Bad news at the Pentagon, and especially bad news at the corporate headquarters of certain defense contractors.

Wall Street Journal:

Computer spies have broken into the Pentagon’s $300 billion Joint Strike Fighter project — the Defense Department’s costliest weapons program ever — according to current and former government officials familiar with the attacks.

Similar incidents have also breached the Air Force’s air-traffic-control system in recent months, these people say. In the case of the fighter-jet program, the intruders were able to copy and siphon off several terabytes of data related to design and electronics systems, officials say, potentially making it easier to defend against the craft.

The latest intrusions provide new evidence that a battle is heating up between the U.S. and potential adversaries over the data networks that tie the world together. The revelations follow a recent Wall Street Journal report that computers used to control the U.S. electrical-distribution system, as well as other infrastructure, have also been infiltrated by spies abroad.

Attacks like these — or U.S. awareness of them — appear to have escalated in the past six months, said one former official briefed on the matter. “There’s never been anything like it,” this person said, adding that other military and civilian agencies as well as private companies are affected. “It’s everything that keeps this country going. …

The intruders compromised the system responsible for diagnosing a plane’s maintenance problems during flight, according to officials familiar with the matter. However, the plane’s most vital systems — such as flight controls and sensors — are physically isolated from the publicly accessible Internet, they said.

The intruders entered through vulnerabilities in the networks of two or three contractors helping to build the high-tech fighter jet, according to people who have been briefed on the matter. Lockheed Martin is the lead contractor on the program, and Northrop Grumman Corp. and BAE Systems PLC also play major roles in its development. …

Investigators traced the penetrations back with a “high level of certainty” to known Chinese Internet protocol, or IP, addresses and digital fingerprints that had been used for attacks in the past, said a person briefed on the matter.

The Telegraph reports that a Canadian study produced by researchers asked to investigate cyberattacks on the office of the Dalai Lama reveals large-scale world-wide cyberattacks, all originating from China.

A vast Chinese cyber-espionage network, codenamed GhostNet, has penetrated sensitive ministries and embassies across 103 countries and infects at least a dozen new computers every week. …

The discovery of GhostNet is the latest sign of China’s determination to win a future “information war”. A ten-month investigation by the Munk Centre for International Studies in Toronto has revealed that GhostNet not only searches computers for information and taps their emails, but also turns them into giant listening devices.

Once a computer has been infected, hackers can turn on its web camera and microphones and record any conversations within range.

The study revealed that almost a third of the targets infected by GhostNet are “considered high-value and include computers located at ministries of foreign affairs, embassies, international organisations, news media and NGOs”. This global web of espionage has been constructed in the last two years.

Another report from Cambridge University said the sophisticated computer attacks had been “devastatingly effective” and that “few organisations, outside the defence and intelligence sector, could withstand such an attack”.

The report stopped short of accusing the Beijing government of responsibility for the network, but said the vast majority of cyber attacks originated from inside China.

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The New York Times also headlined the report in its Technology section.

The researchers, who are based at the Munk Center for International Studies at the University of Toronto, had been asked by the office of the Dalai Lama, the exiled Tibetan leader whom China regularly denounces, to examine its computers for signs of malicious software, or malware.

Their sleuthing opened a window into a broader operation that, in less than two years, has infiltrated at least 1,295 computers in 103 countries, including many belonging to embassies, foreign ministries and other government offices, as well as the Dalai Lama’s Tibetan exile centers in India, Brussels, London and New York.

The researchers, who have a record of detecting computer espionage, said they believed that in addition to the spying on the Dalai Lama, the system, which they called GhostNet, was focused on the governments of South Asian and Southeast Asian countries.

Intelligence analysts say many governments, including those of China, Russia and the United States, and other parties use sophisticated computer programs to covertly gather information.

The newly reported spying operation is by far the largest to come to light in terms of countries affected.

This is also believed to be the first time researchers have been able to expose the workings of a computer system used in an intrusion of this magnitude.

Still going strong, the operation continues to invade and monitor more than a dozen new computers a week, the researchers said in their report, “Tracking ‘GhostNet’: Investigating a Cyber Espionage Network.” They said they had found no evidence that United States government offices had been infiltrated, although a NATO computer was monitored by the spies for half a day and computers of the Indian Embassy in Washington were infiltrated.

