Bloomberg News

China-Linked DuPont Spying Case Puts Consultant on Trial (1)

January 07, 2014

DuPont Co. (DD:US)’s manufacturing secrets were stolen by a U.S. businessman who provided them to a Chinese company for $29 million, prosecutors are set to tell jurors in a trial defense lawyers say may be tainted by “China bashing.”

Walter Liew, a U.S. citizen born in Malaysia who worked as an engineering consultant in California, faces conspiracy charges for allegedly stealing trade secrets from DuPont about making white pigment used in paper, paint and plastics. The Wilmington, Delaware-based company is the world’s largest producer of titanium dioxide, which has global annual sales of $14 billion.

Opening arguments are scheduled to start after jury selection, which began yesterday and is continuing today in San Francisco federal court.

Liew, 56, is one of more than 20 individuals charged amid a U.S. crackdown on industrial espionage alleged by the government to benefit China. Liew contends the information he used was public, not a trade secret, and his lawyer claims negative publicity about alleged intellectual property theft by China is “likely to inflame passion and prejudice based on race and nationality.”

Liew was “engaged in a legitimate effort to design a plant within legal boundaries,” his attorney, Stuart Gasner, said in a court filing. “A vast number of details of the DuPont process have been publicly disclosed in numerous patents, textbooks and other sources.”

Titanium Dioxide

Prosecutors allege that Liew, who emigrated to the U.S. in 1980 to attend graduate school at the University of Oklahoma and became a citizen in 1992, was asked by high-level Chinese officials over a decade ago to seek out titanium dioxide technology in the U.S.

In 2009, Liew, who operated a now-defunct Oakland, California-based company called USA Performance Technology Inc., won a contract to help China’s Pangang Group Co. design and build the world’s largest titanium dioxide plant in Chongqing using a manufacturing process first invented by DuPont in the 1940s that the company wasn’t willing to license in China, prosecutors said.

Liew obtained DuPont trade secrets from ex-DuPont employees, including flow-sheets and formulas for the manufacturing process, according to an indictment. Liew was sued by DuPont in 2011 for trade secret theft and charged with conspiracy and attempted economic espionage by U.S. Attorney Melinda Haag in San Francisco. If convicted, Liew faces as long as 15 years in prison and possibly millions of dollars in fines. Liew, of Orinda, California, about 17 miles (27.4 kilometers) east of San Francisco, has been in federal custody since he was arrested.

DuPont Employees

Two former DuPont employees were also charged, as was Liew’s wife, a Chinese citizen. One of the ex-DuPont workers pleaded guilty and cooperated with prosecutors, and the other is facing trial with Liew. Liew’s wife will be tried separately.

While Pangang, one of China’s largest makers of steel products and the country’s largest supplier of titanium products, was also charged in the case, prosecutors have failed to meet legal requirements for summoning the company and its officials to face trial.

Prosecutors in August asked U.S. District Judge Jeffrey White, who is presiding over the trial, to consider dismissing the indictment against Pangang. White hasn’t ruled on that request.

Three calls to the general telephone line of Sichuan-based Pangang Group went unanswered today.

Expert Witness

Federal prosecutors plan to call DuPont executives and several of Liew’s former employees during the trial, which is expected to last about seven weeks, according to court filings. They may also call Georgetown University Law Center professor James Feinerman, who’s copying of material from the Wikipedia website in a report about his proposed testimony in the case was, White said, “extremely troubling.”

Overseas Citizens

Feinerman was hired by the government as an expert witness to provide jurors with an overview of the Chinese government’s attempts to persuade its citizens overseas to steal trade secrets, according to a report he submitted to prosecutors. Parts of 13 pages of the 19-page report were copied from Wikipedia entries on China’s economy, high-tech development plan and Communist party, Gasner said in court filings.

White barred Feinerman from testifying that China encourages intellectual property theft and “an extraordinary number of Chinese in business and government are engaged in this practice,” according to his order.

White on Dec. 16 rejected Assistant U.S. Attorney John Hemann’s proposal to withdraw Feinerman and substitute him with another expert, saying it was too late. If Feinerman is called as a witness, White said he will first hold a hearing outside the presence of the jury to determine the scope of the testimony, according to a transcript of a Dec. 16 hearing.

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

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

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


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