5 charged in California with economic espionage for China

A San Francisco federal grand jury charged five individuals as well as five companies for economic espionage and trade secret theft. Federal authorities contend that the individuals stole numerous U.S. trade secrets for companies controlled by the People’s Republic of China (PRC).

The multi-agency task force included U.S. Attorney Melinda Haag; Lisa Monaco, Assistant Attorney General for National Security at the Department of Justice; and Stephanie Douglas, Special Agent in Charge of the FBI San Francisco Division, who unveiled their economic espionage case in a San Francisco courtroom.

According to a superseding indictment, the Chinese government identified chloride-route titanium dioxide (TiO2) as a top priority and wanted to steal the development and production capabilities from U.S. companies. TiO2 is a commercially valuable white pigment chemical with numerous uses, including coloring paint, plastics, and paper.

DuPont invented the chloride-route process for manufacturing TiO2 in the late-1940s and has invested a significant amount of research and development to streamline the production process. Officials said the global titanium dioxide market is valued at $12 billion.

Government attorneys warned that other American corporations will continue to lose valuable research. Intellectual property theft is another example of the Chinese government targeting high-tech manufacturing companies to build their own commerical plants at a fraction of the cost.
The five defendants charged in the indictment were Walter Liew, Christina Liew, Robert Maegerle, Hou Shengdong and Tze Chao, all allegedly obtained and illegally possessed TiO2 trade secrets belonging to DuPont. It’s also alleged that they sold the high-tech trade secrets to the Pangang Group so they could develop a streamlined TiO2 production capability in China.

Included in the grand jury indictment were copies of contracts worth in excess of $20 million for individuals who provided DuPont’s lucrative chemical trade secrets to the PRC.

“The Liews allegedly received millions of dollars of proceeds from these contracts,” the U.S. attorney said. “The proceeds were wired through the United States, Singapore and ultimately back into several bank accounts in the PRC in the names of relatives of Christina Liew.”

The Pangang Group had the assistance of U.S. individuals who obtained the TiO2 trade secrets and wanted to sell those secrets for significant sums of money, according to the government’s indictment.

“As this case demonstrates, technology developed by U.S. companies is vulnerable to concerted efforts by competitors—both at home and abroad—to steal that technology,” said U.S. Attorney Haag. “Fighting economic espionage and trade secret theft is one of the top priorities of this Office, and we will aggressively pursue anyone, anywhere who attempts to steal valuable information from the United States.”

The superseding indictment also named five companies as defendants; Pangang Group Company a Chinese state-owned enterprise, Pangang Group Steel Vanadium & Titanium Company, Pangang Group Titanium Industry Company, Pangang Group International Economic & Trading Company and USA Performance Technology.

Assistant Attorney General Monaco echoed the importance of stopping intellectual property theft. “The theft of America’s trade secrets for the benefit of China and other nations poses a substantial and continuing threat to our economic and national security, and we are committed to holding accountable anyone who robs American businesses of their hard-earned research.”

DuPont reportedly gave information to the FBI that its TiO2 trade secrets had been misappropriated. Once the FBI opened an investigation in March 2011, it didn’t take long for agents to discover who the perpetrators were. All of the defendants involved were charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets and attempted economic espionage.

FBI agents working this case also pointed out a myriad of issues that harm American enterprises. “The goal of this scheme was to obtain the benefit of research and development investments by U.S. companies, without making the same investment of time and money. This is not only unfair, but it does great damage to the U.S. economy and, as a result, undercuts on national security.”

The maximum statutory penalties for each of the alleged charges range from 10- 20 years in prison as well as fines ranging from $250,000 to $10 million.

These indictments contain only allegations and, as in all cases, the defendants are presumed innocent until proven guilty in a court of law.

For more detailed information read the FBI report here.

For other stories concerning China’s stealth war against America and why it’s working click here.

For more stories; http://www.examiner.com/homeland-security-in-national/kimberly-dvorak

© Copyright 2012 Kimberly Dvorak All Rights Reserved.

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