American Businessman Who Ran Houston-Based Subsidiary of Chinese Company Sentenced to Prison for Theft of Trade Secrets
The head of a Houston-based company that was the subsidiary of a Chinese company that developed stolen trade secrets was sentenced to 16 months in prison and ordered to forfeit more than $330,000 by U.S. District Judge Christopher R. Cooper of the District of Columbia.
Shan Shi, 55, of Houston, Texas, had previously been found guilty of conspiracy to steal trade secrets by a jury on July 29, 2019. Evidence admitted during a three-week trial showed that Shi had signed an agreement with Taizhou CBM Future New Material Science and Technology Co. Ltd (CBMF), to develop the manufacture of syntactic foam, which is a buoyancy material that aids in offshore oil and gas drilling. The defendant specifically pledged to “digest/absorb” the relevant technology in the United States. The defendant then set up a U.S.-based corporation, CBM International Inc., (CBMI) and hired ex-employees of a victim company that manufactured syntactic foam, located in Houston, Texas. These employees had access to trade secrets developed by the victim company, and the defendant was aware that they had signed agreements with the victim company not to disclose proprietary information. The other employees then transferred proprietary information to CBMI and the defendant, who used the information to create a syntactic foam manufacturing process in China.
The defendant was arrested along with five other individuals in the United States after he and CBMI attempted to market related-technology in the District of Columbia. An additional Chinese national living in China, Hui Huang, was also charged. The trial was solely of defendant Shi.
“The Department of Justice is committed to protecting the intellectual property of American companies, particularly against Chinese malign economic aggression,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division. “As Shan Shi’s prosecution demonstrates, we will steadfastly defend the right of U.S. entrepreneurs to reap the benefits of their innovations.”
“Yesterday’s sentencing underscores our determination to prosecute those who would steal trade secrets from American businesses and further misuse them for their own research and development,” said U.S. Attorney Timothy J. Shea for the District of Columbia. “The Court made clear that the defendant knew or intended that the offense would benefit the People’s Republic of China. To those who would steal proprietary information from U.S. companies and provide it to a foreign government, our message is that you will be prosecuted to the fullest extent of the law.”
“Shan Shi will now pay the consequences in prison for stealing trade secrets from a U.S. company for the benefit of China, while he himself also profited from that theft. This is just another example of the serious and growing threat the Chinese government poses to the United States and our industries,” said Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Office. “Just as the People’s Republic of China is determined to steal from the United States, the FBI and DOJ is determined to protect America's national and economic security and intellectual property from unscrupulous foreign adversaries.”
The FBI’s Houston Field Office, Commerce’s Bureau of Industry and Security Office of Export Enforcement and IRS-Criminal Investigation investigated the case.
Senior Counsel Matthew R. Walczewski of the Criminal Division’s Computer Crime and Intellectual Property Section, Trial Attorney David Recker of the National Security Division’s Counterintelligence and Export Control Section, Assistant U.S. Attorneys Jeff Pearlman, Luke Jones and Zia Faruqui of the District of Columbia, and former Special Assistant U.S. Attorney W. Joss Nichols prosecuted the case.
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