Category: NSD201801

Categories
NSD201801

NSD201801-042

Trade Secrets to South Korea

On May 1, 2015, Kolon Industries, Inc., a South Korean industrial company, was sentenced in the Eastern District of Virginia to 5 years’ probation and was ordered to pay $400 special assessment, $85,000,000 in criminal fines and $275,000,000 in restitution. Kolon Industries, Inc., appearing through two successor entities—Kolon Industries, Inc. and Kolon Corporation (collectively, Kolon)—pleaded guilty in federal court on April 30, 2015, to one count of conspiracy to convert trade secrets involving E.I. DuPont de Nemours & Co.’s (DuPont) Kevlar technology. According to the statement of facts filed with the plea agreement, from June 2006, to Feb. 2009, Kolon conspired with former DuPont employees and others to steal DuPont’s trade secrets for making Kevlar, a highstrength, para-aramid synthetic fiber. Kevlar, a trademarked name, is one of DuPont’s most well-known products and is used in a wide range of commercial applications such as body armor, fiber optic cables, and automotive and industrial products. Kolon admitted that it was attempting to improve the quality of its own para-aramid fiber known as Heracron. Kolon personnel met repeatedly with former DuPont employees, including Edward Schulz of Brownstown, PA, and Michael Mitchell, of Chesterfield, VA, to obtain confidential and proprietary DuPont information about Kevlar. Schulz pleaded guilty to conspiracy to steal trade secrets in Sep. 2014, and was sentenced in July 2015, to 2 years’ probation, 500 hours’ community service, $100 special assessment and a $75,000 fine. Mitchell pleaded guilty to theft of trade secrets and obstruction of justice in Dec. 2009, and was sentenced to 18 months in prison, 3 years supervised release, $200 special assessment, and $187,895.90 in restitution. Kolon admitted that it obtained technical and business documents regarding Kevlar, including instructional materials that described DuPont’s “New Fiber Technology,” documents on polymerization, and a detailed breakdown of DuPont’s capabilities and costs for the full line of its Kevlar products and DuPont’s Kevlar customers. According to the statement of facts and Mitchell’s admissions at his guilty plea, Mitchell exchanged numerous telephone calls and emails with Kolon personnel. On more than one occasion, Mitchell advised Kolon personnel that some of the information they sought was proprietary and that DuPont considered such information to be trade secrets. Mitchell also coordinated a meeting at a hotel in Richmond, at which Kolon personnel were introduced to a cooperating witness who pretended to be a disgruntled scientist from DuPont. During the Richmond meeting, Kolon personnel indicated that they would only be comfortable communicating with the cooperating witness in a manner that was confidential and that would not leave an evidentiary trail. In Feb. 2009, DuPont filed a civil lawsuit against Kolon in the Eastern District of Virginia, alleging theft of trade secrets. Thereafter, certain Kolon personnel attempted to delete files and emails related to Mitchell, Schulz and outside consultants hired to improve Kolon’s para-aramid fiber, and urged other Kolon personnel to search for such materials and mark them for deletion. Kolon also admitted that certain employees approached a former employee of an American subsidiary of Teijin Ltd. – a Japanese company that makes the para-aramid fiber called Twaron—in an unsuccessful effort to obtain information about Twaron. This case represents the first time that foreign corporations with no direct presence in the United States were found to be successfully served with U.S. criminal process, over their objections, based on service pursuant to an international treaty. In Dec. 2014, the district court found that both of the successor companies were properly served, and ordered them to appear for arraignment. In Feb. 2015, the Fourth Circuit Court of Appeals denied Kolon’s petition for extraordinary relief seeking reversal of the district court’s order. Five former Kolon executives and employees, all of South Korea, were charged in an Aug. 2012, indictment filed in the Eastern District of Virginia: Jong-Hyun Choi, a senior executive who oversaw the Heracron Business Team; In-Sik Han, who  managed Kolon’s research and development related to Heracron; Kyeong-Hwan Rho, the head of the Heracron Technical Team; Young-Soo Seo, the general manager for the Heracron Business Team; and Ju-Wan Kim, a manager on the Heracron Business Team. The case was investigated by the FBI’s Richmond Division.

