Chinese Citizen Convicted of Wire Fraud for Stealing Confidential Information from New Jersey Company

TRENTON, NJ—A citizen of the People’s Republic of China was convicted today in Trenton federal court of seven counts of wire fraud in connection with his scheme to steal confidential and proprietary business information, relating to computer systems and software with environmental applications, from his New Jersey employer, U.S. Attorney Paul J. Fishman announced today.

The jury returned the guilty verdict against Yan Zhu, a/k/a “Wesley Zhu,” 33, of Lodi, N.J., following a 13-day trial before U.S. District Judge Joel A. Pisano in Trenton. Zhu was convicted of all seven counts of wire fraud charged in the superseding indictment on which he was tried. The jury acquitted Zhu on a charge of conspiracy to steal trade secrets and two counts of unauthorized transmission of trade secrets in interstate or foreign commerce.

According to documents filed in this case and the evidence at trial:

Zhu was employed at a Mercer County, New Jersey-based company, identified in court documents as “Company A,” as an environmental engineer from May 2006, until his termination in July 2008. Company A, a software development and consulting company, develops, supports, and implements computer systems and software for environmental applications.

While employed with Company A, Zhu worked on a comprehensive hazardous waste information management system that Company A developed for the Chinese market. The purpose of the product was to allow a customer of the company—such as an environmental regulatory agency, as well as entities that interact with the environmental regulatory agency, such as hazardous waste producers and shippers—to enter, organize, and view certain data regarding pollution and hazardous waste within that agency’s jurisdiction. In addition, Zhu worked on a Company A database application that was related to this software system.

In 2006, Zhu introduced a family member in China, identified in court filings as “CC-1,” to Company A to act as Company A’s sales representative in the Chinese market. In 2007, with the sales representative’s assistance, Company A signed a contract to sell the software system to the Environmental Protection Agency for Shaanxi Province, in Xian City, China.

Also in 2007, CC-1 created a Chinese company known as Xian Green Innovation. Zhu, CC-1, and another individual identified in court filings as “CC-2,” were all affiliated with Xian Green Innovation.

Between January and March of 2008, Zhu sent confidential information relating to the Company A software system and the related database application to CC-2. Zhu, CC-1, and CC-2 then used this confidential information to design and build their own environmental software program, which they marketed to the Shaanxi Province as well as at least one other province in China where Company A had sought to do business.

Between January and July of 2008, Zhu concealed his conduct from Company A, including by telling individuals affiliated with Xian Green Innovation not to contact him at work or through his Company A e-mail account regarding Green Innovation business. In addition, when Zhu was terminated in July 2008, for sending Company A confidential and proprietary business information to his personal e-mail account, Zhu represented that he had not disclosed Company A confidential information to anyone outside of the company. Zhu also agreed to bring in all of his computer equipment for inspection by Company A. At trial, Zhu admitted that he brought in only one of the two computers that he owned at that time. The second computer, which was seized by the FBI in April 2009, during the execution of a search warrant, was found to contain e-mails from Zhu to CC-2 attaching Company A’s confidential and proprietary business information regarding the software system.

The seven counts of wire fraud on which the defendant was convicted each carry a maximum penalty of 20 years in prison and a $250,000 fine, or twice the aggregate loss to the victims or gain to the defendants.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, for the investigation leading to today’s conviction.

The government is represented by Assistant U.S. Attorney Eric M. Schweiker of the U.S. Attorney’s Criminal Division in Trenton, and Trial Attorney Richard S. Scott, of the U.S. Department of Justice’s Counterespionage Section.

Defense counsel: James C. Patton, Esq., Livingston, N.J.