A federal indictment unsealed in Indianapolis alleges that 45-year-old Kexue Huang, who was born in China, passed on proprietary information about the development of organic pesticides to Hunan Normal University while he worked as a researcher for Dow AgroSciences in Indiana from 2003 to 2008.
Dow Agrosciences is a subsidiary of Midland, Mich.,-based Dow Chemical Co.
Assistant U.S. Attorney Cynthia Ridgeway said Huang, a Canadian citizen with permanent U.S. resident status, used a "patient and calculated" plan to "drain" the Indianapolis-based company of technology that took 20 years to develop.
The indictment alleges that Huang published a paper in China about the organic pesticides and also directed students at Hunan Normal in further research.
FBI Special Agent Karen Medernach testified that e-mails showed Huang was developing an operation to market the pesticides in China, where he stood to make millions of dollars. She said the agency believed that Huang stole samples of the bacterial strain used in the pesticides and smuggled them to China in his son's suitcase.
The indictment also included a vague reference suggesting Huang also transported stolen material to Germany but the document didn't go into detail.
The gallery in federal court was occupied by about a dozen of Huang's neighbors from his former home in the affluent Indianapolis suburb of Carmel and his current home in Westborough, Mass. Huang, clad in a jail uniform with gray and white stripes, was silent during the two-hour hearing.
Defense attorney Michael Donahoe called the alleged scheme "hypothetical" and said Huang maintained his innocence.
The indictment, which had been kept secret since it was filed June 16, charged Huang with 12 counts of theft and attempted theft of trade secrets to benefit a foreign government under the Economic Espionage Act. He also was charged with five counts of foreign transportation of stolen property. The economic espionage charges are each punishable by up to 15 years in prison while the lesser counts could each land him in prison for 10 years.
The Economic Espionage Act was passed in 1996 after the U.S. realized China and other countries were targeting private businesses as part of their spy strategies.
Magistrate Judge Kennard Foster entered a not guilty plea on behalf of Huang, who has been held without bond since his arrest July 13 in Massachusetts.
Huang's wife, who identified herself as Jie Sun, broke down in tears at one point as she urged the judge to release her husband pending trial, saying she had just bought a condominium with the couple's life savings of $308,000 and her husband wouldn't risk losing that. She also said her husband would do nothing to harm their children, ages 12 and 7.
"There's no reason for us to go anywhere else," she said. "This is our home."
Government witnesses countered that Huang had made eight trips to China in recent years and stood to make millions of dollars from marketing the stolen pesticides.
Foster ordered that Huang remain in jail, saying he was a serious flight risk and that the alleged scheme posed a "clear economic danger."
Daniel Kittle, Dow's global vice president for research and development, testified that developing the organic pesticides called spinosyns had cost the company at least $300 million over 20 years. He said facing a new competitor in China would pose a threat to the company's business.
Ridgeway said the FBI also is investigating allegations that Huang was involved in a similar scheme while he worked for Cargill Inc. in Minneapolis after he was fired from Dow. Most recently he had lived in Massachusetts and worked at a biofuels company called Qteros, witnesses said.
Ridgeway said the Department of Justice has only filed economic espionage charges seven times. Two cases last year resulted in trials, with one ending in a conviction and the other with a deadlocked jury.
The other cases were settled before trial.