The Invasion of the Chinese Cyberspies

Carpenter was even more dismayed to find that his work with the FBI had got him in trouble at Sandia. He says that when he first started tracking Titan Rain to chase down Sandia's attackers, he told his superiors that he thought he should share his findings with the Army, since it had been repeatedly hit by Titan Rain as well. A March 2004 Sandia memo that Carpenter gave TIME shows that he and his colleagues had been told to think like "World Class Hackers" and to retrieve tools that other attackers had used against Sandia. That's why Carpenter did not expect the answer he claims he got from his bosses in response to Titan Rain: Not only should he not be trailing Titan Rain but he was also expressly forbidden to share what he had learned with anyone.

As a Navy veteran whose wife is a major in the Army Reserve, Carpenter felt he could not accept that injunction. After several weeks of angry meetings--including one in which Carpenter says Sandia counterintelligence chief Bruce Held fumed that Carpenter should have been "decapitated" or "at least left my office bloody" for having disobeyed his bosses--he was fired. Citing Carpenter's civil lawsuit, Sandia was reluctant to discuss specifics but responded to TIME with a statement: "Sandia does its work in the national interest lawfully. When people step beyond clear boundaries in a national security setting, there are consequences."

Carpenter says he has honored the FBI's request to stop following the attackers. But he can't get Titan Rain out of his mind. Although he was recently hired as a network-security analyst for another federal contractor and his security clearance has been restored, "I'm not sleeping well," he says. "I know the Titan Rain group is out there working, now more than ever." --With reporting by Matthew Forney/Beijing and Brian Bennett, Timothy J. Burger and Elaine Shannon/Washington