Nortel was the victim of a years-long network security breach that allowed hackers to extract its trade secrets, according to a veteran of the bankrupt Canadian telco systems biz.

The hackers stole at least seven passwords from top executives before downloading research, business plans, technical papers, corporate emails and other sensitive data, the Wall Street Journal reports.

Brian Shields, a veteran former worker at the firm who led an internal investigation, told the paper: "They had access to everything. They had plenty of time. All they had to do was figure out what they wanted."

The attackers, suspected to be based in China, planted carefully camouflaged spyware on client PCs in order to extract passwords, Shields said. The whole assault was so well-executed that it went undetected for years.

Shields, a Nortel employee for 19 years, said the firm only detected a possible breach in 2004 – when it discovered that some PCs were regularly sending sensitive data to an IP address in Shanghai. Subsequent investigations suggested the breach dated back as far back as 2000, if not earlier.

At the time, Nortel responded to the breach by changing compromised passwords, Shields to the WSJ. It discontinued an internal investigation into the breach after six months, reportedly because of lack of progress. Shields said Nortel's management ignored his recommendations on how to tighten up the firm's network.

Mike Zafirovski, Nortel's chief exec between 2005-2009, played down the significance of the breach. He told the Wall Street Journal that staff "did not believe it was a real issue".

China Syndrome

China is routinely blamed for economic espionage-style attacks, which it has consistently denied. Questioned over the Nortel breach, the Chinese embassy denied any involvement and told the journal that cyberspying attacks are "transnational and anonymous".

Nortel went bankrupt three years ago, back in 2009. It allegedly failed to disclose the breach on its network to prospective buyers of its assets around the time it went under.

The reported breach against Nortel follows cyberespionage-style attacks against RSA, Google, US defence contractors and Mitsubishi Heavy industries in Japan – among several others.

Neil Roiter, director of research at Corero Network Security, commented: "We've seen time and again that enterprises are successfully breached and the cyber attackers continue to operate undetected for months, even years. The Nortel breach that apparently spanned over nearly a decade is a lesson to all that organizations must implement strong security policies and technology."

"Organisations need to ensure they have the proper tools at the perimeter and within their networks, and aggressive monitoring to detect outbound traffic and suspicious activity in the event of a breach. The Aurora attacks, the RSA breach and others demonstrate that Fortune 500 companies and other large enterprises are under constant threat from nation states such as China seeking shortcuts to technological advances."

The prevalence of breaches is likely to prompt tougher rules on breach disclosure, according to Roiter.

"Perhaps more disturbing, if the report is accurate, is the failure of Nortel to respond when the breach was discovered, and, less surprisingly, their failure to disclose it. Perhaps the danger was less clear eight years ago than it is now, but the continued failure of what was viewed as an innovative and sophisticated IT company to appreciate and address the risk is puzzling. We expect that the new SEC guidelines will result in more disclosures, such as the recent revelation of the VeriSign breach in 2010, and that companies will be more up front about these events for the sake of the business community at large."

Chris Petersen, CTO of LogRhythm, a log management company, noted that financially motivated industrial espionage has been going on for decades, long before the present focus on attacks from China.

"Should we really be surprised – especially those of us who grew up in the Cold War – that Nations would aggressively compromise US corporate and agency networks in support of their own economic interests? How many other US corporations are breached and leaking right now? Personally I’m afraid we’d be appalled by the number – it is likely very high." ®