Home San Francisco Press Releases 2014 Two Individuals and Company Found Guilty in Conspiracy to Sell Trade Secrets to Chinese Companies

Two Individuals and Company Found Guilty in Conspiracy to Sell Trade Secrets to Chinese Companies
First Federal Jury Conviction Under Economic Espionage Act of 1996

U.S. Attorney’s Office March 05, 2014
  • Northern District of California (415) 436-7200

WASHINGTON—A federal jury in San Francisco has found two individuals and one company guilty of economic espionage, theft of trade secrets, bankruptcy fraud, tax evasion, and obstruction of justice for their roles in a long-running effort to obtain U.S. trade secrets for the benefit of companies controlled by the government of the People’s Republic of China (PRC), announced U.S. Attorney Melinda Haag; John P. Carlin, Acting Assistant Attorney General for National Security at the Department of Justice; David Johnson, Special Agent in Charge of the Federal Bureau of Investigation (FBI), San Francisco Division; and Jose Martinez, Special Agent in Charge of the Oakland Field Office, Internal Revenue Service (IRS), Criminal Investigation.

The jury found that Walter Lian-Heen Liew (aka Liu Yuanxuan); his company, USA Performance Technology Inc. (USAPTI); and Robert Maegerle conspired to steal trade secrets from E.I. du Pont de Nemours & Company regarding their chloride-route titanium dioxide production technology and sold those secrets for large sums of money to state-owned companies of the PRC. The purpose of their conspiracy was to help those companies develop large-scale chloride-route titanium dioxide production capability in the PRC, including a planned 100,000-ton titanium dioxide factory in Chongqing. This case marks the first federal jury conviction on charges brought under the Economic Espionage Act of 1996.

“Fighting economic espionage and trade secret theft is one of the top priorities of this office, and we will aggressively pursue anyone, anywhere, who attempts to steal valuable information from the United States,” said U.S. Attorney Melinda Haag. “As today’s verdict demonstrates, foreign governments threaten our economic and national security by engaging in aggressive and determined efforts to steal U.S. intellectual property. I commend the efforts of the women and men of the FBI and the IRS in protecting America’s businesses and our national security.”

“The theft of America’s trade secrets for the benefit of a foreign government poses a substantial threat to our economic and national security,” said Acting Assistant Attorney General John Carlin. “Today’s verdict clearly demonstrates that we take this threat seriously. This case shows that we will not hesitate to pursue and prosecute those who steal from American businesses.”

“The battle against economic espionage has become one of the FBI’s main fronts in its efforts to protect U.S. national security in the 21st century,” said Special Agent in Charge David Johnson.

“This is a case about lying, cheating, and stealing,” said José M. Martínez, Special Agent in Charge, IRS-Criminal Investigation. “The defendants stole secrets, lied to the bankruptcy court, and cheated the IRS and creditors. In today’s economic environment, it’s more important than ever that the American people feel confident that everyone is playing by the rules and paying their fair share.”

The jury also found that Liew, USAPTI, and Maegerle obstructed justice during the course of their conspiracy. The jury found that Liew filed false tax returns for USAPTI and Performance Group, a predecessor company to USAPTI, and made false statements and oaths in bankruptcy proceedings for Performance Group. The guilty verdicts followed a seven-week jury trial before the Honorable Jeffery S. White of the Northern District of California.

Liew, 56, of Walnut Creek, California, was convicted of conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, attempted economic espionage, attempted theft of trade secrets, possession of trade secrets, conveying trade secrets, conspiracy to obstruct justice, witness tampering, conspiracy to tamper with evidence, false statements, filing false tax returns, false statements in bankruptcy proceedings, and false oath in bankruptcy proceedings. Liew was an owner and president of USAPTI, a company headquartered in Oakland, California, that offered consulting services. USAPTI was found guilty of conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, attempted economic espionage, attempted theft of trade secrets, possession of trade secrets, conveying trade secrets, and conspiracy to obstruct justice.

Evidence at trial showed that in the 1990s, Liew met with the government of the PRC and was informed that the PRC had prioritized the development of chloride-route titanium dioxide (TiO2) technology. TiO2 is a commercially valuable white pigment with numerous uses, including coloring paint, plastics, and paper. DuPont’s TiO2 chloride-route process also produces titanium tetrachloride, a material with military and aerospace uses. Liew was aware that DuPont had developed industry-leading TiO2 technology over many years of research and development and assembled a team of former DuPont employees, including Robert Maegerle, to assist him in his efforts to convey DuPont’s TiO2 technology to entities in the PRC. Liew executed contracts with state-owned entities of the PRC for chloride-route TiO2 projects that relied on the transfer of illegally obtained DuPont technology. Liew, Maegerle, and USAPTI obtained and sold DuPont’s TiO2 trade secret to the Pangang Group companies for more than $20 million.

