U.S. economic espionage trial over China allegations kicks off

SAN FRANCISCO Wed Jan 8, 2014 3:00am EST

SAN FRANCISCO Jan 8 (Reuters) - Opening statements in a rare criminal economic espionage trial are expected to begin on Wednesday in a case where prosecutors accuse a U.S. citizen of conspiring to steal trade secrets from chemical giant DuPont for the benefit of a Chinese company.

California businessman Walter Liew is accused of paying former DuPont engineers for assistance in designing a white pigment -- chloride-route titanium dioxide, also known as TiO2 -- used to make a range of white-tinted products, including paper, paint and plastics.

Liew, his wife and another man charged in connection with the events pleaded not guilty. His wife will be tried separately. Liew's attorneys have argued that the information in his possession were not DuPont trade secrets, but rather publicly available information.

The United States has identified industrial spying as a significant and growing threat to the nation's prosperity.

DuPont is the world's largest producer of TiO2. Prosecutors also accused Pangang Group, a steel manufacturer in Sichuan province, of working with Liew to obtain DuPont's trade secrets.

However, the indictment against Pangang stalled after a U.S. judge ruled that prosecutors' attempts to notify Pangang of the charges were legally insufficient.

Prosecutors contend in court filings that Liew was hosted at a banquet in 1991 by Luo Gan, who at the time was a high-ranking official of the Communist Party of China Central Committee. Luo Gan went on to become a member of the nine-member Standing Committee of the Politburo, prosecutors wrote in a court filing.

Several other Chinese officials also attended, according to correspondence from Liew that U.S. federal officials say they seized from his safety deposit box.

"The purpose of the banquet is to thank me for being a patriotic overseas Chinese who has made contributions to China," Liew wrote in a memo to a Chinese company, according to U.S. prosecutors, "and who has provided key technologies with national defense applications, in paint/coating and microwave communications."

Luo Gan gave Liew directives at the meeting, and two days later Liew received a list of "key task projects," including TiO2, prosecutors stated.

In court filings, Liew denied he attended a banquet with Chinese officials, and said he never intended to benefit the Chinese government.

It is unclear whether the materials seized from Liew's safety deposit box will ultimately be admitted at trial, as the defense has asked for the materials to be kept out. U.S. District Judge Jeffrey White ruled that they may be allowed in if prosecutors can authenticate the documents.

The trial is expected to last about two months.

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

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