By Dan Levine and Malathi Nayak
SAN FRANCISCO, March 1 Lawyers for a
Chinese steel company will challenge the ability of U.S.
prosecutors to bring a criminal case against the company for
trying to steal business secrets from chemical giant DuPont
, a U.S. magistrate judge said.
Additionally, a former DuPont employee pleaded guilty on
Thursday and has agreed to cooperate with U.S. authorities in
A Northern California grand jury indicted Pangang Group and
other defendants last month for conspiracy to commit economic
espionage and other crimes including conspiracy to steal trade
secrets, according to court documents.
Pangang, a state-owned steel manufacturer in
Sichuan province, and its subsidiaries worked with a California
businessman and others to obtain several valuable trade secrets
from DuPont, the indictment alleged.
The United States has identified industrial spying as a
significant and growing threat to the nation's prosperity.
However, some advocates have argued that Chinese targets are
attractive for law enforcement in an election year, due to
concerns about being called soft on China.
At a hearing in a San Francisco federal court on Thursday,
two U.S. lawyers appeared for Pangang and its subsidiaries.
However, U.S. Magistrate Judge Nathaniel Cousins referred to
a letter Pangang's attorneys had sent to the court, specifying
that their appearance was limited to a jurisdictional challenge
to the prosecution.
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 handed up last month.
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
Both Liew and his wife have plead not guilty.
Another defendant in the case, Tze Chao, pleaded guilty to
conspiracy to commit economic espionage at a separate court
hearing on Thursday. Chao, who worked as a chemical engineer for
DuPont for over 35 years, acknowledged that he kept confidential
company information when he left.
"I used a DuPont trade secret," Chao said in court. "
tried to help Pangang company, which is state-owned, controlled
by the government of the People's Republic of China."
John Potter, an attorney for Pangang, declined to comment.
Chao faces a maximum of 15 years in prison and a $500,000
fine, but prosecutors indicated that they would recommend
Assistant U.S. Attorney John Hemann told Cousins that Chao,
a U.S. citizen, was "providing cooperation" to the government.
Cousins agreed to release Chao without bail. An attorney for
Chao declined to comment.
Prosecutors detailed Liew's alleged links with the Chinese
government in a court filing last month. 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.
The Pangang Group 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.
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.