The Rising Influence of Rising Affluence

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China Secrets Case Yields Indictment

http://online.wsj.com/article/SB10001424052970203315804577211463864126278.html

By JUSTIN SCHECK

SAN FRANCISCO—A federal grand jury on Wednesday indicted a San Francisco Bay area couple on charges of conspiring to steal trade secrets from DuPont Co. and sell them to Chinese state-owned companies.

The indictment said Walter Liew, 54 years old, and his wife, Christina Liew, 49, conspired to take confidential DuPont documents and used them to obtain more than $20 million in contracts from companies in China.

The case is the latest in a series of federal indictments alleging the theft of U.S. companies' intellectual property by Chinese companies.

On Wednesday, a federal court in Chicago convicted Chinese national Hanjuan Jin of stealing trade secrets from Motorola Inc. but acquitted her of more serious espionage charges. Federal prosecutors in 2010 abandoned a corporate-espionage case against two men accused of stealing secrets from NetLogic Microsystems Inc. to sell to Chinese companies after a jury acquitted the men on some charges and deadlocked on others.

The indictment against the Liews came after nearly a yearlong investigation in which a witness committed suicide and federal authorities detained two Chinese executives for weeks as witnesses, people familiar with the matter said.

The indictment alleged that Mr. Liew gained information on DuPont's titanium-manufacturing practices by hiring former DuPont employees with knowledge of the company's technology.

A DuPont spokesman said the Wilmington, Del., company approached law-enforcement officials after learning that information on its titanium-dioxide factories had been stolen. Titanium dioxide is found in paints with military and aerospace uses, among other things. DuPont has filed a civil suit against Mr. Liew that is pending.

Lawyers for the Liews declined to comment on Wednesday's indictment.

Ling-Chi Wang, a professor emeritus at University of California, Berkeley, who has been advising the Liews on how to fight the charges, said he was "outraged" that prosecutors detained Mr. Liew, a U.S. citizen, for seven months before obtaining the indictment.

The investigation gained steam over the summer, prosecutors said in court documents, after FBI agents arrested the Liews on charges of obstructing justice after they tried to keep agents from a trove of documents during a search of their home. The Liews have pleaded not guilty to the obstruction charges.

The documents, which prosecutors filed in court last week, include letters and emails in which Mr. Liew allegedly wrote that a Chinese government official told him to develop expertise in titanium manufacturing and wrote that he has "possession and mastery of the DuPont titanium" technology that he can sell to Chinese companies.

Mr. Liew's lawyer has said in court filings that the documents aren't accurate.

In a statement, China's Ministry of Commerce said it hasn't "heard from the U.S. government or relevant industrial circles about the issue," and said the "Chinese government has long been putting emphasis on the protection of Intellectual property."

Prosecutors also built their case using business associates of the Liews, the people familiar with the matter said. These included two executives from Pangang Group Co., a state-owned Chinese enterprise that is a defendant in the case, who federal agents detained last year and prevented from leaving the U.S. to obtain testimony about the Liews, the people said. The executives, the people said, recently were allowed to return to China.

Pangang, which was named as a defendant in the indictment, couldn't be reached for comment. The indictment also names four other Chinese state-owned companies and three business associates of the Liews as defendants.

A former employee of Mr. Liew, Reno, Nev., engineer Tim Spitler, told prosecutors he discussed secret DuPont documents with Mr. Liew, people familiar with the investigation said. Mr. Spitler was expected to be a witness for the government but killed himself last month, the people said. Members of his family didn't return calls.

Wednesday's indictment said Mr. Liew's attempts to obtain and sell DuPont secrets began in the 1990s, when Chinese-government officials placed a priority on the development of titanium-dioxide manufacturing.

In 1998, the indictment said, Mr. Liew signed a $5.6 million contract to sell the technology to a Chinese company, and he signed larger deals with other companies in 2005 and 2009. From 2003 to 2008, prosecutors alleged, Mr. Liew and his associates advised Pangang Group on constructing a titanium-manufacturing plan that used DuPont blueprints.

—Yoli Zhang contributed
to this article.
Write to Justin Scheck at [e-mail]