Pangang Group Cos & Others Charged w/ Trade Secret Theft to China
On February 8, 2011, the Justice Department announced that five individuals and five companies have been charged with economic espionage and theft of trade secrets for their roles in a long-running effort to obtain U.S. trade secrets for the benefit of companies controlled by the Chinese government.
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Chinese Gov't Identified Development of TiO2 Production as a Priority
According to the superseding indictment, the Chinese government identified the development of chloride-route titanium dioxide (TiO2) production capabilities as a priority. TiO2 is a commercially valuable white pigment with numerous uses, including coloring paint, plastics and paper. Companies controlled by the Chinese government, specifically the Pangang Group companies named in the superseding indictment and employees of those companies, conspired and attempted to illegally obtain TiO2 technology that had been developed over many years of research and development by E.I. du Pont de Nemours & Company (DuPont).
(DuPont invented the chloride-route process for manufacturing TiO2 in the 1940s and has since invested heavily in research and development to improve that production process. The global TiO2 market has been valued at roughly $12 billion and DuPont has the largest share of that market. The chloride-route process is more efficient and cleaner than the sulfate-route process prevalent in China. The object of the defendants’ conspiracy was allegedly to convey DuPont’s secret chloride-route technology to Chinese companies for the purpose of building modern TiO2 production facilities in China without investing in time-consuming and expensive research and development.)
Individuals in U.S. Sold TiO2 Trade Secrets from DuPont to Chinese Companies
The Pangang Group companies were allegedly aided in their efforts by individuals in the U.S. who had obtained TiO2 trade secrets and were willing to sell those secrets for significant sums of money. Defendants Walter Liew, Christina Liew, Robert Maegerle and Tze Chao obtained and possessed TiO2 trade secrets belonging to DuPont. Each of these individuals allegedly sold information containing DuPont TiO2 trade secrets to the Pangang Group companies for the purpose of helping those companies develop large-scale chloride route TiO2 production capability in China, including a planned 100,000 ton TiO2 factory at Chongqing, China.
Walter and Christina Liew, USA Performance Technology Inc. (USAPTI) and one of its predecessor companies, Performance Group, entered into contracts worth in excess of $20 million to convey TiO2 trade secret technology to Pangang Group companies. The Liews allegedly received millions of dollars of proceeds from these contracts, which were wired through the U.S., Singapore and ultimately back into several bank accounts in china in the names of Christina Liew's relatives.
Five Companies, Five Individuals Charged for Economic Espionage, Etc.
Each of the five corporate defendants named in the superseding indictment are charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets and attempted economic espionage. The superseding indictment names the following five companies as defendants:
- Pangang Group Company Ltd. -- a state-owned enterprise controlled by the State-Owned Assets Supervision and Administration Commission of China's State Council and located in Sichuan Province, China.
- Pangang Group Steel Vanadium & Titanium Company Ltd. (PGSVTC) -- a subsidiary of the Pangang Group.
- Pangang Group Titanium Industry Company Ltd. -- a subsidiary of PGSVTC and was the entity directly responsible for constructing the 100,000 ton chloride-route TiO2 factory at Chongqing, China. Pangang Group Titanium entered into an agreement with USAPTI in 2009 under which USAPTI conveyed DuPont TiO2 technology to Pangang Group Titanium and its employees.
- Pangang Group International Economic & Trading Co. (PIETC) -- a subsidiary of PGSVTC and is responsible for financial matters related to the construction of the Chongqing TiO2 factory. PIETC signed a 2009 agreement with USAPTI under which DuPont technology was transferred.
- USA Performance Technology Inc. (USAPTI) -- a California-based engineering consulting company owned and operated by Walter and Christina Liew. USAPTI allegedly succeeded two other companies owned by the Liews -- Performance Group USA and LH Performance -- which also were used in the conspiracy to convey DuPont trade secrets to China-based companies.
The five individuals charged in the indictment are:
- Walter Lian-Heen Liew, co-owner of USAPTI;
- Christina Hong Qiao Liew, co-owner of USAPTI;
- Hou Shengdong, a Chinese citizen who was vice director of the Chloride Process TiO2 Project Department for the Pangang Group Titanium Industry Company Ltd.;
- Robert Maegerle, who was employed by DuPont as an engineer from 1956 to 1991; and
- Tze Chao, who was employed by DuPont from 1966 to 2002.