consulate that the US government believed was a hotbed for Chinese spies, and obstructed what they saw as clear efforts to place listening devices near sensitive military and government installations.
Among the most alarming things the FBI discovered relates to Chinese-made Huawei equipment on top of cell phone towers near US military bases in the rural Midwest.
According to multiple sources familiar with the matter, the FBI determined that the team was capable of capturing and disrupting highly restricted Department of Defense communications, including those used by US Strategic Command, which oversees the country's nuclear weapons.
Although general concerns about Huawei equipment near US military installations are well known, the existence of this investigation and its findings were never reported.
Its origins go back at least to the Obama administration.
More than a dozen sources described him to CNN, including current and former national security officials, who spoke on condition of anonymity because they were not authorized to speak publicly.
FE Warren Air Force Base, a strategic missile base, is located in Cheyenne, Wyoming, an area near a large number of cell phone towers using Huawei equipment.
Source: From FE Warren Air Force Base/Facebook
It is unclear whether the intelligence community determined whether the data was actually intercepted and sent to Beijing from these towers.
Sources familiar with the matter say that, from a technical point of view, it is incredibly difficult to prove that a given packet of data was stolen and sent abroad.
The Chinese government strongly denies any attempt to spy on the United States.
Huawei, in a statement to CNN, also denied that its equipment is capable of operating on any communications spectrum assigned to the Department of Defense.
But multiple sources familiar with the investigation told CNN there is no question Huawei's equipment has the ability to intercept not only commercial cellular traffic, but also the highly restricted airwaves used by the military and disrupt critical communications. of the US Strategic Command, giving the Chinese government a potential window into the US nuclear arsenal.
"This gets into some of the most sensitive things we do," said a former FBI official with knowledge of the investigation.
“It would affect our ability to command and control essentially with the nuclear triad.
That falls into the 'BFD' category."
"If it's possible for that to be interrupted, then it's a very bad day," this person added.
Turning doves into hawks
Former officials described the investigation's findings as a watershed moment.
The investigation was so secret that some top officials in the White House and other parts of the government were not informed of its existence until 2019, according to two sources familiar with the matter.
That fall, the Federal Communications Commission (FCC) initiated a rule that effectively barred small telecommunications companies from using Huawei and some other brands of Chinese-made equipment.
"The existence of research at the highest level turned some pigeons into hawks," said a former US official.
In 2020, Congress approved $1.9 billion to phase out Chinese-made Huawei and ZTE cellular technology in large swaths of rural America.
But two years later, none of that equipment has been recalled and rural telecommunications companies are still waiting for federal reimbursement money.
The FCC has received requests to recall some 24,000 pieces of Chinese-made communications equipment, but according to a July 15 update from the commission, it is more than $3 billion short of the money it needs to reimburse all eligible companies.
Short of more money from Congress, the FCC says it plans to start reimbursing approved companies about 40% of the costs of recalling Huawei equipment.
The FCC did not specify a timeframe for when the money will be disbursed.
In late 2020, the Justice Department referred its national security concerns about Huawei equipment to the Commerce Department and provided information on where the equipment was located in the US, a former senior law enforcement official told CNN. United States order.
After the Biden administration took office in 2021, the Commerce Department opened its own investigation into Huawei to determine whether more urgent action was needed to remove the Chinese technology provider from US telecommunications networks, he said. former police officer and current senior official.
That investigation has moved slowly and is ongoing, the current US official said.
Among the concerns noted by national security officials was that external communication from Huawei equipment that occurs when software is updated, for example, could be exploited by the Chinese government.
Depending on what the Commerce Department finds, US telecom carriers could be forced to quickly recall Huawei equipment or face fines or other penalties.
Reuters first reported the existence of the Commerce Department investigation.
“We cannot confirm or deny the ongoing investigations, but we are committed to securing our information and communications technology and services supply chain.
Protecting the safety of the American people from malicious information gathering is vital to protecting our economy and national security,” a Commerce Department spokesperson said.
Triangle Communication Systems' network is equipped in part by Huawei, according to engineering documents filed with the FCC.
Its towers are partially scattered among missile fields.
Recently, US counterintelligence officials prioritized the publicity of China's threats.
This month, the US National Security and Counterintelligence Center issued a warning to US companies and state and local governments about what it says are covert efforts by China to manipulate them and influence US policy.
FBI Director Christopher Wray has just traveled to London for a joint meeting with senior British police officials to draw attention to Chinese threats.
In an exclusive interview with CNN, Wray said the FBI opens a new China counterintelligence investigation every 12 hours.
"It's probably about 2,000 investigations," Wray said.
"And that's not even talking about their cyber theft, where they have a hacking program bigger than all other major nations combined, and they've stolen more personal and corporate data from Americans than all nations combined."
