Chinese Espionage Alleged to Target DuPont

Feb 8, 2012 5:35pm

Reported  by Jack Cloherty, Pierre Thomas and Jason Ryan:

 The Justice Department today charged that Chinese-controlled companies conspired to steal production secrets potentially worth billions of dollars from  U.S. chemical giant DuPont.

The long-running, multi-billion dollar economic espionage plot was revealed as five people and five companies were indicted for allegedly stealing trade secrets to benefit companies controlled by the People’s Republic of China.

The conspiracy reportedly centered on DuPont because it produces one of the world’s most valuable, and ubiquitous, pigments — titanium dioxide.  Titanium dioxide infuses a bright, white, reflective glow in coloring paint, plastics, paper and other commercial products.  The worldwide titanium dioxide market has been valued at about $12 billion, and DuPont controls the largest share of the market.  

The Justice Department indictment charges that the Chinese tried to steal unique, titanium dioxide production technology from DuPont and use it to open a new, 100,000 ton titanium dioxide plant at Chongqing, China.

 To achieve that goal, the Justice Department charges, “companies controlled by the PRC government, specifically the Pangang Group companies … conspired and attempted to illegally obtain titanium dioxide (TiO2) technology that had been developed over many years of research and development … by DuPont.”  The Pangang Group is the Chinese company that was to build the titanium dioxide plant in Chongquing, according to the Justice Department

Pangang and four other corporate defendants are charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets and attempted economic espionage. The Justice Department said the Pangang Group companies paid “significant sums of money” to at least five insiders for DuPont’s trade secrets. 

The five people charged today are:  

  • Walter Lian-Heen Liew, aka “Liu Yuanxuan,” 54, of Orinda, Calif.   Liew is a naturalized U.S. citizen and co-owner of USAPTI.  Liew is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, attempted economic espionage, attempted theft of trade secrets, possession of trade secrets, conveying trade secrets, conspiracy to obstruct justice, witness tampering, conspiracy to tamper with evidence and false statements.  Liew was charged in August 2011 with obstruction of justice and making false statements to the FBI.  He was arrested at that time and has been ordered detained pending trial based on a finding by Magistrate Judge Nathanael Cousins that he is a flight risk. 

 

  • Christina Hong Qiao Liew, aka “Qiao Hong,” 49, of Orinda.  Christina  Liew is a naturalized U.S. citizen and co-owner, with her husband, Walter Liew, of USAPTI. Liew is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, attempted economic espionage, attempted theft of trade secrets, witness tampering, conspiracy to tamper with evidence and false statements.  Liew was also charged in August 2011 with obstruction of justice and making false statements to the FBI.  She was released by the court on conditions that include travel restrictions and electronic monitoring

 

  • Hou Shengdong, 42, a citizen of the PRC.  Hou was the vice director of the Chloride Process TiO2 Project Department for the Pangang Group Titanium Industry Co. Ltd.  According to the superseding indictment, Hou and other Pangang Group employees requested DuPont blueprints as a condition of working on the Pangang Group project.  Hou is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets and attempted economic espionage.  A warrant has been issued for Hou‘s arrest.

 

  • Robert Maegerle, 76, of Harbeson, Del.  Maegerle was employed by DuPont as an engineer from 1956 to 1991.  According to the superseding indictment, Maegerle had access to DuPont TiO2 trade secrets, including specific information regarding DuPont’s TiO2 facility at Kwan Yin, Taiwan.  Maegerle is charged with conspiracy to commit theft of trade secrets, attempted theft of trade secrets, conveying trade secrets and conspiracy to obstruct justice.  Maegerle was arrested this morning in Harbeson.

 

  • Tze Chao, 77, of Newark, Del.  Chao was employed by DuPont from 1966 to 2002.  Chao is charged with conspiracy to commit economic espionage. 

 ”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,” Assistant Attorney Lisa General Monaco said. “We are committed to holding accountable anyone who robs American businesses of their hard-earned research.  I thank the agents and prosecutors who helped bring about this important case.”  

 The case is being prosecuted by the Special Prosecutions and National Security Unit of the U.S. Attorney’s Office in San Francisco, and the Counterespionage Section of the U.S. Department of Justice.  The investigation, which is ongoing, is being conducted by the FBI.

 DuPont spokesman Dan Turner issued this statement late today:

“DuPont has taken, and will continue to take, aggressive measures to protect its proprietary, unique  and confidential technologies for the benefit of our shareholders, employees and customers. We are disappointed that former DuPont employees working together with certain companies allegedly stole our proprietary technology.  Upon learning of the apparent breach, we took prompt action and filed a civil suit.  We also referred the theft of our technology to law enforcement.” “Because this matter is pending both criminally and civilly, we cannot comment  further.”

The Chinese Embassy did not immediately return calls for comment.

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