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DuPont Hit by Chinese TiO2 Spy Ring

Thursday, February 16, 2012

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A federal grand jury has charged five individuals and five companies controlled by the Chinese government with raking in millions of dollars by stealing lucrative titanium dioxide technology developed by DuPont.

The defendants, who include former DuPont employees, were charged with economic espionage, theft of trade secrets, witness tampering and other federal crimes “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),” authorities in San Francisco announced.

$20M Contracts

The defendants are accused of earning millions of dollars—funneled through bank accounts and third parties in multiple countries—for providing DuPont’s TiO2 trade secrets to companies controlled by the Chinese government.

 The defendants are accused of stealing trade secrets to help the Chinese government obtain a piece of the $12 billion titanium dioxide global market
The defendants are accused of stealing trade secrets to help the Chinese government obtain a piece of the $12 billion titanium dioxide global market.

Those companies entered into contracts worth more than $20 million to obtain the technology for a company known as the Pangang Group, according to a superseding indictment filed Feb. 7 in the case.

At Stake: $12B Global Market

DuPont is the world’s largest producer of titanium dioxide, currently a $12 billion global market. The pigment is widely used in paints and coatings.

The cost of the pigment has skyrocketed in recent years, as supplies have failed to keep pace with rising global demand. The shortage has set off a worldwide scramble to increase production.

That scramble apparently includes the Chinese government, which has “identified as a priority the development of chloride-route titanium dioxide (TiO2) production capabilities,” according to the indictment. The chloride-route process is more efficient and cleaner than the sulfate-route process prevalent in the PRC, the indictment says.

Conspiracy Cited

To achieve that goal, the Pangang Group and related companies and their employees “conspired and attempted to illegally obtain TiO2 technology that had been developed over many years” by DuPont, authorities said. 

According to the superseding indictment, the companies were aided by “individuals in the United States who had obtained TiO2 trade secrets and were willing to sell those secrets for significant sums of money.” (The fifth defendant is a Chinese citizen.)

The U.S. individuals were identified as Walter Liew and Christina Liew, of California; and former DuPont employees Robert Maegerle and Tze Chao, of Delaware.

“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 the PRC, including a planned 100,000-ton TiO2 factory at Chongqing, PRC,” authorities said in a statement.

Contracts and Bank Accounts

The indictment said the Liews’ engineering consulting company, USA Performance Technology Inc. (USAPTI), and two predecessor companies entered into contracts worth more than $20 million to deliver TiO2 trade secret technology to Pangang Group companies. The Liews allegedly received millions of dollars of proceeds from these contracts, authorities said.

“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,” authorities said.

Multiple Charges

Except for Chao, the defendants all face multiple charges, most of which carry a minimum 10-year prison term. The list includes 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, and false statements.

Charged were:

• Walter Lian-Heen Liew (aka Liu Yuanxuan), 54, of Orinda, CA, a naturalized U.S. citizen and co-owner of USAPTI. Liew was arrested in August on other charges in the case and is being held pending trial.

• Christina Hong Qiao Liew (aka Qiao Hong), 49, of Orinda, CA. The wife of Walter Liew is also a naturalized U.S. citizen and co-owner of USAPTI.

• Hou Shengdong, 42, a citizen of the PRC, was the vice director of the Chloride Process TiO2 Project Department for the Pangang Group Titanium Industry Company Ltd. Hou and other Pangang employees allegedly requested DuPont blueprints as a condition of working on the project. A warrant has been issued for Hou’s arrest.

• Robert Maegerle, 76, of Harbeson, DE, worked for DuPont as an engineer from 1956 to 1991. According to the indictment, Maegerle had access to DuPont TiO2 trade secrets, including specific information regarding its TiO2 facility at Kwan Yin, Taiwan. He was arrested earlier this month.

• Tze Chao, 77, of Newark, DE, worked for DuPont from 1966 to 2002. Chao was served with a summons to appear in court on a single charge.

The investigation began in March 2011 after DuPont reported to the FBI that its TiO2 trade secrets had been misappropriated.

Assistant Attorney General Lisa Monaco said: “The theft of America’s trade secrets for the benefit of China and other nations poses a substantial and continuing threat to our economic and national security, and we are committed to holding accountable anyone who robs American businesses of their hard-earned research.”

   

Tagged categories: DuPont; Laws and litigation; Titanium dioxide

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