Categories
NSD201801

NSD201801-029

Theft of Valuable Source Code for China

On June 14, 2016, Jiaqiang Xu was charged in the Southern District of New York in a six-count superseding indictment with economic espionage and theft of trade secrets, in connection with Xu’s theft of proprietary source code from his former employer, with the intent to benefit the National Health and Family Planning Commission of the People’s Republic of China. On May 19, 2017, Xu pleaded guilty to the indictment, and is to be sentenced in January 2018. Xu was initially arrested by the FBI on Dec. 7, 2015, and subsequently charged on Jan. 6, 2016, by indictment with one count of theft of trade secrets. According to court documents, from Nov. 2010, to May 2014, Xu worked as a developer for a particular U.S. company (the “Victim Company”). As a developer, Xu enjoyed access to certain proprietary software (the “Proprietary Software”), as well as that software’s underlying source code (the “Proprietary Source Code”). The Proprietary Software is a clustered file system developed and marketed by the Victim Company in the U.S. and other countries. A clustered file system facilitates faster computer performance by coordinating work among multiple servers. The Victim Company takes significant precautions to protect the Proprietary Source Code as a trade secret. The Victim Company takes these precautions in part because the Proprietary Software and the Proprietary Source Code are economically valuable, which value depends in part on the Proprietary Source Code’s secrecy. In May 2014, Xu voluntarily resigned from the Victim Company. Xu subsequently, in a series of communication with UC agents, uploaded Victim Company’s Proprietary Source Code to the UC’s computer network. On Dec. 7, 2015, Xu met with UC-2 at a hotel in White Plains, New York (the Hotel). Xu stated, in sum and substance, that Xu had used the Proprietary Source Code to make software to sell to customers, that Xu knew the Proprietary Source Code to be the product of decades of work on the part of the Victim Company, and that Xu had used the Proprietary Source Code to build a copy of the Proprietary Software, which Xu had uploaded and installed on the UC Network (i.e., the Xu Upload). Xu also indicated that Xu knew the copy of the Proprietary Software that Xu had installed on the UC Network contained information identifying the Proprietary Software as the Victim Company’s property, which could reveal the fact that the Proprietary Software had been built with the Proprietary Source Code without the Victim Company’s authorization. Xu told UC-2 that Xu could take steps to prevent detection of the Proprietary Software’s origins – i.e., that it had been built with stolen Proprietary Source Code – including writing computer scripts that would modify the Proprietary Source Code to conceal its origins. Later on Dec. 7, 2015, Xu met with UC-1 and UC-2 at the Hotel. During that meeting, Xu showed UC-2 a copy of what Xu represented to be the Proprietary Source Code on Xu’s laptop. Xu noted to UC-2 a portion of the code that indicated it originated with the Victim Company as well as the date on which it had been copyrighted. Xu also stated that Xu had previously modified the Proprietary Source Code’s command interface to conceal the fact that the Proprietary Source Code originated with the Victim Company and identified multiple specific customers to whom Xu had previously provided the Proprietary Software using Xu’s stolen copy of the Proprietary Source Code. This case was investigated by the FBI.

Categories
NSD201801

NSD201801-028

Satellite Trade Secrets to Undercover Agent

On July 7, 2016, in the Central District of California, Gregory Allen Justice was arrested by FBI special agents on federal charges of economic espionage and violations of the Arms Export Control Act (AECA) for his attempts to sell sensitive satellite information to a person he believed to be a foreign intelligence agent. Justice worked for a cleared defense contractor as an engineer on military and commercial satellites during his alleged crimes. According to the affidavit in support of the criminal complaint, Justice stole proprietary trade secret materials from his employer and provided them to a person whom he believed to be a representative of a foreign intelligence service, but who was in fact an FBI undercover agent. In addition to their proprietary nature, the documents contained technical data covered by the U.S. Munitions List and therefore controlled for export from the United States under the International Traffic in Arms Regulations, according to the allegations. In exchange for providing these materials, Justice allegedly sought and received cash payments. On May 22, 2017, Gregory Allen Justice pleaded guilty to one count of attempting to commit economic espionage and one count of attempting to violate the AECA; on Sep. 19, 2017, he was sentenced to 60 months in prison. This investigation was conducted by the FBI and AFOSI.

