Ex-DuPont Workers, Pangang Charged in Trade Secret Theft Case

China’s Pangang Group Co. (PISZ), California businessman Walter Liew and two former DuPont Co. (DD) employees face charges they conspired to steal trade secrets about titanium dioxide technology from DuPont, according to the U.S. Justice Department and a revised indictment.

The defendants made a “long-running effort” to obtain U.S. trade secrets for Chinese companies, U.S. Attorney Melinda Haag in San Francisco said yesterday in a statement.

China sought to develop a manufacturing process for developing chloride-route titanium oxide, a white pigment used in paint, plastics and paper, and state-owned Pangang conspired to steal the technology developed by DuPont, she said.

“The theft of America’s trade secrets for the benefit of China and other nations poses a substantial and continuing threat to our economic and national security,” Lisa Monaco, assistant attorney general for national security, said in an e- mailed statement

Pangang runs the largest titanium complex in China and is one of the country’s largest titanium pigment producers, according to its website.

Liew, of Orinda, California, and the other defendants sold information on DuPont’s trade secrets to Pangang so it could develop a large-scale titanium-oxide factory in Chongqing, China, Haag said.

The company began building the plant in 2010, with the first phase scheduled to be commissioned at the end of this year, according to Pangang’s website.

Conspiracy Charges

Pangang was charged in an indictment with conspiracy to commit economic espionage, attempted economic espionage and conspiracy to commit trade-secrets theft. A former vice director of Pangang’s chloride process titanium oxide project department who is a Chinese citizen was also charged and a warrant issued for his arrest, the Justice Department said.

A former DuPont employee who had access to information about a company titanium oxide plant in Taiwan was arrested today in Harbeson, Delaware, and charged. A second ex-DuPont employee who lives in Newark, Delaware, was also charged, the agency said. Arraignment is scheduled for March 1.

Liew was charged with attempted economic espionage, according to a superseding indictment filed yesterday.

He was previously charged with witness tampering and threatening a former employee to prevent the disclosure that he had hired two former DuPont workers to help design manufacturing facilities for customers in China.

Dupont Civil Suit

The threat allegedly came just days after Liew and the employee were sued in a civil case by DuPont and accused of giving confidential information about the manufacturing process to competitors in China, according to a 2011 indictment. DuPont, based in Wilmington, Delaware, the world’s largest manufacturer of titanium dioxide, reported the technology theft to the Federal Bureau of Investigation, leading to a federal investigation starting last March, prosecutors said.

Since then, the government has obtained documents that it alleges show that Liew was directed by a Chinese government official to obtain technology needed to build the pigment manufacturing factories, according to a Jan. 31 court document.

A magistrate judge in San Francisco on Feb. 1 ordered that Liew remain in custody after his lawyers sought his release.

Liew’s lawyer, Thomas Nolan, declined to comment yesterday on the revised indictment.

Liew owned Oakland-based USA Performance Technology Inc., according to the first indictment, filed in August. DuPont sued the company in April.

Company General Counsel

“We are disappointed that former DuPont employees working together with certain companies allegedly stole our proprietary technology,” Thomas Sager, DuPont general counsel, said in an e-mail. “Upon learning of the apparent breach, we took prompt action and filed a civil suit. We also referred the theft of our technology to law enforcement.”

China’s Anshan Iron & Steel Group won government approval in May 2010 to merge with rival Pangang Group. Calls to Pangang spokesman Zhou Jun seeking comment about the charges weren’t answered. An Anshan spokeswoman, who declined to be identified due to a company policy, declined to comment about the case. The Chinese consulate in San Francisco couldn’t be reached immediately for comment on the charges.

The criminal 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 San Francisco at kgullo@bloomberg.net.

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

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