Bloomberg News

China’s Pangang Paid for Stolen DuPont Secrets, Prosecutors Say

January 08, 2014

DuPont Auto-paint

An employee paints a car with DuPont Co. auto-paint at Haydocy Automotive in Columbus, Ohio. Photographer: Jay LaPrete/Bloomberg

Chinese officials “desperately wanted” the technical know-how to cleanly manufacture white pigment and California engineer Walter Liew told them he could provide it, a U.S. prosecutor told jurors.

Except Liew didn’t have the knowledge, the prosecutor said. So he stole it from DuPont Co. (DD:US), the world’s largest producer of the pigment, and gave it to a Chinese state-owned company for $28 million in contracts, Assistant U.S. Attorney John Hemann said yesterday in San Francisco, where Liew is on trial, accused of conspiracy, economic espionage and trade secret theft.

“He didn’t have the ability,” Hemann said in opening statement in federal court. “It had to be taken. This case is about theft.”

Liew, a poor Malaysian farmer’s son who emigrated to the U.S. in 1980, and co-defendant Robert Maegerle, a 78-year-old ex-DuPont engineer, say trade secrets played no role in the plans they delivered to help a Chinese company in the $14 billion global market for white pigment.

Rather, they took publicly available information developed in the 1960s, and technology that wasn’t protected by confidentiality agreements, and over several years came up with their own design to cleanly manufacture titanium dioxide, a white chemical substance used paper, paint and plastics, their lawyers said.

‘Old Stuff’

“We are talking about some old stuff,” Stuart Gasner, Liew’s attorney, told the jury. “There’s no evidence of trade secrets being used.”

Liew, of Orinda, California, and Maegerle, a Delaware resident who retired from DuPont in 1991, are among more than 20 people charged in recent years with stealing U.S. technology for China. The Obama administration has said Chinese spy agencies are involved in a far-reaching industrial espionage campaign targeting biotechnology, telecommunications, clean energy and nanotechnology industries.

China’s Pangang Group Inc. paid Liew $28 million from 2006 to 2011 for contracts to design a titanium plant that used chloride, instead of the more toxic sulphate, to make titanium dioxide, Hemann said. The men had process-flow diagrams and parts of an internal report from Wilmington, Delaware-based DuPont, the biggest U.S. chemical maker, about the specialized vats needed for such a plant, both trade secrets, he said.

While Pangang was also charged in the case, U.S. District Judge Jeffrey White is weighing dismissal of the indictment because prosecutors failed to get the charging documents to the company.

Chinese Connections

Liew bragged of his connections to high-ranking Chinese officials in a 2004 letter investigators found in his safe-deposit box, Hemann said. In it, Liew wrote that he had been given important tasks by the officials, including obtaining the technology needed for chloride-processed titanium dioxide, the prosecutor told the jury.

Gasner responded that the letter was a never-sent “piece of puffery” written when Liew was trying to win business. He described his client as a hard-working small businessman who rose from a dirt farm in Malaysia to earn an electrical engineering degree in Taiwan and a master’s degree from the University of Oklahoma. He aspired to attend an Ivy League school, though never had the money, Gasner said. Liew told people had a PhD from Stanford University, Gasner said.

Anonymous Letter

His downfall came when a fired employee of his engineering consulting firm in Oakland, California, wrote an anonymous letter to DuPont, claiming Liew was using trade secrets, Gasner said. Twenty federal agents raided Liew’s home in 2011, and DuPont engineers worked “side-by-side” with investigators to provide a “self-serving and biased view” of the documents, Gasner said.

Dan Turner, a DuPont spokesman, declined to comment on the trial. The company brought a civil lawsuit against Liew that’s on hold pending the outcome of the criminal case.

DuPont said in October that it plans to split itself in two by spinning off its performance-chemicals unit, the world’s biggest producer of titanium dioxide.

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 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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