American Businessman Who Ran Houston-Based Subsidiary of Chinese Company Sentenced to Prison for Theft of Trade Secrets
WASHINGTON – The head of a Houston-based company that was the subsidiary of a Chinese company that developed stolen trade secrets was sentenced Monday to sixteen months in prison and ordered to forfeit $342,424.96 by U.S. District Judge Christopher R. Cooper of the District of Columbia.
Shan Shi, 55, of Houston, Texas, had previously been found guilty by a jury on July 29, 2019, of Conspiracy to Steal Trade Secrets. Evidence presented during a three-week trial established that Shi had entered into 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 build “China’s first deep[-]sea drilling buoyance [sic] material production line” by moving to “digest/absorb” the relevant, critical U.S. technology. 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 former employees of the victim company then transferred proprietary information to CBMI and the defendant, who used the information to create a syntactic foam manufacturing process in China.
The government also entered into evidence that the defendant intended to benefit the People’s Republic of China (PRC) by developing the technology, and that after the technology was stolen, the defendant attempted to sell syntactic foam based on the stolen proprietary information to the China National Offshore Oil Corporation (CNOOC) and the People’s Liberation Army (PLA) of the PRC. 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. Shi, defendant Gang Liu, CBMI, and CBMF were subsequently charged in a superseding indictment with Conspiracy to Commit Economic Espionage, in violation of 18 U.S.C. § 1831. Shi and CBMI and CBMF were additionally charged in the superseding indictment with Conspiracy to Commit Money Laundering, in violation of 18 U.S.C. § 1956(h). The jury found the defendant guilty of Conspiracy to Steal Trade Secrets, and acquitted on the remaining counts. The trial was solely of defendant Shi.
“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.”
This case was investigated by the Houston Field Office of the Federal Bureau of Investigation, the Bureau of Industry and Security (BIS) Office of Export Enforcement of the U.S. Department of Commerce, and the Internal Revenue Service-Criminal Investigation (IRS-CI).
The case was prosecuted by Assistant U.S. Attorneys Jeff Pearlman, Luke Jones, Zia Faruqui, and former Special Assistant United States Attorney W. Joss Nichols of the District of Columbia; Senior Counsel Matthew R. Walczewski of the Computer Crime and Intellectual Property Section of the Criminal Division of the Department of Justice; and Trial Attorney David Recker of the National Security Division’s Counterintelligence and Export Control Section of the Department of Justice.