One battle won in Cargill trade-secrets theft

  • Article by: JIM SPENCER , Star Tribune
  • Updated: October 19, 2011 - 9:54 PM

Ex-worker at Cargill and Dow pleaded guilty to sharing proprietary information. U.S. authorities are pushing harder against such crimes.

Kexue Huang worked as a biotechnologist at Cargill Inc. for little more than a year. When he left the company in 2009, he took with him a secret, or more to the point, a secret ingredient.

What Huang possessed was a valuable proprietary component for a new food product produced by the St. Paul-based agribusiness. Having that knowledge was not a crime. Sharing it was. And Huang faces up to 10 years in federal prison for passing the secret to others.

Huang, a Chinese citizen, pleaded guilty this week to trade secret theft for sharing the Cargill component. He also pleaded guilty to economic espionage for using trade secrets about insecticides stolen from an earlier employer, Dow AgroScience of Indianapolis. That charge carries a maximum of 15 years in prison.

The case is the latest example of the Obama administration's push to more actively prosecute intellectual property crimes that cost U.S. businesses hundreds of billions of dollars a year. Officials from the U.S. Justice Department estimates that Huang's two thefts carried a value of $7 million to $20 million.

"These crimes present a danger to the U.S. economy and jeopardize our nation's leadership in innovation," Assistant Attorney General Lanny Breuer said in announcing the plea deal. Prosecutors from the U.S. attorney's office declined to comment because Huang has not been sentenced.

Cargill conducted an internal investigation while Huang was working at the company and found that he "had deliberately ... taken confidential materials outside the company," said spokeswoman Lori Fligge. "Because of our prompt investigation and the security measures we have in place, Cargill limited the extent of the theft. We redoubled our already stringent security measures to prevent such a theft from happening again."

When Huang left Cargill, the company kept working with government investigators looking into his activities. "Cargill is pleased that the case has been resolved," Fligge said.

The Huang case exemplifies the confounding nature of intellectual property crimes. They are mostly inside jobs, in which employees with legitimate access to important information gather and use that information once they leave a company. The ex-employees usually hope to enhance their careers and possibly compete with their former employers.

Law enforcement officials say Huang did just that when he told a university student in China about Cargill's secret ingredient and delivered Dow AgroScience trade secrets to people in Germany and China, so they could research the material with an eye toward starting a competing business.

"Technological advances have created unprecedented opportunities for businesses to market and sell their intellectual property anywhere in the world," Breuer told an international conference on intellectual property crime in September. "But these same advances also allow trademark counterfeiters, trade secret thieves and copyright pirates to operate in an essentially borderless environment."

While the Securities and Exchange Commission issued guidelines last week that require stricter, more detailed reporting of computer hacking incidents and other cyberattacks on publicly traded companies, it is significantly more difficult to anticipate and prevent crimes such as Huang's.

Investigators call "insider threat" a huge problem, made worse by the fact that many businesses do not have in place security procedures to thwart this kind of intellectual property crime.

"Industry must identify their most important [bits of intellectual property], realize they are a target, implement internal protection mechanisms ... and communicate issues of concern immediately to the FBI," said Robert Holley, the special agent in charge of the Huang case.

Companies have traditionally been reluctant to reveal the theft of intellectual property to police for fear of spooking shareholders or empowering competitors, law enforcement officials say.

Jim Spencer • 202-408-2752

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