California Businessman Sentenced for Economic Espionage to Help China

Thursday, July 17, 2014

California businessman Walter Liew was sentenced to 15 years in prison and fined $28.3 million last week for selling DuPont Co. trade secrets to China after the first-ever federal jury conviction under the Espionage Act of 1996, according to the FBI.

Around 20 other people have been accused of economic espionage over the years, but they pleaded guilty before trial.

Liew's crime is different, and rises to a level of betrayal that many will find hard to forgive, despite his abject apology in court when he begged for leniency. He told the Chinese how to whiten the creme filling in Oreo cookies and received more than $20 million for the sellout.

The recipe for titanium dioxide (TiO2), which is also used to manufacture paper and plastics products, is a closely guarded DuPont secret. The whitening agent is also an ingredient in toothpaste, sunscreen and cosmetics. It is used for the “M” on M&M candy and is an ingredient in the honey mustard sauce served at McDonald’s and Wendy’s. Just look for the “E171” on the packaging.

The process uses chloride, which is considered much better than standard procedures that use sulfates. The white pigment has global sales of $14 billion a year and China’s government-controlled Pangang Group, a chemical company, is building a huge plant to manufacture it.

Liew, a naturalized U.S. citizen born in Malaysia, used trade secrets he obtained from DuPont for the Chinese. He was convicted with ex-DuPont engineer Robert Maegerle on March 5 of economic espionage, trade secret theft, bankruptcy fraud, tax evasion and obstruction of justice.

Maegerle, 78, of Delaware, worked for DuPont for 35 years and was said to have provided many of the documents for Liew. He is out on bail and awaits sentencing.

Liew and his wife set up a California company in the 1990s and hired former DuPont engineers to obtain documents that detailed the process of making the pigment, according to the FBI. The Pangang Group awarded Liew a $17 million contract in 2009 to help build the plant after inking smaller deals with him earlier.

Liew's wife has pleaded not guilty to charges including obstruction of justice.

Prosecutors said Liew used five DuPont trade secrets in building the plant, including a computer model for the chemical process and a basic data document detailing the equipment needed to design a production line.

–Ken Broder


To Learn More:

Man Gets 15 Years’ Prison for Stealing DuPont Secrets (by Karen Gullo, Bloomberg)

California Man Sentenced to 15 Years for Espionage (by Paul Elias, Associated Press)

Two Individuals and Company Found Guilty in Conspiracy to Sell Trade Secrets to Chinese Companies (Federal Bureau of Investigation)

Two Americans Convicted of Economic Espionage for China (by Noel Brinkerhoff, AllGov)

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