When asked why after years of national security concerns raised about Huawei equipment is still largely on top of cell phone towers near US military bases, Wray said that, "We are concerned about allowing any company that is beholden to a nation state that does not adhere to or share our values, giving that company the ability to hack into our telecommunications infrastructure."
He noted that in 2020, the Justice Department charged Huawei with racketeering conspiracy and conspiracy to steal trade secrets.
"And I think that's probably all I can say on the subject," Wray said.
Critics see xenophobic overreach
Despite his harsh rhetoric, the US government's refusal to provide evidence to support its claims that Huawei's technology poses a risk to US national security has led some critics to accuse it of overreach. xenophobic
The lack of incriminating evidence also raises questions about whether US officials can separate legitimate Chinese investment from espionage.
"All of our products imported into the US have been tested and certified by the FCC before being deployed there," Huawei said in its statement to CNN.
“Our equipment only operates in the spectrum assigned by the FCC for commercial use.
This means you cannot access any spectrum assigned to the DOD.”
"For more than 30 years, Huawei has maintained a proven track record in cybersecurity and we have never been involved in any malicious cybersecurity incident," the statement said.
In their quest to uncover evidence of Chinese espionage, critics argue that the feds have cast too wide a net, particularly when it comes to academic institutions.
In a recent high-profile case, a federal judge acquitted a former University of Tennessee engineering professor whom the Justice Department had prosecuted under its so-called China Initiative targeting Chinese espionage, arguing "no evidence was presented that [ the professor] once collaborated with a Chinese university in conducting NASA-funded research."
And on January 20, the Justice Department dismissed a separate case against an MIT professor accused of concealing his ties to China, saying it could no longer prove its case.
In February, the Biden administration completely shut down the China Initiative.
The federal government's reluctance across multiple administrations to spell out what it knows has led some critics to accuse the government of chasing ghosts.
“It comes down to: do you treat China as a neutral actor?
Because if you treat China as a neutral actor, then yes, this sounds crazy, that there is a plot behind every tree,” said Anna Puglisi, a senior fellow at the Center for Security and Emerging Technology at Georgetown University.
"However, China has shown us through its policies and actions that it is not a neutral actor."
Chinese technology in the heart of America
Under the Obama administration, FBI agents were monitoring a disturbing pattern along stretches of Interstate 25 in Colorado and Montana, and on arteries into Nebraska.
The busy corridor connects some of the most secret US military installations, including an archipelago of nuclear missile silos.
For years, small rural telecom providers had been installing cheaper Chinese-made routers and other technology on top of cell phone towers along I-25 and elsewhere in the region.
In much of these sparsely populated swaths of the west, these smaller carriers are the only option for cellular coverage.
And many of them turned to Huawei for cheaper and more reliable equipment.
Beginning in late 2011, Viaero, the area's largest regional carrier, signed a contract with Huawei to provide equipment for its 3G upgrade.
A decade later, it has Huawei technology installed in its entire fleet of towers, roughly 1,000 spread across five western states.
As Huawei equipment began to proliferate near US military bases, federal investigators began to take notice, sources familiar with the matter told CNN.
Of particular concern was that Huawei routinely sold cheap equipment to rural suppliers in cases that appeared to be unprofitable for Huawei, but placed their equipment near military assets.
Federal investigators initially began “examining [Huawei] less from a technical standpoint and more from a business/financial standpoint,” explained John Lenkart, a former senior FBI agent focused on China-related counterintelligence issues.
Officials studied where Huawei's sales efforts were concentrated the most and looked for deals that "didn't make sense from a return on investment perspective," Lenkart said.
“A lot of [counterintelligence] concerns were uncovered based on” those searches, Lenkart said.
Examining Huawei's technology themselves, FBI investigators determined that it could recognize and disrupt DOD spectrum communications, even though it had been certified by the FCC, according to a source familiar with the investigation.
“Technically it is not difficult to make an FCC-compliant device that listens to non-public bands, but then quietly waits for some activation trigger to listen to other bands,” said Eduardo Rojas, who heads the radio spectrum lab at the Aeronautical University. Embry-Riddle in Florida.
"Technically, it is feasible."
To prove that a device had clandestine capabilities, Rojas said, technical experts would be required to dismantle a device "down to the semiconductor level" and "reverse engineer the design."
But, he said, it can be done.
And there was another major concern along I-25, according to sources familiar with the investigation.
Weather cameras raise concerns
Around 2014, Viaero began installing high-definition surveillance cameras on its towers to broadcast live weather and traffic, a public service it shared with local news organizations.
With dozens of cameras positioned up and down I-25, the cameras provided a 24/7 bird's-eye view of incoming traffic and weather, and even provided advance warnings of tornadoes.
But they also inadvertently captured the movement of US military equipment and personnel, giving Beijing — or anyone — the ability to track the pattern of activity between a series of closely guarded military installations.