The malware is remarkable both for its sweep — in computer jargon, it has not been merely “phishing” for random consumers’ information, but “whaling” for particular important targets — and for its Big Brother-style capacities. It can, for example, turn on the camera and audio-recording functions of an infected computer, enabling monitors to see and hear what goes on in a room. The investigators say they do not know if this facet has been employed.

The researchers were able to monitor the commands given to infected computers and to see the names of documents retrieved by the spies, but in most cases the contents of the stolen files have not been determined. Working with the Tibetans, however, the researchers found that specific correspondence had been stolen and that the intruders had gained control of the electronic mail server computers of the Dalai Lama’s organization.

The electronic spy game has had at least some real-world impact, they said. For example, they said, after an e-mail invitation was sent by the Dalai Lama’s office to a foreign diplomat, the Chinese government made a call to the diplomat discouraging a visit. And a woman working for a group making Internet contacts between Tibetan exiles and Chinese citizens was stopped by Chinese intelligence officers on her way back to Tibet, shown transcripts of her online conversations and warned to stop her political activities.

The Toronto researchers said they had notified international law enforcement agencies of the spying operation, which in their view exposed basic shortcomings in the legal structure of cyberspace.

By some curious coincidence, the web-site offering the actual report as inaccessible today.

The Conficker worm (also known as Downadup.AD) appeared last October targeting (surprise! surprise!) Microsoft Windows vulnerabilities common to 2000, XP, Vista, et al.

It has contaminated more than 9 million PCs worldwide, hitting 1.1 million on a single day last January. Conficker has shut down the operations of the French Air Force, 24 RAF air bases, and 75% of the Royal Navy, and infected hundreds of computers serving Germany’s Bundeswehr and Defense Ministry.

New York Times:

The program grabbed global attention when it began spreading late last year and quickly infected millions of computers with software code that is intended to lash together the infected machines it controls into a powerful computer known as a botnet.

Since then, the program’s author has repeatedly updated its software in a cat-and-mouse game being fought with an informal international alliance of computer security firms and a network governance group known as the Internet Corporation for Assigned Names and Numbers. Members refer to the alliance as the Conficker Cabal. …

An examination of the program reveals that the zombie computers are programmed to try to contact a control system for instructions on April 1. There has been a range of speculation about the nature of the threat posed by the botnet, from a wake-up call to a devastating attack.

Researchers who have been painstakingly disassembling the Conficker code have not been able to determine where the author, or authors, is located, or whether the program is being maintained by one person or a group of hackers. The growing suspicion is that Conficker will ultimately be a computing-for-hire scheme. Researchers expect it will imitate the hottest fad in the computer industry, called cloud computing, in which companies like Amazon, Microsoft and Sun Microsystems sell computing as a service over the Internet. …

Several people who have analyzed various versions of the program said Conficker’s authors were obviously monitoring the efforts to restrict the malicious program and had repeatedly demonstrated that their skills were at the leading edge of computer technology.

For example, the Conficker worm already had been through several versions when the alliance of computer security experts seized control of 250 Internet domain names the system was planning to use to forward instructions to millions of infected computers.

Shortly thereafter, in the first week of March, the fourth known version of the program, Conficker C, expanded the number of the sites it could use to 50,000. That step made it virtually impossible to stop the Conficker authors from communicating with their botnet. …

A report scheduled to be released Thursday by SRI International, a nonprofit research institute in Menlo Park, Calif., says that Conficker C constitutes a major rewrite of the software. Not only does it make it far more difficult to block communication with the program, but it gives the program added powers to disable many commercial antivirus programs as well as Microsoft’s security update features.

“Perhaps the most obvious frightening aspect of Conficker C is its clear potential to do harm,” said Phillip Porras, a research director at SRI International and one of the authors of the report. “Perhaps in the best case, Conficker may be used as a sustained and profitable platform for massive Internet fraud and theft.”

“In the worst case,” Mr. Porras said, “Conficker could be turned into a powerful offensive weapon for performing concerted information warfare attacks that could disrupt not just countries, but the Internet itself.”

The researchers, noting that the Conficker authors were using the most advanced computer security techniques, said the original version of the program contained a recent security feature developed by an M.I.T. computer scientist, Ron Rivest, that had been made public only weeks before. And when a revision was issued by Dr. Rivest’s group to correct a flaw, the Conficker authors revised their program to add the correction.

Although there have been clues that the Conficker authors may be located in Eastern Europe, evidence has not been conclusive.

Information Week links this removal tool.

Alarmingly, TrendMicro’s virus encyclopedia entry is “temporarily unavailable.”