Bloomberg News

Michigan Couple Stole GM Secrets for Chinese, U.S. Says

November 29, 2012

Michigan Couple Stole GM Secrets for Chinese, U.S. Says

Flags fly outside General Motors Co. world headquarters in Detroit. Photographer: Jeff Kowalsky/Bloomberg

A former General Motors Co. (GM:US) engineer and her husband should be convicted of stealing the automaker’s trade secrets related to hybrid-car technology to help develop such vehicles in China, a U.S. prosecutor said at the end of their trial.

Shanshan Du, the ex-GM employee, copied the Detroit-based company’s private information on the motor control of hybrids and provided documents to her husband, Yu Qin, the government alleges. Qin used the confidential data to seek business ventures or employment with GM’s competitors, including the Chinese automaker Chery Automobile Co., the U.S. said.

General Motors contends that the trade secrets at issue are worth more than $40 million, prosecutors have said.

“Theft is at the heart of this case,” prosecutor Cathleen Corken said today in federal court in Detroit in closing arguments. Acquiring the GM information was “purposeful, deliberate and criminal,” she told the jury.

Both defendants have pleaded not guilty. Their lawyers argued that the information at issue didn’t consist of trade secrets, wasn’t stolen and was useless for other companies.

The government “ignored the central issue of this case,” Frank Eaman, Qin’s lawyer, said in his closing argument today. “Are these documents trade secrets? They said nothing about that.”

Deliberations Begin

The jury began deliberating this afternoon.

The case is one of more than a dozen brought in the past three years by the U.S. Justice Department alleging defendants of Chinese ancestry or citizenship sought to take trade secrets from U.S.-based companies for use by the Chinese government or businesses.

Last month in Chicago, a former software engineer for Chicago-based CME Group Inc. (CME:US), the world’s largest derivatives exchange, pleaded guilty to charges of downloading more than 10,000 files containing source code from his employer to support trading activities in an exchange in China.

In September in Newark, New Jersey, a native of China who worked for L-3 Communications Holdings Inc. (LLL:US)’s space and navigation division was convicted of transporting stolen property and possession of trade secrets related to precision navigation devices.

In the Detroit case, Du and Qin were indicted in July 2010 on three counts each of trade secrets theft and wire fraud. Qin was also charged with obstruction of justice.

‘More Lies’

This case consists of “lies, more lies, concealment and document shredding,” Corken, the prosecutor, told the jury.

The defendants argued in court papers that the government withheld evidence, hampering their rights to a fair trial.

Much of the material the government claimed is secret is available on the Internet, defense expert Roger King testified yesterday. King, a professor of electrical engineering and computer sciences at the University of Toledo in Ohio, said GM exaggerated the value of some of the information.

“GM suffered no damage,” Eaman said at the trial today. Prosecutors sought to use “prejudice” over Chinese competition with U.S. companies in pursuing the claims against Qin and Du, the defense lawyer said.

The U.S. alleges that Du, an electrical engineer who worked at GM from 2000 to March 2005, sought assignment to the company’s hybrid work project to gain access to information on the motor control of such vehicles.

Engineering Projects

Du worked on various software engineering projects related to hybrid vehicle technology and was responsible for some code used in motor controller cards.

The U.S. claims that Du began providing GM documents to her husband for use in a company they had started, Millennium Technology International. Du copied material and Qin developed a plan to sell hybrid vehicle technology through a joint venture in China, the U.S. said.

Qin was e-mailing with his sister in China in 2003 about using material gained from GM, Corken said today. With “American technology and Chinese labor,” they could build an auto company in China, Corken said the sister wrote in one of the e-mails.

“American technology should be read ‘General Motors technology,’” the prosecutor said.

The process accelerated after GM sought Du’s resignation in late January 2005, according to the indictment.

Documents ‘Copied’

“Approximately five days after GM offered defendant Shanshan Du a severance package, defendant Shanshan Du copied thousands of GM documents, including documents containing GM trade secrets, to an external hard drive used for MTI company business,” the U.S. said.

Prosecutors said at the beginning of the trial that 16,262 GM files were found on Du’s computer.

“These were never trade secrets,” Eaman said in his closing argument today. The material wasn’t marked secret and, as proof that the documents weren’t significant, he said, “they gave them to Ms. Du, a low-level engineer.”

The government’s reliance on witnesses from General Motors presented a one-sided view, Robert Morgan, Du’s lawyer, said in his closing argument. While GM contended at trial that the material was confidential, the company didn’t indicate that in internal records at the time, he said.

“The government is asking you to do what GM didn’t do, treat it as a trade secret,” he told the jury.

Secret Information

After Du left the company, the couple uploaded GM documents containing secret information onto a computer at their home, the U.S. claimed. In July or August 2005, Qin “communicated with others, by e-mail and in person, about collaboration on a new business venture which would provide hybrid vehicle technology to Chery,” the U.S. said.

General Motors was informed by Qin’s employer, Controlled Power Co., in 2005 that CPC workers discovered a bag with an internal hard drive containing electronic documents that appeared to be the property of GM, according to a federal appeals court decision in July on evidence in the case.

The U.S. also alleges that Qin destroyed evidence during the government’s initial investigation. In May 2006, the U.S. said, the defendants dumped bags of shredded documents in a Dumpster behind a grocery store.

The defendants lied to their employers, shredded documents, formed a business plan and created a joint venture, Eaman conceded today. These weren’t illegal acts, he said.

“Not one time did they ever share a GM document with anyone outside of their family,” he said. “No witness said they had contact with Chery.”

The case is U.S. v. Qin, 10-cr-20454, U.S. District Court, Eastern District of Michigan (Detroit).

To contact the reporters on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net; Steven Raphael in Detroit at sraphael5@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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