Two Chinese Nationals Charged with Stealing Trade Secrets from Missouri Manufacturing Plant

KANSAS CITY, MO—Two Chinese nationals were charged in federal court today with attempting to pay $100,000 for stolen trade secrets from Pittsburgh Corning, which has a manufacturing plant in Sedalia, Missouri, that produces FOAMGLAS, announced David M. Ketchmark, Acting U.S. Attorney for the Western District of Missouri.

Ji Li Huang, 45, and Xiao Guang Qi, 31, both citizens of China, were charged in a federal criminal complaint filed in the U.S. District Court in Kansas City. Today’s complaint alleges that Huang and Qi attempted to illegally purchase trade secrets of Pittsburgh Corning for the purpose of opening a plant in China to compete with Pittsburgh Corning. Huang and Qi, who were arrested on Sunday, September 2, 2012, had an initial court appearance today and remain in federal custody pending a detention hearing.

Pittsburgh Corning, headquartered in Pittsburgh, manufactures various grades or densities of cellular glass insulation sold under the trade name FOAMGLAS. That material is used to insulate industrial piping systems and liquefied natural gas storage tank bases. Pittsburgh Corning’s main customers are energy companies, petrochemical companies, and natural gas facilities.

The Pittsburgh Corning facility in Sedalia is the company’s flagship facility, responsible for approximately 90 percent of the material produced by the company. The Sedalia facility operates 24 hours per day, 365 days per year. The plant employs 250-300 people and conducts research and development on FOAMGLAS for Pittsburgh Corning.

Pittsburgh Corning recently made technological advances in the formulation and manufacturing process of FOAMGLAS insulation. Pittsburgh Corning considers the product formula and manufacturing process for FOAMGLAS proprietary and trade secrets.

Three months ago, Pittsburgh Corning announced plans to open a facility in China. Pittsburgh Corning is negotiating to build a plant in China, since most of the world’s need for FOAMGLAS comes from China. FOAMGLAS is used in liquid natural gas (LNG) tanks. China has approximately 10,000 LNG plants.

According to an affidavit filed in support of today’s criminal complaint, a man identified as “T.S.” requested a tour of Pittsburgh Corning’s FOAMGLAS plant on June 7, 2012. Pittsburgh Corning refused the request for a tour. On June 14, 2012, T.S., along with Huang and an uncharged co-conspirator (who is not identified in the affidavit), met with a plant employee. The plant employee discussed some of the general processes of producing FOAMGLAS, however, he did not disclose any proprietary information.

Another plant employee reported that Huang and the uncharged co-conspirator were trespassing at the Sedalia plant on June 18 and 19, 2012. They allegedly recorded video or photos on a cell phone and asked employees specific questions about FOAMGLAS.

On July 22, 2012, an advertisement was published in the local newspaper that solicited “technical talent” with experience at Corning Pittsburgh to lead a project to build a foam glass factory in the Asian market. A confidential source—a trusted employee working with the FBI—responded to the contact e-mail address cited in the newspaper advertisement. A second uncharged co-conspirator (who also is not identified in the affidavit) allegedly corresponded by e-mail with the FBI’s cooperating source, who pretended to be willing to unlawfully copy and sell trade secrets. During a monitored telephone call, the affidavit says, the cooperating source told this co-conspirator that the information he requested was Pittsburgh Corning’s proprietary and confidential information and that he could go to jail if anyone found out he gave away Pittsburgh Corning’s proprietary information.

During the monitored telephone call, the affidavit says, this co-conspirator agreed to pay $100,000 to the cooperating source. They later arranged for Huang to travel from China to the United States to meet with the cooperating source. They allegedly agreed that $25,000 would be exchanged on September 2, 2012, for a package of Pittsburgh Corning’s processes and formulary on FOAMGLAS. They also discussed paying the cooperating source to travel to China several times for consulting, the affidavit says.

On Saturday, September 1, 2012, the cooperating source met with Huang and Qi at a Kansas City restaurant. Qi participated in the meeting and also acted as a translator for Huang for parts of the conversation. According to the affidavit, a follow-up meeting was scheduled for the next day, at which the cooperating source would bring the stolen proprietary information and Huang and Qi would bring the payment. The cooperating source told Huang and Qi that he had to drive back to Pittsburgh Corning and break into the engineering department to steal the documents and drawings for the equipment in order to complete the list. Qi asked if there would be any problem; the cooperating source explained to Qi there would be no problem because nobody would be at the plant over the holiday weekend.

The next day, the affidavit says, Huang and Qi met the cooperating source at a prearranged location and brought a bag containing the money. The cooperating source showed them documents that were purportedly Pittsburgh Corning’s trade secret information, some of which were stamped with secret and confidential markings.

Shortly afterward, FBI agents arrested Huang and Qi at their hotel room.

Ketchmark cautioned that the charge contained in this complaint is simply an accusation, and not evidence of guilt. Evidence supporting the charge must be presented to a federal trial jury, whose duty is to determine guilt or innocence.

This case is being prosecuted by Assistant U.S. Attorneys Brian Casey and Matt Wolesky. It was investigated by the FBI.