FBI: Man Sentenced for Distributing Avionics Trade Secrets

The FBI released the below report:

For an aircraft electronics company looking to ramp up production, Derek Wai Hung Tam Sing must have seemed like a dream hire—20 years of experience as an electrical engineer and an extensive résumé.

But the Glendale, California resident turned out to be a nightmare for his employer, Rogerson Kratos.

Sing was hired by the Pasadena-based firm in April 2012 to improve avionics systems and circuit boards that would ultimately end up in military helicopters. Before starting work with the company, Rogerson Kratos required Sing to sign a confidentiality agreement prohibiting him from sharing trade secrets with anyone outside the company.

Despite the agreement, Sing stole and distributed product schematics to several competitors, violating the Economic Espionage Act. The crimes resulted in an investigation by the FBI, which ended up landing Sing in federal prison.

“The whole time Sing was at Rogerson Kratos, he was bringing home a treasure trove of work files and project photos,” said Special Agent Michael Fitzpatrick, who investigated the case out of the FBI’s Los Angeles Field Office. “He never had permission to do that and wasn’t following company protocols.”

In the seven months that Sing was employed at the company, he often missed project deadlines, struggled with tardiness, pushed back on leadership decisions, and ridiculed fellow employees.

Sing’s unprofessional behavior and poor work performance got him fired in November 2012. Disgruntled over the company’s actions, he set on a vengeful mission—according to his testimony at trial, he “wanted to get back at Rogerson Kratos” for being unappreciative of his efforts.

“Harming Rogerson Kratos for what they did to him was a top priority for Sing,” said Fitzpatrick. “He had the advantage of possessing their trade secrets and the means to distribute them widely to competitors.”

In December 2012, Sing packaged up seven different product schematics along with files that explained the importance of the proprietary information and instructions on how to reverse-engineer the products. In early 2013, he used fictitious e-mail accounts to send the stolen trade secrets to domestic and foreign companies that produced avionics products.

One overseas recipient of Sing’s communications realized the files contained stolen trade secrets, determined the information belonged to Rogerson Kratos, and alerted the company. In turn, Rogerson Kratos contacted authorities, which led to the FBI opening an investigation in February 2013. Through a series of search warrants, evidence-gathering, and interviews, agents found Sing to be the source of the leaked trade secrets.

“Rogerson Kratos would have faced millions of dollars in lost revenue if any of the companies that received Sing’s files actually took advantage of them,” said Fitzpatrick. “If it wasn’t for the ethical decision-making of one organization, untold damage could have been committed.”

Sing was arrested and indicted in April 2014 following the FBI investigation. In December 2015, he was convicted of 32 counts of violating the Economic Espionage Act by stealing trade secrets from his former employer. On June 6, 2016, the 45-year-old was sentenced to one year and one day in prison for his crimes.

Former Connecticut Resident Pleads Guilty To Attempting To Send Sensitive Military Documents To Iran

The U.S. Justice Department released the below information:

Assistant Attorney General for National Security John P. Carlin and U.S. Attorney Deirdre M. Daly for the District of Connecticut announced that Mozaffar Khazaee, 60, formerly of Manchester, Connecticut, pleaded guilty today before U.S. District Judge Vanessa L. Bryant in Hartford to violating the Arms Export Control Act, in connection with his efforts to send to Iran sensitive, proprietary, trade secret and export controlled material relating to military jet engines for the U.S. Air Force’s F35 Joint Strike Fighter program and the F-22 Raptor program, which he had stolen from defense contractors where he had previously been employed.

“While employed with U.S. defense contractors, Mozaffar Khazaee stole sensitive, proprietary and controlled technology to send it to Iran,” said U.S. Attorney Daly.  “The illegal export of our military technology compromises U.S. national security and reduces the advantages our armed forces currently possess.  As today’s case demonstrates, we will aggressively investigate and hold accountable those who attempt to steal trade secrets and sensitive military technology from U.S. industries, whether for their own personal gain or for the benefit of foreign actors.”

