Six Chinese Accused of Stealing Genetically Modified Corn

Six Chinese nationals were indicted in Iowa on charges of plotting to steal genetically modified seeds worth tens of millions of dollars to Monsanto Co. (MON) and DuPont Co. (DD)

The indictments follow the arrest last week of Mo Hailong, director of international business at Beijing Dabeinong Technology Group Co. (002385), part of the Beijing-based DBN Group, who was accused of stealing trade secrets after he was found digging in a Iowa cornfield. The indictment of Mo and five others connected to DBN, filed on Dec. 17, was unsealed today in federal court in Des Moines.

The U.S. alleges Mo and the other defendants stole inbred corn seed from production fields in Iowa and Illinois to benefit Kings Nower Seed, DBN’s corn seed unit. Inbred lines, developed by scientists to have a particular trait such as resistance to herbicides, are crossbred with other lines to develop hybrid seeds, the U.S. said.

Prosecutors charge that the defendants stole from DuPont’s Pioneer seed unit, Monsanto and AgReliant Genetics LLC’s LG Seeds subsidiary. They “intended to convert a trade secret” for the economic benefit of someone other than the U.S. seed companies, prosecutors said.

Zip-Lock Bags

In May 2012, Mo and two other defendants “attempted to ship approximately 250 pounds of corn seed, packaged in 42, five-gallon zip-lock bags contained in five separate boxes,” from Illinois to Hong Kong, according to the indictment.

Mo’s attorney, Valentin Rodriguez Jr., didn’t immediately return a call seeking comment on the indictment.

Last week he said Mo had “no intention to commit any crime” and that the government hadn’t been able to prove that any of the seeds were proprietary to Monsanto or DuPont.

Kings Nower Seed didn’t immediately respond to an e-mail sent before regular business hours in Beijing.

Mo, also known as Robert Mo, was arrested in Miami last week. The other defendants are still at large, said Kevin VanderSchel, spokesman for Nicholas Klinefeldt, the U.S. attorney in Des Moines.

The others indicted are Li Shaoming, Wang Lei, Wang Hongwei, Ye Jian and Lin Yong.

The investigation started when DuPont’s Pioneer seed unit detected suspicious activity, according to a statement by Klinefeldt’s office.

Storage Lockers

Mo and others visited farms, and bought seed and individual ears of corn, stashing the items in storage lockers to be shipped back to China, according to an affidavit by FBI special agent Mark Betten filed with the initial complaint. In China, scientists would use the seed and corn to develop their own products, the U.S. said in court papers.

Mo and Wang Lei, the vice chairman of Kings Nower Seed, approached a grower of a Pioneer test field near Tama, Iowa, on May 2, 2011, and “asked what he was planting in his field,” the FBI agent said in his affidavit. “The grower replied seed corn.”

The next day, “a Pioneer field manager saw Mo on his knees in the same grower’s field, which had just been planted within the previous two days, and another Asian male sitting in a nearby car,” Betten said.

Four months later, Mo, Wang Lei and another scientist were stopped by a deputy from the Polk County’s Sheriff’s Office, responding to a report of “Asian males acting suspiciously near a farm field in Bondurant, Iowa,” Betten said. Mo told the deputy they were driving across the Midwest looking at crops, he said.

‘Inbred Line’

“An individual wishing to steal an inbred line of seed can either obtain the seed in seed form, i.e. either straight from the bag or shortly after it’s been planted and before germination (such as digging in the field as Mo was doing), or the seed can be obtained from grown ears during the harvest season when grown by contract growers,” Betten said.

Companies such as Monsanto require dealers to sell seed only to farms that have signed agreements promising not to use these methods to develop their own seeds, Betten said. Mo wasn’t authorized to buy the seeds, according to the affidavit.

“Pioneer executives estimated that the loss of an inbred line of seed would result in losing approximately 5-8 years of research and a minimum of $30-40 million,” Betten said in the filing.

The defendants were aware that they risked prosecution in the U.S., according to the indictment, citing taped conversations during the investigation.

“Nowadays, the U.S. is very hostile to China on this matter,” Lin said to Ye in September 2012, according to the indictment. “If they max the punishment, then we are done.”

In another exchange between the two, according to the U.S., Lin asked how to respond if they were stopped by the police. Ye replied, “depends on where. The only thing to say, if in the fields, would be that we are students … working on surveys.”

The case is U.S. v. Li, 13-cr-00147, U.S. District Court, Southern District of Iowa (Des Moines).

To contact the reporter on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

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

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