A federal jury in Washington has convicted a Texas man of conspiracy to commit theft of trade secrets in order to transfer dual-use marine technology to the Chinese regime and its state-owned companies.
Shi Shan, 54, a naturalized U.S. citizen living in Texas, was convicted following a nine-day trial, according to a July 29 press release from the U.S. Department of Justice. He was acquitted of two other charges: conspiracy to commit economic espionage and money laundering.
The trade-secret theft charge was brought against Shi and a group of co-defendants in 2017. In 2018, the other two charges were added to Shi’s indictment.
Shi led a scheme to recruit former and current employees at the Houston-based Trelleborg Offshore and entice them to steal proprietary technology for manufacturing syntactic foam, a strong, lightweight material that has both military and commercial applications, such as deep-sea oil and gas drilling.
Trelleborg Offshore is a subsidiary of the Sweden-based Trelleborg Group, a top manufacturer of high-performance engineered plastics.
Shi transferred the technology to China via his role as president of CBMI, a U.S. subsidiary of the Chinese firm CBM-Future New Material Science and Technology Corp. (CBMF).
Both CBMI and CBMF have been indicted on the three charges.
Co-defendant Liu Gang, 32, was another chief mastermind, according to prosecutors. He was a material development engineer at Trelleborg, who allegedly transferred company trade secrets to CBMI, and later worked at CBMI, doing research and development.
Shi also sought to obtain trade secrets by attempting business relationships between CBMI, Trelleborg, and other U.S. firms.
Through Shi’s theft of Trelleborg’s technology, CBMF eventually established a Chinese factory in 2016 to manufacture syntactic foam.
CBMF received contracts to provide a number of state-owned entities with buoyancy materials, including China Shipbuilding Industry Corp., according to the federal indictment.
In May, the U.S. Department of Commerce added CBMF to its “Entity List”—effectively a trade blacklist—for participating in the “prohibited export of controlled technology concerning the manufacture of syntactic foam and supplying syntactic foam to PRC [People’s Republic of China] state-owned enterprises, PRC defense industrial corporations, and PRC military-related academic institutions.”
The Chinese company was also part of a national marine engineering team, working with state-owned companies to develop deep-sea buoyancy materials and “advance Chinese military and civilian interests,” according to the indictment.
“Shi and his co-conspirators went to great lengths to cash in on the Chinese government’s desire to obtain syntactic foam technology,” stated Assistant Attorney General Brian A. Benczkowski in the press release.
Beijing has publicly stated that developing marine technology is one of its economic priorities, including in its latest industrial plan, the 13th Five-Year Plan (2016–2020), and industrial roadmap, “Made in China 2025.”
Assistant Attorney General John C. Demers said that this case exemplifies “China’s economic aggression” and the threat it poses to U.S. companies.
Shi will be sentenced on Oct. 25, according to the press release.
CBMF itself has extensive ties to the Chinese regime, partially through one of its founders.
According to Chinese government websites, CBMF was founded in May 2012 by Qiao Yingjie, a material science professor from Harbin Engineering University, and three Chinese companies in Linhai, a county-level city in Zhejiang Province. CMBF said on its website that Qiao became vice chairman in October 2013.
Qiao’s personal homepage on the university website shows that he was a former member of the Heilongjiang provincial committee of the People’s Political Consultative Conference, which is an advisory body for the ruling Chinese Communist Party (CCP).
In a 2017 Harbin Engineering University school publication, Qiao was quoted as saying that as a committee member, he must do more “pioneering work” to contribute to the country’s prosperity.
Also that year, the university announced on its website that Qiao was hired for five years as a committee member at a nuclear reactor fuel and materials laboratory located in the Nuclear Power Institute of China (NPIC).
NPIC is a subsidiary of China’s state-owned China National Nuclear Corporation (CNNC), which oversees China’s civilian and military nuclear programs.
Casey Fleming, CEO of BlackOps Partners, a consultancy specializing in guarding organizations against theft of trade secrets, told The Epoch Times this case exemplifies a small part of a broader plan employed by the Chinese regime.
“The Chinese Communist Party has an insatiable thirst for our technology to dominate the global order—both economically and militarily,” he said.
On July 23, FBI Director Christopher Wray told senators that the agency has more than 1,000 active investigations into theft of U.S. intellectual property, “almost all leading back to China.”
“The current FBI caseload of 1,000 is a fraction of the actual volume of theft committed by the Chinese Communist Party,” Fleming said.
Chinese state-sanctioned economic espionage has been underway for several decades, Fleming said, adding that senior leaders across all U.S. industries should understand the risks posed by the regime.
“Senior leaders must understand that they are at war and must act accordingly,” he said.