Categories
NSD201801

NSD201801-027

Sensitive Military and Export Controlled Data to China

On July 13, 2016, in the Central District of California, Su Bin, also known as Stephen Su and Stephen Subin, a Chinese national and resident of the People’s Republic of China, was sentenced to 46 months’ imprisonment, a fine of $10,000 and one year of supervised release. Previously, on March 23, 2016, Su Bin pleaded guilty to participating in a yearslong conspiracy to hack into the computer networks of major U.S. defense contractors, steal sensitive military and export-controlled data and send the stolen data to China. A criminal complaint filed in 2014 and subsequent indictments filed in Los Angeles charged Su Bin, a China-based businessman in the aviation and aerospace fields, for his role in the criminal conspiracy to steal military technical data, including data relating to the C-17 strategic transport aircraft and certain fighter jets produced for the U.S. military. Su was initially arrested in Canada in July 2014, on a warrant issued in relation to this case. Su ultimately waived extradition and consented to be conveyed to the United States in Feb. 2016. In the plea agreement, Su admitted to conspiring with two persons in China from Oct. 2008, to March 2014, to  gain unauthorized access to protected computer networks in the United States, including computers belonging to the Boeing Company in Orange County, California, to obtain sensitive military information and to export that information illegally from the United States to China. As part of the conspiracy, Su would email the co-conspirators with guidance regarding what persons, companies and technologies to target during their computer intrusions. One of Su’s co-conspirators would then gain access to information residing on computers of U.S. companies and email Su directory file listings and folders showing the data that the co-conspirator had been able to access. Su then directed his co-conspirator as to which files and folders his co-conspirator should steal. Once the co-conspirator stole the data, including by using techniques to avoid detection when hacking the victim computers, Su translated the contents of certain stolen data from English into Chinese. In addition, Su and his co-conspirators each wrote, revised and emailed reports about the information and technology they had acquired by their hacking activities, including its value, to the final beneficiaries of their hacking activities. Su’s plea agreement makes clear that the information he and his co-conspirators intentionally stole included data listed on the U.S. Munitions List contained in the International Traffic in Arms Regulations. Su also admitted that he engaged in the crime for the purpose of financial gain and specifically sought to profit from selling the data the he and his co-conspirators illegally acquired. This case was investigated by the FBI, the U.S. Air Force’s Office of Special Investigations, and the Justice  Department’s CRM/OIA and NSD/CES.

Categories
NSD201801

NSD201801-025

Theft of Trade Secrets of Inbred Corn Seeds to China

On Oct. 5, 2016, in the Southern District of Iowa, Mo Hailong, a/k/a Robert Mo, a Chinese national, was sentenced to 36 months in prison for conspiracy to steal trade secrets. Mo Hailong was also ordered to serve three years of supervised release following his term of imprisonment. On Dec. 19, 2016, Mo Hailong was ordered to pay restitution in the amount of $425,000. In addition, the Court ordered the forfeiture of two farms in Iowa and Illinois that were purchased and utilized by Mo Hailong and others during the course of the conspiracy. Mo Hailong is a Chinese national who became a lawful permanent resident of the United States. During the course of the conspiracy, Mo Hailong was employed as the Director of International Business of the Beijing Dabeinong Technology Group Company, commonly referred to as DBN. DBN is a Chinese conglomerate with a corn seed subsidiary company, Kings Nower Seed. According to the plea agreement entered on Jan. 27, 2016, Mo Hailong admitted to participating in a long-term conspiracy to steal trade secrets from DuPont Pioneer and Monsanto. Mo Hailong participated in the theft of inbred corn seeds from fields in the Southern District of Iowa and elsewhere for the purpose of transporting the seeds to DBN in China. The stolen inbred, or parent, seeds were the valuable trade secrets of DuPont Pioneer and Monsanto. The investigation was initiated when DuPont Pioneer security staff detected suspicious activity and alerted the FBI. DuPont Pioneer and Monsanto were fully cooperative throughout the investigation. This matter was investigated by the FBI.

