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September 30, 2014

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2 men guilty in sale of trade secrets to China

SAN FRANCISCO — Two men were found guilty of stealing an American company's secret recipe for making a chemical used to whiten products from cars to the middle of Oreo cookies and selling it to a competitor controlled by the Chinese government.

The four-man, eight-woman federal jury found Robert Meagerle, 78, and Walter Liew, 56, guilty of economic espionage and each could face 15 years or more in prison and hundreds of thousands of dollars in fines.

Noting Liew's connections to China, U.S. District Judge Jeffrey White ordered him taken into custody immediately.

"He has received millions of dollars from the People's Republic of China that remains unaccounted for," White said. "That's a lot of money that could help someone flee."

The two men were convicted in San Francisco of stealing Delaware-based DuPont Co.'s method for making titanium dioxide, a chemical that fetches $17 billion a year in sales worldwide.

Federal prosecutors said Walter Liew and his wife Christina Liew launched a small California company in the 1990s aimed at exploiting China's desperate desire to build a DuPont-like factory.

The couple recruited former DuPont scientists with the single-minded goal of winning Chinese contracts. Maegerle worked for DuPont from 1956 to 1991 before joining the Liews.

Tze Chao, another former DuPont scientist who worked with the Liews, pleaded guilty in 2012 to conspiracy to commit economic espionage and will be sentenced later. A third DuPont engineer linked to in the case, Tim Spitler, committed suicide.

Prosecutors say Liew received more than $12 million from the Chinese company between 2009 and 2011 for his efforts.

Maegerle remained free on bond pending his sentencing scheduled for June 10. He declined comment as he left court. He could face a maximum of 15 years in prison.

"Justice was served," U.S. Attorney Melinda Haag said after the verdicts. Jurors declined to discuss the case publicly.

In addition to economic espionage, Liew was also found guilty of witness tampering, filing false tax returns and bankruptcy fraud. He could face a maximum of 20 years in prison.

The rare criminal economic espionage case began when a disgruntled former employee of Liew wrote DuPont a letter about the Liews efforts to secure its technology. DuPont contacted the FBI, which launched an investigation.

A court document showed that China buys more titanium oxide from the West than it makes domestically. So, U.S. prosecutors said, Chinese communist leaders had decreed that duplicating — or obtaining — DuPont's manufacturing method was a national economic and scientific imperative.

DuPont's patented manufacturing method, while still dangerous, dirty and complicated, is nonetheless still cleaner and quicker than the outdated production method employed by Chinese factories. DuPont controls 20 percent of the global market.

Prosecutors said DuPont was unwilling to sell its method to China, so it was stolen and sent to a company called Pangang Group Co. Ltd., according to testimony during the diplomatically dicey proceedings. The jury heard six weeks of testimony.

Prosecutors alleged that Pangang's factory is the only facility inside China known to be producing titanium oxide the DuPont way, which uses chlorination.

A trial for Christina Liew is scheduled for later this year.

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