Robert Maegerle, 78, of Harbeson, Delaware, was found guilty of conspiracy to commit theft of trade secrets, attempted theft of trade secrets, conveying trade secrets, and conspiracy to obstruct justice. Evidence at trial showed that Maegerle was employed by DuPont as an engineer from 1956 to 1991, where he had developed detailed knowledge of DuPont’s TiO2 technology and expertise in building TiO2 production lines. He also had access to DuPont TiO2 trade secrets, including specific information regarding DuPont’s TiO2 facility at Kuan Yin, Taiwan. He provided these trade secrets to Liew and USAPTI in furtherance of their contracts with state-owned companies of the PRC for chloride-route TiO2 projects.

The jury also found Liew, Maegerle, and USAPTI guilty of obstructing justice by causing an answer to be filed in a federal civil lawsuit in which they falsely claimed that no information from DuPont’s Kuan Yin plant was used in the USAPTI designs for the development of TiO2 manufacturing facilities. Liew was also found guilty of witness tampering for his efforts to influence a co-defendant’s testimony in the civil lawsuit. The jury also convicted Liew of conspiring with his wife, Christina Liew, to mislead the FBI by corruptly concealing records, documents, and other objects during the FBI’s investigation into their criminal activity.

Liew was also convicted of filing a false income tax return for his company, Performance Group, for calendar years 2006, 2007, and 2008 and for USAPTI in 2009 and 2010. The jury also found Liew guilty of making false statements and a false oath in connection with filing for bankruptcy for Performance Group in 2009.

Liew, as co-owner of USAPTI, entered into contracts worth in excess of $20 million to convey TiO2 trade secret technology to Pangang Group companies. The Liews received millions of dollars of proceeds from these contracts. The proceeds were wired through the United States, Singapore, and ultimately back into several bank accounts in the PRC in the names of relatives of Christina Liew.

DuPont is a company based in Wilmington, Delaware, that manufactures a wide variety of products, including TiO2. DuPont invented the chloride-route process for manufacturing TiO2 in the late-1940s and since then has invested heavily in research and development to improve that production process. The global titanium dioxide market has been valued at roughly $12 billion per year, and DuPont has the largest share of that market.

The chloride-route process is cleaner, more efficient, and produces a higher-quality product than the sulfate-route process prevalent in the PRC. The object of the defendants’ conspiracy was to convey DuPont’s secret chloride-route technology to the PRC companies for the purpose of building modern TiO2 production facilities in the PRC without investing in time-consuming, costly research and development.

The second superseding indictment also charges Liew’s wife, Christina Hong Qiao Liew (aka Qiao Hong), with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, attempted theft of trade secrets, possession of trade secrets, witness tampering, conspiracy to tamper with evidence, and false statements. The charges against Ms. Liew were severed from those against Walter Liew, Maegerle, and USAPTI. Ms. Liew will appear before the Honorable Jeffery S. White on Thursday, March 6, 2014, in San Francisco to set the date for her trial.

Tze Chao (aka Zhao Zhi), a former DuPont employee who was also charged in the second superseding indictment, pleaded guilty to conspiracy to commit economic espionage on March 1, 2012.

Hou Shengdong, the vice director of the Chloride Process TiO2 Project Department for the Pangang Group, was also charged in the second superseding indictment with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, and attempted economic espionage. He is currently a fugitive.

Charges of conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, and attempted economic espionage are also pending against the four PRC state-owned companies charged in the second superseding indictment.

The sentencing hearings for Liew, Maegerle, and USAPTI are scheduled for June 10, 2014, before Judge White in Oakland, California. Liew was remanded to the custody of the U.S. Marshals pending sentencing. Maegerle remains out of custody on conditions of release. The maximum statutory penalties for each of the counts are listed below. However, any sentence will be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

The case is being prosecuted by the Special Prosecutions and National Security Unit of the U.S. Attorney’s Office in San Francisco, the Counterespionage Section of the National Security Division of the U.S. Department of Justice in Washington, D.C., the FBI, Palo Alto Resident Agency, and Oakland Field Office of the IRS-Criminal Investigation.

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