Chinese espionage cases touch DuPont, Motorola

SAN FRANCISCO/CHICAGO Thu Feb 9, 2012 4:09am EST

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SAN FRANCISCO/CHICAGO (Reuters) - U.S. prosecutors expanded a criminal case over the alleged theft of industrial secrets from chemical giant DuPont, securing an indictment against a Chinese company on economic espionage-related charges.

A Northern California grand jury indicted Pangang Group for conspiracy to commit economic espionage and other charges including conspiracy to steal trade secrets, according to court documents unsealed on Wednesday.

Pangang, a state-owned steel manufacturer in Sichuan province, allegedly worked with a California businessman and others to obtain several valuable trade secrets from DuPont, the indictment says.

Separately, a former engineer for Motorola Inc was found guilty on Wednesday of stealing trade secrets from the company but cleared of economic espionage for China.

The latest developments in the two cases come as Chinese Vice President Xi Jinping is scheduled to visit the United States next week on a range of economic, trade, regional and global issues.

Xi, considered China's president-in-waiting, will meet President Barack Obama at the White House next Tuesday. The U.S. visit will be a major step in signaling Xi's readiness to take over as China's next top leader and run Beijing's complex and sometimes vexed relationship with Washington.

The United States has identified industrial spying as a significant and growing threat to the nation's prosperity. In a government report released last November, authorities cited China as "the world's most active and persistent perpetrators of economic espionage."

California businessman Walter Liew has already been in custody for several months on witness tampering charges related to the DuPont allegations. Liew and his wife, Christina, also face charges of conspiracy to commit economic espionage and other counts in the latest indictment.

Lawyers for Walter and Christina Liew could not be reached for comment. Tom Nolan, a lawyer for Walter Liew, has previously maintained that his client only possessed publicly available information, not trade secrets from DuPont.

The Pangang Group, named in the Dupont case, is based in Panzhihua city in the far south of China's Sichuan province and is western China's largest steelmaker. It was formally known as Panzhihua Iron and Steel (Group) Co Ltd.

Three of Pangang's subsidiaries are also named in the indictment, along with a Chinese citizen who worked for that company.

In 2010 authorities Pangang's merger with Angang Steel Co Ltd, which would make Angang the country's largest steel mill.

Phone calls to Pangang's headquarters on Thursday went unanswered, and company officials did not respond to faxed queries.

Liew, a U.S. citizen, allegedly paid former DuPont engineers for assistance in designing chloride-route titanium dioxide, also known as TiO2, according to the indictment. DuPont is the world's largest producer of the white pigment used to make a range of white-tinted products, including paper, paint and plastics.

Two former DuPont engineers were also indicted on Wednesday. DuPont general counsel Thomas Sager said the company is disappointed that former DuPont employees allegedly stole technology. The company filed a civil suit against Liew and referred the theft to law enforcement, Sager said.

Separately, former Motorola employee Hanjuan Jin has been charged with illegally possessing thousands of the firm's trade secrets on her computer and in other forms of digital storage, and prosecutors said she intended to pass the information to the Chinese military.

Jin was found guilty by a Chicago federal judge on three counts of theft of trade secrets after a bench trial, and faces a maximum penalty of 10 years in prison on each count.

TARGETED

However, California businessman Liew's continued detention has angered one Chinese-American advocate. Ling-Chi Wang, a professor at the University of California, said spying between countries and companies is a regular occurrence, and law enforcement should have allowed DuPont's civil suit to develop before arresting Liew.

Chinese targets might be more attractive in an election year, Wang said, due to concerns about being called soft on China.

"I just find that to be very, very troublesome," said Wang, who has previously spoken out against espionage-related prosecutions of ethnic Chinese scientists.

In a statement on Wednesday, San Francisco U.S. Attorney Melinda Haag said authorities will "aggressively pursue anyone, anywhere" who tries to steal from the United States.

Prosecutors detailed Liew's alleged links with the Chinese government in a court filing last week. They named, as one of the Chinese representatives who once met with him, a high-ranking Communist Party official who later became a member of the Politburo.

In another development, Timothy Spitler, a former DuPont employee who consulted for Liew, took his own life last week, say multiple people familiar with the situation. Spitler supplied material information to prosecutors in the investigation, these people say. A lawyer for Spitler did not respond to inquiries on Wednesday.

The case is United States of America vs. Walter Liew, Christina Liew et al., U.S. District Court, Northern District of California, No. 11-cr-573.

(Additional reporting by Matt Spetalnick in Washington and Terril Yue Jones and David Stanway in Beijing; Editing by Bernard Orr and Sanjeev Miglani)

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