“Today’s guilty plea demonstrates the ongoing cooperation with our federal law enforcement partners to prevent U.S. technology from falling into the wrong hands,” said Special Agent in Charge Bruce Foucart of HSI Boston.  “Across the globe, the magnitude and scope of threats facing the United States has never been greater, and that's why one of Homeland Security Investigations highest priorities is to prevent illicit procurement networks, terrorist groups and hostile nations from illegally obtaining U.S. military products and sensitive dual-use technologies.  Homeland Security Investigations takes pride in protecting our country, and today’s guilty plea is the latest example of our effective investigative efforts.”

“This joint investigation has emphasized the need for American companies to remain vigilant against the theft of valuable and sensitive technologies,” said Special Agent in Charge Patricia M. Ferrick of the FBI’s New Haven Division.  “As our nation continues to lead the way in research and development, we are constantly reminded that there are those who seek to advance their own causes by stealing the hard work of others, and we owe it to ourselves and to the American public to guard against it. The FBI vigorously investigates these matters in cooperation with our law enforcement partners, both domestic and abroad.”

“This investigation demonstrates the dedication of the Department of Defense, Office of the Inspector General, Defense Criminal Investigative Service and our federal and military partners to ensure that critical technology is not exploited by criminals acting on behalf of governments hostile to the U.S.,” said Special Agent in Charge Craig W. Rupert of the Defense Criminal Investigative Service’s Northeast Field Office.  “Foreign governments continue to actively seek U.S. military technology in an effort to advance their own military development.  Today’s plea represents our continuing efforts to safeguard sensitive technology and to shield America’s investment in national defense by thwarting those who try to illegally acquire our national security assets.”

According to court documents and statements made in court, at different times between 2001 and 2013, Khazaee was employed by three separate defense contractors.  From at least 2009 through and including late 2013, Khazaee attempted to use trade secret, proprietary and export controlled material that he had obtained from his employers to gain employment in Iran.

In November and December 2009, Khazaee corresponded by email with an individual in Iran to whom he attempted to send, and in some cases did send, documents containing trade secret, proprietary and export controlled material relating to the Joint Strike Fighter Program.  In one email Khazaee wrote “some of these are very controlled . . . and I am taking [a] big risk.  Again please after downloading these two Power Point files delete everything immediately.”

Analysis of Khazaee’s computer media revealed not only additional documents containing proprietary, trade secret and export controlled material belonging to the U.S. defense contractors at which he had been employed, but also cover letters and application documents, dating from in or about 2009 through in or about 2013, in which Khazaee sought employment with multiple state-controlled technical universities in Iran.  In multiple letters Khazaee described the knowledge and skills he had obtained while working for the U.S. defense contractors and wrote:  “[a]s lead engineer in these projects I have learned some of the key technique[s] that could be transferred to our own industry and universities.”  Khazaee stated that he was “looking for an opportunity to work in Iran, and . . . transferring my skill and knowledge to my nation.”

In or about November 2013, while residing in Connecticut, Khazaee caused a shipment to be sent by truck from Connecticut to a freight forwarder located in Long Beach, California, which was intended for shipment to Iran.  The shipment included numerous boxes and digital media containing thousands of documents consisting of sensitive technical manuals, specification sheets, technical drawings and data, and other proprietary material relating to military jet engines and the United States Air Force’s F35 Joint Strike Fighter (JSF) program and the F-22 Raptor.  Many documents were labeled as “Export-Controlled,” as well as stamped with “ITAR-controlled” warnings.  Khazaee did not apply for nor did he obtain any export license or written authorization to export any of the documents, and the export or attempted export of such material to Iran is illegal.

On Jan. 9, 2014, Khazaee was arrested at the Newark Liberty International Airport before boarding a flight with a final destination of Iran.  Search warrants executed on Khazaee’s checked and carry-on luggage revealed additional sensitive, proprietary, trade secret and export controlled documents relating to military jet engines, in both hard copy and in electronic form on Khazaee’s computer media.  Khazaee has been detained since that time.

Judge Bryan scheduled sentencing proceedings for May 20, 2015, at which time Khazaee faces up to 20 years in prison and a $1,000,000 fine.

This investigation is being led by the United States Department of Homeland Security’s Homeland Security Investigations in New Haven, in coordination with the New Haven Division of the Federal Bureau of Investigation, the Defense Criminal Investigative Service in New Haven and the Department of Commerce’s Boston Office of Export Enforcement.