Categories
NSD201801

NSD201801-015

Trade Secrets for Technologically Advanced Titanium to China

On Dec. 16, 2016, in the District of Connecticut, Yu Long, a citizen of China and lawful permanent resident of the U.S., waived his right to be indicted and pleaded guilty to charges related to his theft of numerous sensitive military program documents from United Technologies and transporting them to China. Long pleaded guilty to one count of conspiracy to engage in the theft of trade secrets knowing that the offense would benefit a foreign government, foreign instrumentality or foreign agent. He also pleaded guilty to one count of unlawful export and attempted export of defense articles from the U.S., in violation of the Arms Export Control Act. On June 27, 2017, Yu Long was sentenced to time served and a special assessment of $200. Previously, on Nov. 7, 2014, Long was arrested in Ithaca, NY, pursuant to a federal criminal complaint which charged Long with attempting to travel to China with sensitive proprietary documents that set forth detailed equations and test results used in the development of technologically advanced titanium for U.S. military aircraft. The documents were taken from a Connecticut defense contractor where Long had been employed. Long attempted, two days earlier, to fly to China from Newark Liberty International Airport in New Jersey. As alleged in the complaint affidavit and in statements made in court, Long holds Chinese citizenship and is a lawful permanent resident of the U.S. From approximately Aug. 2008, to May 2014, Long worked as a Senior Engineer/Scientist at a research and development center for a major defense contractor in Connecticut (“Company A”). Both during and after his employment there, Long traveled to the People’s Republic of China. Most recently, on Aug. 19, 2014, Long returned to the U.S. from China through John F. Kennedy International Airport in New York. During a secondary inspection screening by U.S. Customs and Border Protection (CBP) officers, Long was found in the possession of $10,000.00 in undeclared U.S. cash, registration documents for a new corporation being set up in China, and a largely completed application for work with a state-controlled aviation and aerospace research center in China. The application materials highlighted certain of Long’s work history and experiences that he claimed to have obtained while employed at Company A, including work on F119 and F135 engines. The F119 engine is employed by the U.S. Air Force F-22 Raptor fighter aircraft. The F135 engine is employed by the U.S. Air Force F-35 Lightning II fighter aircraft. The criminal complaint and statements made in court further state that on Nov. 5, 2014, Long boarded a flight from Ithaca to Newark Liberty International Airport, with a final destination of China. During Long’s layover in Newark, CBP officers inspected Long’s checked baggage and discovered that it contained, among other things, sensitive, proprietary and export controlled documents from another major defense contractor located outside the state of Connecticut (“Company B”). Further investigation determined that the U.S. Air Force had convened a consortium of major defense contractors, including Company A and Company B, to work together to see whether they could collectively lower the costs of certain metals used. As part of those efforts, members of the consortium shared technical data, subject to stringent restrictions on further dissemination. Company B reviewed the Company B documents found in Long’s possession at Newark Liberty Airport and confirmed that it provided the documents to Company A as part of the consortium. Company B further confirmed that Long was never an employee of Company B. A review of Company A’s computer records indicated that Long had printed the documents while employed at Company A. The documents bore warnings that they contained sensitive, proprietary and export-controlled material, which could not be copied or communicated to a third party. This investigation was conducted by the FBI, HSI, and CBP.

