Espionage Case Falters|for Bad Service of Process

SAN FRANCISCO (CN) - A federal judge may have delivered the knock-out punch to charges against Chinese companies that allegedly stole trade secrets from the chemical giant DuPont.

A federal grand jury indicted the Pangang Group for conspiring to steal secrets for the manufacture of chloride-route titanium oxide from DuPont in February. Believing that the New Jersey-based Pan America acted as Pangang's agent in the United States, the Justice Department then issued summons.

But U.S. District Judge Jeffrey White found Monday that the government did not tie Pangang to Pan America's management. There is also no evidence that Pan America is an agent for Pangang or any of its subsidiaries that are also defendants in the criminal action, such as Pangang Group Titanium Industry and Pangang Group Steel Vanadium & Titanium Company.

"The government has not shown that Pan American is Titanium's general agent," White wrote. "Accordingly, as to Titanium, the government has not established that it complied with the delivery requirement."

Uncle Sam also failed to satisfy the summons' mailing requirement, the judge found.

"The government's theory that mailing a summons to a general agent satisfies the mailing requirement is not persuasively supported by the criminal cases that have addressed this issue," White wrote. "The court is persuaded that the only way for the government to show that it has complied with the mailing requirement is to show that Pan America is the alter-ego of a particular Pangang defendant."

But that alter-ego link is lacking, as is the claims that Pan America represents yet another subsidiary, Pangang Group International Economic and Trading Company.

Though White admitted there was sufficient evidence to call Pan America the "general agent" of this entity, this does not prove that the United States mailed a copy of the summons to Pangang Group.

"Therefore, even if the court found that Pan America acted as a general agent for any of these entities, the court still would grant the motion to quash, because the government has not shown that Pan America is their alter-ego," White wrote.

The government moreover cannot rely on its agreement with the People's Republic of China for cooperation in legal matters, the decision states, noting that China refuses to effect service on the Pangang defendants.

"Accepting that representation for purposes of this motion, it appears that the government will take the position that it will be left without a means to effect service on the Pangang defendants," White wrote. "The Pangang defendants have not asked the court to dismiss the superseding indictment, and the court has only ruled that the summonses served on the Pangang defendants should be quashed."

Judge White ordered the U.S. government and Pangang defendants to address how they intend to proceed in a joint status report due Aug. 16.

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