November 21, 2008

Silicon Valley Engineers Face Sentencing For Economic Espionage

Two men from China face sentencing today after pleading guilty to economic espionage against the United States.

The two engineers "“ Fei Ye, a citizen of the U.S., and Ming Zhong, a permanent U.S. resident "“ each face a maximum of 30 years in prison after confessing to stealing microprocessor designs from their Silicon Valley employers in 2006.  The duo planned to smuggle the designs to China to launch a government-sponsored startup company there.  

Their guilty pleas were the first convictions for the most serious crime under the 1996 Economic Espionage Act.  Unlike traditional industrial espionage, such as the theft of a trade secret, economic espionage means that someone acted to benefit a foreign government.

Only a few economic espionage cases have been filed under the law, primarily because it's difficult to prove a person was acting to benefit a foreign nation, even if authorities believe that to be the case. Also, the trail of evidence often goes cold in these cases as many countries refuse to cooperate with investigations, prosecutors say.

The case against Ye and Zhong began seven years ago, when they were arrested at San Francisco International Airport while attempting to board a flight to China.  Their luggage was allegedly full of sensitive documents on chip designs taken illegally from four Silicon Valley tech firms who had employed the engineers.  The companies include NEC Electronics Corp., Sun Microsystems Inc., Transmeta Corp. and Trident Microsystems Inc.  Both had worked at Transmeta and Trident, while Ye had also worked at Sun and NEC.

Other documents seized by authorities allegedly demonstrate the engineers were attempting to solicit money from Chinese government agencies to fund a startup firm.

Prosecutors say the documents showed that Ye and Zhong were promoting the startup as something that would elevate China's chip-making capabilities and help the nation better compete against other countries in microelectronics.

Those documents were crucial to federal prosecutors' claim that Ye and Zhong were trying to help China.  However, the documents do not confirm the Chinese government was aware that the chip designs were stolen.

Court papers are vague on the degree of success the pair had in gaining financing for the project, and the indictment does not charge anyone in the Chinese government as a co-conspirator.

The allegations against Ye and Zhong are one of the first economic espionage cases filed.  Other cases in Silicon Valley have developed since that time, including one in which an engineer confessed in June that he tried to sell fighter-pilot training software to the Chinese Navy.  He was later sentenced to two years in prison.

Prosecutors for the case said Xiaodong Sheldon Meng, an engineer who was raised in China but holds Canadian citizenship, was motivated by profit, not a foreign allegiance.  As a result they sought a more lenient sentence.

In another case, Lan Lee and Yuefei Ge, both Silicon Valley engineers, are under indictment on charges they stole chip designs and tried to launch a microprocessor startup with a Chinese venture capital firm.   A date for the trial has not been set. 

In Southern California, Dongfan "Greg" Chung, a Chinese-American engineer who worked at Boeing Co. and Rockwell International, has pleaded not guilty of stealing secrets relating to the space shuttle, a military transport plane and a rocket on behalf of the Chinese government.