Categories
NSD201801

NSD201801-014

Production and Development of Nuclear Material for China

On Jan. 6, 2017, in the Eastern District of Tennessee, Szuhsiung Ho, a/k/a Allen Ho, a naturalized U.S. citizen, pleaded guilty to conspiracy to unlawfully engage or participate in the production or development of special nuclear material outside the United States, without the required authorization from the U.S. Department of Energy (DOE), in violation of the Atomic Energy Act. On August 31, 2017, Ho was sentenced to 24 months in prison and fined $20,000. In April 2016, a federal grand jury issued a two-count indictment against Ho; China General Nuclear Power Company (CGNPC), the largest nuclear power company in China; and Energy Technology International (ETI), a Delaware corporation. At the time of the indictment Ho was a nuclear engineer, employed as a consultant by CGNPC, and was also the owner of ETI. CGNPC specialized in the development and manufacture of nuclear reactors and was controlled by China’s State-Owned Assets Supervision and Administration Commission. According to documents filed in the case, beginning in 1997 and continuing through April 2016, Ho conspired with others to engage or participate in the development or production of special nuclear material in China, without specific authorization to do so from the U.S. Secretary of Energy, as required by law. Ho assisted CGNPC in procuring U.S.-based nuclear engineers to assist CGNPC and its subsidiaries with designing and manufacturing certain components for nuclear reactors more quickly by reducing the time and financial costs of research and development of nuclear technology. In particular, Ho sought technical assistance related to CGNPC’s Small Modular Reactor Program; CGNPC’s Advanced Fuel Assembly Program; CGNPC’s Fixed In-Core Detector System; and verification and validation of nuclear reactor-related computer codes. Under the direction of CGNPC, Ho also identified, recruited, and executed contracts with U.S.-based experts from the civil nuclear industry who provided technical assistance related to the development and production of special nuclear material for CGNPC in China. Ho and CGNPC also facilitated travel to China for and payments to the U.S.-based experts in exchange for their services. This investigation was conducted by the FBI, Tennessee Valley Authority-Office of the Inspector General, DOE-National Nuclear Security Administration and U.S. Immigration and Customs Enforcement Homeland Security Investigations, with assistance from other agencies.

Categories
NSD201801

NSD201801-007

Trade Secrets for Company in China

On May 24, 2017, in the District of Columbia, a criminal complaint was unsealed charging seven individuals with conspiring to steal trade secrets from a business in the United States on behalf of a company in China that was engaged in manufacturing a highperformance, naval-grade product for military and civilian uses. On May 23, 2017, two defendants were arrested in Washington, D.C., three in the Southern District of Texas, and one in the District of Massachusetts. All are charged in the U.S. District Court for the District of Columbia with conspiracy to commit theft of trade secrets. The government also filed a related civil forfeiture complaint in the District of Columbia for two pieces of real property which were involved in, and are traceable to, the alleged illegal conduct. Those arrested and charged include four U.S. citizens: Shan Shi, 52, of Houston, Texas; Uka Kalu Uche, 35, of Spring, Texas; Samuel Abotar Ogoe, 74, of Missouri City, Texas; and Johnny Wade Randall, 48, of Conroe, Texas. Also charged were Kui Bo, 40, a Canadian citizen who has been residing in Houston, and Gang Liu, 31, a Chinese national who has been residing in Houston as a permanent resident. Additionally, charges were filed against one Chinese national living in China, Hui Huang, 32, an employee of the Chinese manufacturing firm allegedly involved in tasking employees of the Houston company. According to an affidavit filed in support of the criminal complaint, the trade secrets were stolen in order to benefit a manufacturer located in China; this manufacturer was the only shareholder for a company that had been incorporated in Houston. Between in or about 2012 and the present, the affidavit alleges that the Chinese manufacturer and employees of its Houston-based company engaged in a systematic campaign to steal the trade secrets of a global engineering firm, referred to in the affidavit as “Company A,” that was a leader in marine technology. The case involves the development of a technical product called syntactic foam, a strong, light material that can be tailored for commercial and military uses, such as oil exploration; aerospace; underwater vehicles, such as submarines; and stealth technology. According to the affidavit, the Chinese manufacturer intended to sell syntactic foam to both military and civilian, state-owned enterprises in China – part of a push toward meeting China’s national goals of developing its marine engineering industry. The affidavit alleges that the conspirators took part in the theft of trade secrets from Company A, a multi-national company with a subsidiary in Houston that is among the major producers of syntactic foam. The affidavit identifies a number of trade secrets allegedly taken from the company between January and June of 2015, including secrets that allegedly were passed to people associated with the Chinese manufacturer and Houston-based company. The maximum penalty for a person convicted of conspiring to commit theft of trade secrets is 10 years in prison and potential financial penalties. This case is being investigated by the FBI’s Houston Field Office; the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), Office of Export Enforcement; and the IRS-Criminal Investigation (IRS-CI).