FBI Uncovers Spy Ring Based in China

The Wall Street Journal highlights a U.S. Justice Department investigation against a California couple and -based conglomerate Pangang Group which, according to the government, marks the first time U.S. officials have filed criminal espionage charges against a state-owned foreign company:

Federal agents were searching Walter and Christina Liew’s home here last July for evidence of corporate espionage when a safe deposit box key caught their attention. They asked Ms. Liew if she knew where the bank was located. Her husband told her in Chinese to say she didn’t, according to an account later given by federal prosecutors.

An agent who understood Chinese picked up on the exchange and followed Ms. Liew as she left the house, drove to an Oakland bank and tried to empty a safe deposit box the key fit. The box, according to prosecutors, contained documents outlining a more than decadelong plot to steal DuPont Co. corporate secrets and sell them to a Chinese government-owned company.

Chinese state-owned companies, including Pangang, a conglomerate based in Panzhihua in Sichuan Province, talked for years with DuPont about opening a joint-venture titanium plant in China, say people familiar with the matter, but a deal was never worked out.

In the 1990s, according to documents confiscated from Mr. Liew in Orinda last summer and since filed in federal district court in San Francisco, Pangang and Chinese-government officials started asking businessmen to procure DuPont’s proprietary titanium-production methods.

A spokesman for the Chinese embassy in Washington called that assertion “groundless,” saying: “There would not be any kind of instruction or request to Chinese businessmen. They behave on their own behalf.” He said the DuPont case is a business dispute and the businessmen involved “have no connection to the Chinese government.”

Among the DuPont employees alleged to have had a hand in the corporate espionage, according to court filings and WSJ sources, 36-year DuPont veteran Tze Chao pleaded guilty last week to stealing trade secrets. News of the DuPont case comes exactly one month after a Chicago judge ruled that a Chinese-born former  software engineer had stolen secrets from the company, though the judge acquitted her on charges that she did so to benefit a Chinese company and the People’s Liberation Army.

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