California Conviction for Economic Espionage

California

In a ground-breaking case which has spanned some three years, a Federal Court in California has finally sentenced a man convicted for economic espionage to a 15-year sentence. Walter Liew was convicted in March for selling trade secrets to the Chinese government, and has also been fined $28.3 million.

Though economic espionage is a little-known form of the crime, the FBI’s website on the subject states that the Economic Espionage Act was put into place in 1996 to protect the trade secrets and intellectual property of corporations in the United States who would be adversely economically affected if protected information were to be made illegally available to foreign competitors. A person participating in economic espionage, the FBI says, is one who knowingly acquires trade secrets from a company and sells or gives them to any foreign government or company for the benefit of that government.

Walter Liew, a former Malaysian turned naturalized U.S. citizen who now lives in Walnut Creek, California, set up a company in the 1990s whose purpose was to gain access to the formula and methods of making a certain type of pigment manufactured by the DuPont Corporation, as well as to plans detailing how the U.S. manufacturing giant set up its factories and managed production of the pigment. Liew hired a number of former engineers from DuPont in order to gain access to this information, then sold it to a Chinese company called Pangang Group Co. The Chinese government-controlled company contracted Liew’s company to build a factory which would produce the patent-protected pigment, paying over $28 million for them to do so.

Two California engineers who worked for Liew were also convicted for the same crime of economic espionage in March for knowingly supplying the confidential information to Liew and his Chinese clients, as well as knowingly developing the copycat formula to be used in the manufacture of the disputed pigment, and they currently await sentencing. A third engineer was charged at the same time as Liew and his other two employees, but committed suicide the day before he was supposed to sign a plea bargain.

The FBI had been investigating Liew and his company for quite some time, and say this is the first case of its kind to be brought to court since the Economic Espionage Act was signed into law almost 20 years ago. Among the evidence in both cases were plans for DuPont’s titanium dioxide plant in Taiwan which was branded and clearly marked confidential, and a thumb drive containing formulas and processes for manufacturing titanium dioxide. Both of these items were found in the home of Robert Meagerle, one of the other convicted engineers, who testified that he did not work with DuPont on the Taiwanese plant, and in a letter to Liew stated that he believed the information was publicly available after the sale of the Taiwan plant.

Maegerle’s story was clearly not believed by the jury, who also found Liew and Meagerle guilty of obstructing justice in their attempts to withhold information from the FBI. Liew’s company, USAPTI and Performance Group, was also indicted for filing false tax returns in an effort to cover up the thefts.  In addition to the $28.3 million in damages payable to DuPont  in a complementary civil lawsuit filed by the manufacturing company, Liew’s company is being fined $18 million for it’s misfiling of taxes and false statements in related bankruptcy proceedings.

Robert Meagerle is expected to be sentenced later this month for his hand in the case. The sentence he faces is similar to Liew’s, but with much lighter fines. For the FBI’s part, it hopes that this conviction in California is a first step in its fight to protect U.S. companies and their intellectual property from economic espionage and the selling of trade secrets to foreign governments and foreign companies.

By Layla Klamt

Sources:
ABC.com
FBI.gov (Economic Espionage)
FBI.gov (Two Individuals)
Law360

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