The intelligence community determined that the public livestreams were being viewed and likely captured from China, according to three sources familiar with the matter.
Two sources briefed on the investigation at the time said officials believed it was possible that Beijing's intelligence service was "taking care" of the cameras: hacking the network and controlling where they pointed.
At least some of the cameras in question were running on Huawei networks.
Viaero CEO Frank DiRico said it never occurred to him that the cameras could be a national security risk.
“There are a lot of missile silos in the areas we cover.
There is some military presence,” DiRico said in an interview from his Colorado office.
But, he said, "they never told me to remove the equipment or make any changes."
In fact, DiRico first learned of the government's concerns about Huawei equipment through newspaper articles — not the FBI — and says he was never told about the matter.
DiRico does not dispute the government's insistence that it needs to remove Huawei equipment, but he is skeptical that China's intelligence services could exploit Huawei hardware or camera equipment.
“We monitor our network pretty well,” DiRico said, adding that Viaero took over support and maintenance of its own networks from Huawei shortly after installation.
"We think we have a pretty good idea if there's something going on that's inappropriate."
Touring the country in search of Chinese investments
When the White House was informed of the I-25 investigation in 2019, counterintelligence officials began looking for other places where Chinese companies might be buying land or offering to develop municipal property, such as a park or a former factory, sometimes as part of a "sister city" agreement.
In one case, officials closed what they believed to be a risky business deal near a highly sensitive military testing facility in Utah shortly after the I-25 investigation began, according to a former US official.
The Army has a test and training range for hypersonic weapons in Utah, among other things.
The sources declined to provide further details.
Federal officials were also alarmed by what the sources described as a series of espionage and influence activities in Houston and, in 2020, closed the Chinese consulate there.
United States Attorney for the Eastern District of New York Richard P. Donoghue announces indictments against Huawei Technologies Co Ltd of China, several of its subsidiaries, and its CFO Meng Wanzhou on January 28, 2019.
Bill Evanina, who until early last year headed the National Security and Counterintelligence Center, told CNN that it can sometimes be hard to tell the difference between a legitimate business opportunity and espionage, in part because both can be happening at the same time.
“What we have seen is that legitimate companies that are three times removed from Beijing buy [a] facility for obvious logical reasons, not knowing what the [Chinese] intelligence apparatus wants on that parcel [of land],” Evanina said.
"What we have seen recently, has been what is under the ground."
"The hard part is that that's a legitimate business, and what city or town isn't going to want to take that money for that land when it just sits there doing nothing?"
she added.
a complicated problem
After the results of the I-25 investigation were reported to the Trump White House in 2019, the FCC ordered that telecommunications companies that receive federal subsidies to provide cellular service to remote areas—companies like Viaero—must "remove and replace" its Huawei and ZTE technology.
The FCC has since said the cost could be more than double the $1.9 billion allocated in 2020 and, absent an additional appropriation from Congress, the agency only plans to reimburse companies for a fraction of its costs.
Given the staggering strategic risk, Lenkart said, "rip and replace is a very blunt and inefficient remedy."
DiRico, the CEO of Viaero, noted that the cost of "rip and replace" is astronomical and that he doesn't expect the refund money to be enough to pay for the switch.
According to the FCC, Viaero is expected to receive less than half of the funding it is actually entitled to.
Still, he hopes to start retiring the team within the next year.
"It's hard and it's a lot of money," DiRico said.
Some former counterintelligence officials have expressed frustration that the US government is not providing more granular details about what it knows to companies, or to cities and states considering a Chinese investment proposal.
They believe that kind of detail would not only help private industry and state and local governments understand the severity of the threat as they see it, but also help combat criticism that the US government is targeting Chinese companies and individuals, rather than Chinese state espionage.
"This government has to do a better job of letting everyone know that this is a Communist Party problem, not a Chinese people's problem," Evanina said.
“And I will be the first to say that the government has to do better with respect to understanding that the intentions of the Communist Party are not the same intentions of the Chinese people.”
A current FBI official said the bureau will provide more defensive reports to US businesses, academic institutions and state and local governments that include far more detail than in the past, but officials still face an uphill battle.
"Sometimes I feel like we're a lifeguard coming up to a drowning person and they don't want our help," the current FBI official said.
However, this person said, “I think sometimes we [the FBI] say 'the China threat' and take for granted what that all means in our heads.
And it means something else to the people we're giving it to."
"I think we just need to be more careful about how we talk about it and educate people about why we're doing what we're doing."
Meanwhile, the "rip and replace" program remains fiercely controversial.
"It's not going to be easy," DiRico said.
"I'm going to be up all night worrying about it, but we'll do what we're told."
CNN's Sean Lyngaas contributed to this report.