Assistant Attorney General Carlin joins U.S. Attorney Daly in commending the efforts of the many other agencies and offices that were involved in this investigation, including U.S. Attorney’s Offices for the Central District of California, the Southern District of Indiana and the District of New Jersey, Homeland Security Investigations in Los Angeles, the U.S. Customs and Border Protection Service in Los Angeles, the U.S. Air Force’s Office of Special Investigations in Los Angeles and Boston,  as well as HSI, CBP, and FBI in New Jersey, and HSI, FBI and DCIS in Indianapolis.

This case is being prosecuted by Assistant U.S. Attorneys Stephen Reynolds and Krishna Patel of the National Security and Major Crimes Unit of the District of Connecticut, and Trial Attorney Brian Fleming of the Justice Department’s National Security Division.

Chinese National Pleads Guilty To Economic Espionage And Theft Of Trade Secrets

The U.S. Justice Department released the below today: 

WASHINGTON – Kexue Huang, a Chinese national and a former resident of Carmel, Ind., pleaded guilty today to one count of economic espionage to benefit a component of the Chinese government and one count of theft of trade secrets.

The guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division, Assistant Attorney General for National Security Lisa O. Monaco, U.S. Attorney Joseph H. Hogsett of the Southern District of Indiana, U.S. Attorney B. Todd Jones of the District of Minnesota, and Robert J. Holley, Special Agent in Charge of the Indianapolis Field Office of the FBI.

This is the first trade secret prosecution in Indiana under a provision of the Economic Espionage Act that prohibits trade secret theft intended to benefit a component of a foreign government. Since its enactment in 1996, there have been a total of eight such cases charged nationwide under the Economic Espionage Act.

Huang, 46, pleaded guilty to the charges before U.S. District Judge William T. Lawrence in the Southern District of Indiana. In July 2010, Huang was charged in an indictment filed in the Southern District of Indiana for misappropriating and transporting trade secrets to the People’s Republic of China (PRC) while working as a research scientist at Dow AgroSciences LLC. Today, a separate indictment filed in the District of Minnesota was unsealed, charging Huang with stealing a trade secret from a second company, Cargill Inc.

According to court documents, from January 2003 until February 2008, Huang was employed as a research scientist at Dow, a leading international agricultural company based in Indianapolis that provides agrochemical and biotechnology products. In 2005, Huang became a research leader for Dow in strain development related to unique, proprietary organic insecticides marketed worldwide.

As a Dow employee, Huang signed an agreement that outlined his obligations in handling confidential information, including trade secrets, and prohibited him from disclosing any confidential information without Dow’s consent. Dow employed several layers of security to preserve and maintain confidentiality and to prevent unauthorized use or disclosure of its trade secrets.

Huang admitted that during his employment at Dow, he misappropriated several Dow trade secrets. According to plea documents, from 2007 to 2010, Huang transferred and delivered the stolen Dow trade secrets to individuals in Germany and the PRC. With the assistance of these individuals, Huang used the stolen materials to conduct unauthorized research with the intent to benefit foreign universities that were instrumentalities of the PRC government. Huang also admitted that he pursued steps to develop and produce the misappropriated Dow trade secrets in the PRC, including identifying manufacturing facilities in the PRC that would allow him to compete directly with Dow in the established organic pesticide market.

According to court documents, after Huang left Dow, he was hired in March 2008 by Cargill, an international producer and marketer of food, agricultural, financial and industrial products and services. Huang worked as a biotechnologist for Cargill until July 2009 and signed a confidentiality agreement promising never to disclose any trade secrets or other confidential information of Cargill. Huang admitted that during his employment with Cargill, he stole one of the company’s trade secrets – a key component in the manufacture of a new food product, which he later disseminated to another person, specifically a student at Hunan Normal University in the PRC.

According to the plea agreement, the aggregated loss from Huang’s criminal conduct exceeds $7 million but is less than $20 million.

“Mr. Huang used his insider status at two of America’s largest agricultural companies to steal valuable trade secrets for use in his native China,” said Assistant Attorney General Breuer. “We cannot allow U.S. citizens or foreign nationals to hand sensitive business information over to competitors in other countries, and we will continue our vigorous criminal enforcement of economic espionage and trade secret laws. These crimes present a danger to the U.S. economy and jeopardize our nation’s leadership in innovation.”

