FBI: Scientists Stole Lucent Trade Secrets for Chinese

Two Lucent Technologies scientists and another man -- all three of them Chinese-born -- were arrested by the FBI on Thursday and accused of stealing Lucent software and sharing it with a company largely run by the Chinese government.

The three formed a joint venture with the Chinese company to market the product and boasted that the business would become "the Cisco of China," prosecutors said.

U.S. Attorney Robert Cleary said there are no allegations that the Chinese company, Datang Telecom Technology Co. of Beijing, was aware of the theft.

The stolen software was for Lucent's now-discontinued PathStar system, which enables Internet service providers to offer low-cost voice and data services. PathStar had over 90 percent of the market and generated $100 million for Lucent last year, according to court papers.

The Chinese venture was "ready to roll out with it in September of this year," Cleary said. "In the information age, it is difficult to imagine anything more dangerous to a company's business interests."

Arrested were Yong-Qing Cheng, 37, who runs an optical networking business, and Lucent employees Hai Lin, 30, and Kai Xu, 33.

Lin and Xu are Chinese citizens in the United States on business visas, while Cheng is a naturalized citizen, authorities said.

All three defendants faced a court appearance Thursday and were not immediately available for comment. They face charges of conspiracy to commit wire fraud, which carries up to five years in prison and a $250,000 fine.

The scientists were designated "distinguished members" of Lucent's technical staff at the Murray Hill headquarters of the telecommunications giant.

Lucent spokesman Bill Price could not immediately say what the alleged theft cost the company, or how long the scientists worked at Lucent. He said Lucent notified authorities in February that company equipment and intellectual property had been stolen.

He also said PathStar was dropped before the theft was discovered.

Lucent, spun off from AT&T Corp. in 1996, is among the most widely held stocks in the country.

The case is the latest bad news for Lucent, which last month denied rumors that it plans to file for Chapter 11 bankruptcy reorganization.

It also faces class-action lawsuits by shareholders who claim they lost money last year because of company wrongdoing. Lucent lost about $80 billion in market value under chairman and chief executive Richard McGinn, who was fired in October.