Chinese Accused of Stealing Trade Secrets

(CN)- A grand jury in San Francisco indicted five individuals and five companies on charges of economic espionage and theft of trade secrets for their roles in a sustained effort to steal an American chemical technology for companies controlled by the Chinese government, the Justice Department announced Wednesday.

The indictment alleges Pangang Group, among others, conspired with Walter Liew and Christina Liew of Orinda, Calif., to steal secrets on how to manufacture chloride-route titanium oxide (TiO2), a white pigment that is used to whiten products ranging from paint to plastics to paper.

Prosecutors say Wilmington, Del.-based DuPont invented the chloride-route process for manufacturing TiO2 in the late-1940s and since then has invested heavily in research and development to improve that production process. The global titanium dioxide market has been valued at $12 billion, and DuPont has the largest share of that market.

DuPont told the FBI that its TiO2 trade secrets had been misappropriated, resulting in an investigation beginning in March 2011.

The indictment says the Pangang Group companies were aided by individuals in the United States who had obtained TiO2 trade secrets and were willing to sell for significant sums of money. It says defendants Walter Liew, Christina Liew, Robert Maegerle and Tze Chao obtained and possessed TiO2 trade secrets belonging to DuPont. Each of these individuals allegedly sold the information to the Pangang Group companies so they could develop large-scale chloride route TiO2 production capability in China, including a 100,000 ton TiO2 factory at Chongqing.

According to prosecutors the Liews, USA Performance Technology Inc., and one of its predecessor companies, Performance Group, entered into contracts worth in excess of $20 million to convey the trade secret technology to Pangang Group companies. The Liews allegedly received millions of dollars from these contracts, proceeds that were wired through the United States, Singapore and ultimately back into several bank accounts in China in the names of relatives of Christina Liew.

In a written statement, Assistant Attorney General Lisa Monaco said, "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."

Each of the five corporate defendants named in the superseding indictment are charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets and attempted economic espionage.

The defendants are scheduled to be arraigned on March 1.

If convicted, penalties on most of the individual counts range from 10 to 15 years in prison and fines of $250,000 to $500,000 per count; Organizational defendants face fines of $5 million to $10 million per count, or an amount of twice the pecuniary gain or loss from their actions.

The penalty for two of the counts, tampering with witnesses and tampering with evidence, is potentially 20 years in prison.

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