Two Chinese Nationals Charged with Stealing Trade Secrets in Missouri

Chinese ECONOMIC ESPIONAGE in the Heartland of our Country:

From United States Attorney for the Western District of Missouri:

KANSAS CITY, Mo. – David M. Ketchmark, Acting United States Attorney for the Western District of Missouri, announced two Chinese nationals were charged in federal court today with attempting to pay $100,000 for stolen trade secrets from Pittsburgh Corning Corporation, which has manufacturing plant in Sedalia, Mo., that produces FOAMGLAS® insulation.

Ji Li Huang, 45, and Xiao Guang Qi, 3, both citizens of China, were charged in a federal criminal complaint filed in the U.S. District Court in Kansas City, Mo.

Today’s complaint alleges that Huang and Qi attempted to illegally purchase trade secrets of Pittsburgh Corning for the purpose of opening a plant in China to compete with Pittsburgh Corning.

Huang and Qi, who were arrested on Sunday, Sept. 2, 2012, had an initial court appearance today and remain in federal  custody pending a detention hearing.

Pittsburgh Corning, headquartered in Pittsburgh, Penn., manufactures various grades or densities of cellular glass insulation sold under the trade name FOAMGLAS®.  That material is used to insulate buildings, industrial piping systems and  liquefied natural gas storage tank bases. Pittsburgh Corning’s customers include  energy companies, petro chemical companies, and natural gas facilities.

The Pittsburgh Corning facility in Sedalia is the company’s flagship facility in  the United States, responsible for the majority of the material produced by the  company. The Sedalia facility operates 24 hours per day, 365 days per year. The  plant employs approximately 200 people and conducts research and development on FOAMGLAS® for Pittsburgh Corning.

Pittsburgh Corning recently made technological advances in the formulation and manufacturing process of FOAMGLAS® insulation. Pittsburgh Corning considers the product formula and manufacturing process for FOAMGLAS® proprietary and trade secrets.

Three months ago, Pittsburgh Corning announced that it is planning to open a facility in China to satisfy the growing building and industrial markets in China.

According to an affidavit filed in support of today’s criminal complaint, a man identified as “T.S.” requested a tour of Pittsburgh Corning’s FOAMGLAS® plant  on June 7, 2012.

Pittsburgh Corning refused the request for a tour.

On June 14,  2012, T.S., along with Huang and an uncharged co-conspirator (who is not  identified in the affidavit), met with a plant employee.

The plant employee discussed some of the general process of producing FOAMGLAS®, however, he did not disclose any proprietary information.

Another plant employee reported that Huang and the uncharged co-conspirator were trespassing at the Sedalia plant on June 18 and 19, 2012.

They allegedly recorded video or  photos on a cell phone and asked employees specific questions about FOAMGLAS®.

On July  22, 2012, an advertisement was published in the local newspaper that solicited  “technical talent” with experience at Corning Pittsburgh to lead a project to build a foam glass factory in the Asian market.

A confidential source – working  with the FBI – responded to the contact e-mail address cited in the newspaper advertisement.

A second uncharged co-conspirator (who also is not identified in the affidavit) allegedly corresponded by e-mail with the FBI’s cooperating source, who pretended to be willing to unlawfully copy and sell trade secrets.

During a monitored telephone call, the affidavit says, the cooperating source told this co-conspirator that the  information he requested was Pittsburgh Corning’s proprietary and confidential information and that he could go to jail, if anyone found out he gave away Pittsburgh Corning’s proprietary information.

During  the monitored telephone call, the affidavit says, this co-conspirator agreed to  pay $100,000 to the cooperating source.

They later arranged for Huang to travel from China to the United States to meet with the cooperating source.

They allegedly agreed that $25,000 would be exchanged on Sept. 2, 2012, for a  package of Pittsburgh Corning’s processes and formulary on FOAMGLAS®.

They also discussed paying the cooperating source to travel to China several times for consulting, the affidavit says.

On  Saturday, Sept. 1, 2012, the cooperating source met with Huang and Qi at a Kansas City restaurant. Qi participated in the meeting and also acted as a translator for Huang for parts of the conversation.

According to the affidavit,  a follow-up meeting was scheduled for the next day, at which the cooperating  source would bring the stolen proprietary information and Huang and Qi would  bring the payment.

The cooperating source told Huang and Qi that he had to  drive back to Pittsburgh Corning and break into the engineering department to steal the documents and drawings for the equipment in order to complete the  list.

Qi asked if there would be any problem; the cooperating source explained to Qi there would be no problem because nobody would be at the plant over the holiday weekend.

The next  day, the affidavit says, Huang and Qi met the cooperating source at a prearranged location and brought a bag containing the money.

The cooperating  source showed them documents that were purportedly Pittsburgh Corning’s trade secret information, some of which were stamped with secret and confidential  markings.

Shortly  afterward, FBI agents arrested Huang and Qi at their hotel room.

Ketchmark  cautioned that the charge contained in this complaint is simply an accusation,  and not evidence of guilt. Evidence supporting the charge must be presented to  a federal trial jury, whose duty is to determine guilt or innocence.

This case is being prosecuted by Assistant U.S.  Attorneys Brian Casey and Matt Wolesky. It was investigated by the FBI.

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