“Today’s plea underscores the continuing threat posed by the theft of business secrets for the benefit of China and other nations,” said Assistant Attorney General Monaco.

U.S. Attorney Hogsett noted that it is the first time economic espionage has been charged in the Southern District of Indiana. Hogsett remarked that “as U.S. Attorney, I am committed to working with Hoosier businesses who have been victimized and doing everything within our influence to protect Hoosier companies.” Hogsett praised Dow for its cooperation with the investigation and prosecution, noting that “companies must first report and then work with federal investigators and prosecutors if we are to stem the illicit export of trade secrets vital to the economy not only of Indiana but the United States.” Hogsett also stated, “the dual prosecutions from Indiana and Minnesota should serve as a warning to anyone who is considering robbing American companies of their information and weaken the American economy by selling that information to foreign governments or others that he will face severe consequences. The federal agents and prosecutors who worked tirelessly in these two cases are to be commended for their hard work and dedication.”

FBI Special Agent in Charge Holley stated: “Among the various economic espionage and theft of trade secret cases that the FBI has investigated in Indiana, the vast majority involve an inside employee with legitimate access who is stealing in order to benefit another organization or country. This type of threat, which the FBI refers to as the Insider Threat, often causes the most damage. In order to maintain our competitive advantage in these sectors, industry must identify their most important equities, realize that they are a target, implement internal protection mechanisms to protect their intellectual property, and communicate issues of concern immediately to the FBI.”

At sentencing, Huang faces a maximum prison sentence of 15 years on the economic espionage charge and 10 years on the theft of trade secrets charge.

The case is being prosecuted by Assistant U.S. Attorney Cynthia J. Ridgeway of the Southern District of Indiana, Trial Attorneys Mark L. Krotoski and Evan C. Williams of the Criminal Division’s Computer Crime and Intellectual Property Section, and Assistant U.S. Attorney Jeffrey Paulsen of the District of Minnesota, with assistance from the National Security Division’s Counterespionage Section.

Former Dow Scientist Convicted Of Stealing Trade Secrets And Selling Them To Communist China

The U.S. Justice Department reported yesterday that a federal jury in Baton Rouge, La., convicted a former research scientist of stealing trade secrets from Dow Chemical Company and selling them to companies in the People’s Republic of China, as well as committing perjury.

After a three-week trial, the jury found Wen Chyu Liu, aka David W. Liou, 74, of Houston, guilty of one count of conspiracy to commit trade secret theft and one count of perjury.

According to the evidence presented in court, Liou came to the United States from China for graduate work. He began working for Dow in 1965 and retired in 1992. Dow is a leading producer of the elastomeric polymer, chlorinated polyethylene (CPE). Dow’s Tyrin CPE is used in a number of applications worldwide, such as automotive and industrial hoses, electrical cable jackets and vinyl siding.

While employed at Dow, Liou worked as a research scientist at the company’s Plaquemine, La., facility on various aspects of the development and manufacture of Dow elastomers, including Tyrin CPE. Liou had access to trade secrets and confidential and proprietary information pertaining to Dow’s Tyrin CPE process and product technology.

The evidence at trial established that Liou conspired with at least four current and former employees of Dow’s facilities in Plaquemine and Stade, Germany, who had worked in Tyrin CPE production, to misappropriate those trade secrets in an effort to develop and market CPE process design packages to various Chinese companies.

Liou traveled extensively throughout China to market the stolen information, and evidence introduced at trial showed that he paid current and former Dow employees for Dow’s CPE-related material and information. In one instance, Liou bribed a then-employee at the Plaquemine facility with $50,000 in cash to provide Dow’s process manual and other CPE-related information.

“Today a federal jury found Mr. Liou guilty of stealing protected trade secrets from Dow Chemical Company, including by bribing fellow employees for this valuable information,” said Assistant Attorney General Lanny A. Breuer of the Criminal Division Breuer. “American industries thrive on innovation and they invest substantial resources in developing new products and technology. We will not allow individuals to steal the technology and products that U.S. companies have invested years of time and considerable money to create.”

“This office will continue to pursue sophisticated and complex schemes, such as the one perpetrated by this defendant,” said U.S. Attorney Donald J. Cazayoux Jr. for the Middle District of Louisiana. “Such actions undermine the economic viability of our community and our nation, and will not be tolerated.”

