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U.S. businessman convicted in China economic espionage case

A view of the Dupont logo on a sign at the Dupont Chestnut Run Plaza facility near Wilmington, Delaware, April 17, 2012. REUTERS/Tim Shaffer
A view of the Dupont logo on a sign at the Dupont Chestnut Run Plaza facility near Wilmington, Delaware, April 17, 2012. REUTERS/Tim Shaffer

By Dan Levine

SAN FRANCISCO (Reuters) - A California businessman was convicted on Wednesday of stealing DuPont trade secrets to help a state-owned Chinese company develop a white pigment used in a wide range of products.

In a San Francisco federal court, a jury found Walter Liew guilty on over 20 criminal counts including conspiracy to commit economic espionage and trade secret theft. It also convicted another defendant, former DuPont engineer Robert Maegerle, on multiple counts as well.

U.S. prosecutors contended Liew paid former DuPont employees like Maegerle to reveal trade secrets that would help the Chinese company, Pangang Group, develop a white pigment called chloride-route titanium dioxide, also known as TiO2. The pigment is used to make a variety of white-tinted products, including paper, paint and plastics.

Liew was ordered into custody after the verdict. In a statement, his attorney Stuart Gasner said they were "very disappointed" in the result.

"Walter Liew is a good man in whom we believe and for whom we will continue to fight," Gasner said.

An attorney for Maegerle could not be reached for comment.

Defense attorneys argued Liew never intended to benefit the Chinese government, and that the DuPont materials Liew and Maegerle handled were not trade secrets.

The United States has identified industrial spying as a significant and growing threat. DuPont is the world's largest producer of TiO2.

Prosecutors also charged Pangang Group <000629.SZ>, a steel manufacturer in Sichuan province, in the case, but that indictment stalled after a U.S. judge ruled that prosecutors' attempts to notify Pangang of the charges were legally insufficient.

U.S. Attorney Melinda Haag in San Francisco said fighting economic espionage is a top priority.

"We will aggressively pursue anyone, anywhere who attempts to steal valuable information from the United States," she said in a statement.

DuPont had filed a civil lawsuit against Liew in 2011 and alerted the FBI, which launched the criminal case. During trial, Liew's attorney called the relationship between DuPont and the government an "unholy alliance."

Federal prosecutors, meanwhile, countered Liew attended a banquet in 1991 with a number of Chinese officials. In court filings, prosecutors say the banquet was hosted by Luo Gan, who at the time was a high-ranking official of the Communist Party of China Central Committee. Luo Gan went on to become a member of the nine-member Standing Committee of the Politburo, prosecutors wrote in a court filing.

'PUFFERY'

Liew described the meeting in a draft letter that U.S. federal officials say they seized from his safety deposit box and presented to the jury.

"The purpose of the banquet is to thank me for being a patriotic overseas Chinese who has made contributions to China," Liew wrote in a memo to a Chinese company, according to U.S. prosecutors, "and who has provided key technologies with national defense applications, in paint/coating and microwave communications."

Luo Gan gave Liew directives at the meeting, and two days later Liew received a list of "key task projects," including TiO2, prosecutors said. Pangang ultimately paid Liew's company $28 million.

Liew's attorney told jurors the letter was merely "puffery" on the part of his client.

Sentencing for Liew and Maegerle is scheduled for June.

The case in U.S. District Court, Northern District of California is United States of America vs. Walter Liew et al., no. 11-cr-573.

(Reporting by Dan Levine; Editing by Meredith Mazzilli and Cynthia Osterman)

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