Bloomberg News

Former DuPont Worker Pleads Guilty in Economic Espionage Case

March 02, 2012

Former DuPont Co. (DD) employee Tze Chao pleaded guilty to conspiring to steal trade secrets about titanium dioxide technology from the company and provide them to China’s state-owned Pangang Group Co. (000629)

Chao, 77, a naturalized U.S. citizen who spent 35 years at DuPont, said he used his former employer’s trade secrets to help Pangang, which was building a 100,000 metric-ton-per-year plant to produce titanium dioxide, a white pigment used in paints, plastics and paper. He entered his plea yesterday in federal court in San Francisco, admitting to one count of conspiracy to commit economic espionage.

“I’m making a plea agreement with the court for the crime I committed,” Chao said in court.

Chao, a Delaware resident, is cooperating with the government in an investigation of DuPont trade secret theft, according to his plea agreement, which was summarized at the hearing. He was with DuPont from 1966 to 2002 and while there worked on chloride-route titanium oxide processing, which is cleaner than other methods for producing the pigment, prosecutors said in court filings.

Pangang Group, California businessman Walter Liew, Liew’s wife and another former DuPont employee also face charges, U.S. Attorney Melinda Haag in San Francisco said Feb. 8 when a revised indictment was filed. China sought to develop a manufacturing process for chloride-route titanium dioxide, which had been invented by DuPont, according to the indictment.

Titanium Dioxide

DuPont, based in Wilmington, Delaware, is the world’s largest manufacturer of titanium dioxide, and won’t sell or license its technology to Chinese companies.

Two years after leaving DuPont, Chao was hired by Pangang as a consultant because of his experience with the technology, prosecutors said. His consulting company bid on Pangang’s 2008 plant contract, saying it possessed DuPont technology, the government said.

During the bidding process Pangang sought DuPont blueprints and hired Chao to review plans that had been submitted by a company owned by co-defendant Walter Liew, of Orinda, California.

“Chao accepted that assignment and provided Pangang with additional trade secrets at the time,” Assistant U.S. Attorney Peter Axelrod said at the hearing yesterday.

Chao’s Attorney

Edmund Lynch, Chao’s attorney, said Chao didn’t provide Pangang with the blueprints.

Pangang runs the largest titanium complex in China and is one of the country’s largest titanium pigment producers, according to its website.

U.S. District Judge Jeffrey White accepted Chao’s plea.

The maximum sentence for conspiracy to commit economic espionage is 15 years in prison, a $500,000 fine and restitution as ordered by a judge. Prosecutors may recommend a more lenient sentence for Chao’s cooperation, White said, referring to items in the plea agreement, which wasn’t public.

Liew’s lawyer, Thomas Nolan, declined to comment Feb. 8 on the revised indictment.

The case is U.S. v. Liew, 3:11-cr-00573, U.S. District Court, Northern District of California (San Francisco).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net


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