“Companies within the United States lose millions of dollars to the theft of trade secrets such as this,” said Special Agent-in-Charge David Welker of the FBI’s New Orleans Division. “The FBI is committed to aggressively identifying and investigating such schemes and along with our partners to bring the perpetrators to justice.”

In addition, according to evidence presented at trial related to the perjury charge, Liou falsely denied during a deposition that he made arrangements for a co-conspirator to travel to China to meet with representatives of a Chinese company interested in designing and building a new CPE plant. Liou was under oath at the time of the deposition, which was part of a federal civil suit brought by Dow against Liou.

Liou faces a maximum of 10 years in prison on the conspiracy to commit trade secrets theft charge, and a maximum of five years in prison on the perjury charge. Each count also carries a maximum fine of $250,000. A sentencing date has not yet been scheduled.

The case is being prosecuted by Assistant U.S. Attorney Corey R. Amundson, who serves as the Senior Deputy Criminal Chief, and Assistant U.S. Attorney Ian F. Hipwell for the Middle District of Louisiana, as well as Trial Attorney Kendra Ervin of the Criminal Division’s Computer Crime and Intellectual Property Section. The case was investigated by the FBI’s New Orleans Division.

Communist Chinese Spy Pleds Guilty To Stealing Ford Secrets

A former Ford employee, Xiang Dong Yu, aka Mike Yu, 49, of Beijing, China, pleaded guilty today in federal court to two counts of theft of trade secrets, announced Barbara L. McQuade, United States Attorney for the Eastern District of Michigan.

McQuade was joined in the announcement by Andrew G. Arena, Special Agent in Charge of the FBI.

According to the plea agreement in this case, Yu was a product engineer for the Ford Motor Company from 1997 to 2007 and had access to Ford trade secrets, including Ford design documents.

In December 2006, Yu accepted a job at the China branch of a U.S. company. On the eve of his departure from Ford and before he told Ford of his new job, Yu copied some 4,000 Ford documents onto an external hard drive, including sensitive Ford design documents.

Included in those documents were system design specifications for the engine/transmission mounting subsystem, electrical distribution system, electric power supply, electrical subsystem and generic body module, among others.

Ford spent millions of dollars and decades on research, development, and testing to develop and continuously improve the design specifications set forth in these documents. The majority of the design documents copied by the defendant did not relate to his work at Ford.

On December 20, 2006, the defendant traveled to the location of his new employer in Shenzhen, China, taking the Ford trade secrets with him. On January 2, 2007, Yu e-mailed his Ford supervisor from China and informed him that he was leaving Ford’s employ.

The plea agreement further states that in November 2008, the defendant began working for Beijing Automotive Company, a direct competitor of Ford. On October 19, 2009, the defendant returned to the United States, flying into Chicago from China.

Upon his arrival, the defendant was arrested on a warrant issued upon the indictment in this case. At that time, the defendant had in his possession his Beijing Automotive Company laptop computer.

Upon examination of that computer, the FBI discovered that 41 Ford system design specifications documents had been copied to the defendant’s Beijing Automotive Company work computer.

The FBI also discovered that each of those design documents had been accessed by the defendant during the time of his employment with Beijing Automotive Company.

Under the plea agreement, Yu faces a sentence of between 63-78 months’ imprisonment based on an agreed loss amount of more than $50 million and less than $100 million and a fine of up to $150,000. The agreement also provides that Yu will be deported from the United States after completing any term of incarceration.

"We will vigilantly protect the intellectual property of our U.S. automakers, who invest millions of dollars and decades of time in research and development to compete in a global economy," McQuade said. "Those who do not play by the rules will be brought to justice."

Special Agent Arena stated, “Michigan, as well as the rest of the United States, is significantly impacted by the auto industry. Theft of trade secrets is a threat to national security and investigating allegations involving theft of trade secrets is a priority for the FBI. The FBI will continue to aggressively pursue these cases.”

Yu remains in federal custody and is scheduled to be sentenced on February 23, 2011 at 10:00 a.m.

The investigation of this case had been conducted by the Federal Bureau of Investigation. This case is being prosecuted by Assistant U.S. Attorney Cathleen Corken.