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Justice News

Department of Justice
U.S. Attorney’s Office
Northern District of California

FOR IMMEDIATE RELEASE
Friday, September 7, 2018

Four Chinese State-Owned Industrial Companies Arraigned In Economic Espionage Conspiracy

OAKLAND – Four state-owned Chinese companies were arraigned on a Third Superseding Indictment charging each of the companies and two of their officers with conspiring to commit economic espionage and related crimes, announced United States Attorney Alex G. Tse and Federal Bureau of Investigation Special Agent in Charge John F. Bennett.  The companies were arraigned yesterday before U.S. Magistrate Judge Donna M. Ryu on charges that the defendants conspired and attempted to engage in economic espionage by seeking to acquire misappropriated trade secrets for the production technology for chloride-route titanium dioxide (TiO2) from E.I. du Pont de Nemours & Company (DuPont).

According to the indictment that was filed January 5, 2016, between 1998 and 2011, Pangang Group Company, Ltd. (also known as Panzhihua Iron and Steel (Group) Co., Ltd.) allegedly conspired with Chinese nationals Hou Shengdong and Dong Yingjie as well as three of the company’s subsidiaries and others to acquire stolen or misappropriated trade secrets.  The defendant subsidiaries companies are:

  • Pangang Group Steel Vanadium & Titanium Company, Ltd.;
  • Pangang Group Titanium Industry Company Ltd.; and
  • Pangang Group International Economic & Trading Company.

The trade secrets relate to TiO2 technology from DuPont.  DuPont had developed the technology and controlled a significant amount of the world’s TiO2 sales.  The defendants are alleged to have obtained confidential trade secret information including photographs related to TiO2 plant technologies and facilities.  Further, the defendants are alleged to have paid an Oakland company at least $27,000,000 between 2006 and 2011 for assistance with TiO2 technology, including obtaining DuPont trade secrets.  The defendants also allegedly attempted, between 2008 and 2011, to commit economic espionage related to DuPont’s TiO2 processes.  

In sum, the indictment charges the four companies and two officers with one count of conspiracy to commit economic espionage, in violation of 18 U.S.C. § 1831(a)(5), and one count of attempted economic espionage, in violation of 18 U.S.C. §§ 1831(a)(1), (2), (3), and (4).  The indictment also seeks forfeiture of any property used in the offenses or derived from the commission of the offenses.  

The four companies appeared before Magistrate Judge Ryu through an attorney and pleaded not guilty to all charges.  

Initial appearances are scheduled for October 2, 2018, in Oakland, before the Honorable Jeffrey S. White, U.S. District Judge.  

An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt.  If convicted, each defendant company faces a maximum sentence five years of probation and a fine of $10,000,000 for each count of conviction.  Hou and Dong face 15 years of imprisonment, a $500,000 fine, and a maximum of 3 years of supervised release for each count in the indictment.  Restitution, if appropriate, may also be ordered.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.  

This case is being prosecuted by the Special Prosecutions and National Security Unit of the United States Attorney’s Office.  The prosecution is the result of an investigation by the Federal Bureau of Investigation. 
 

Updated September 7, 2018