Former GE Engineer and Chinese Businessman Charged with Economic Espionage and Theft of GE’s Trade Secrets

The Pair Allegedly Conspired to Steal GE’s Trade Secrets for Use in Their China-Based Companies to Benefit the People’s Republic of China

WASHINGTON – An indictment unsealed today charges Xiaoqing Zheng, age 56, of Niskayuna, New York, and Zhaoxi Zhang, age 47, of Liaoning Province, China, with economic espionage and conspiring to steal General Electric’s (GE’s) trade secrets surrounding turbine technologies, knowing and intending that those stolen trade secrets would be used to benefit the People’s Republic of China.  Assistant Attorney General for National Security John C. Demers, U.S. Attorney Grant C. Jaquith, FBI Assistant Director John Brown of the Counterintelligence Division, and Special Agent in Charge James N. Hendricks of the FBI’s Albany Field Office made the announcement.

According to the 14-count indictment (copy attached), Zheng, while employed at GE Power & Water in Schenectady, New York, as an engineer specializing in sealing technology, exploited his access to GE’s files by stealing multiple electronic files, including proprietary files involving design models, engineering drawings, configuration files, and material specifications having to do with various components and testing systems associated with GE gas and steam turbines.  Zheng e-mailed and transferred many of the stolen GE files to his business partner, Chinese businessman Zhaoxi Zhang, who was located in China.  Zheng and Zhang used the stolen GE trade secrets to advance their own business interests in two Chinese companies, Liaoning Tianyi Aviation Technology Co., Ltd. (LTAT) and Nanjing Tianyi Avi Tech Co. Ltd. (NTAT), companies that research, develop, and manufacture parts for turbines.

The indictment also alleges that Zheng and Zhang conspired to commit economic espionage, as the thefts of GE’s trade secrets surrounding various turbine technologies were done knowing and intending that the thefts would benefit the People’s Republic of China and one or more foreign instrumentalities, including LTAT, NTAT, Shenyang Aerospace University, Shenyang Aeroengine Research Institute, and Huaihai Institute of Technology.  The defendants, through LTAT and NTAT, received financial and other support from the Chinese government and coordinated with Chinese government officials to enter into research agreements with Chinese state-owned institutions to develop turbine technologies.

“The indictment alleges a textbook example of the Chinese government’s strategy to rob American companies of their intellectual property and to replicate their products in Chinese factories, enabling Chinese companies to replace the American company first in the Chinese market and later worldwide,” said Assistant Attorney General Demers.  “We will not stand idly by while the world’s second-largest economy engages in state-sponsored theft.  As part of the Attorney General’s China Initiative, we will partner with the private sector to hold responsible those who violate our laws, and we urge China’s leaders to join responsible nations and to act with honesty and integrity when competing in the global marketplace.”

“As alleged, the thefts of trade secrets to benefit the People’s Republic of China are serious crimes against the victimized company and our country,” said United States Attorney Jaquith. “Both fair competition and incentivized innovation require that American companies be able to rely on the secrecy of technological advances forged through their talent and tenacity.  When technology is taken through treachery, we will continue to work with the National Security Division and the FBI to prosecute the perpetrators.”

“American businesses spend many hours and large amounts of money developing unique technology.  When such technology is stolen it can be devastating to U.S. businesses and can result in American workers losing jobs,” said FBI Assistant Director Brown.  “China continues to support behavior that violates the rule of law. This case demonstrates the FBI will continue to pursue China’s efforts to steal American technology.”

“Economic espionage and the theft of trade secrets have a profound impact on our companies and communities,” said FBI Special Agent in Charge Hendricks.  “We view this as a grave threat to our economic and national security and the FBI will work tirelessly to prevent the loss of American technology and American jobs.”

Zheng was arraigned today in Albany before United States Magistrate Judge Christian F. Hummel, and released with conditions pending a trial before United States District Judge Mae A. D’Agostino. 

The economic espionage counts (Counts One, Three, Four, Seven, Eight and Eleven) carry a maximum sentence of 15 years in prison, a fine of up to $5,000,000, and a term of supervised release of up to three years.  The trade secrets theft counts (Counts Two, Five, Six, Nine, Ten, Twelve and Thirteen) carry a maximum sentence of 10 years in prison, a fine of up to $250,000, and a term of supervised release of up to three years.  Count Fourteen of the indictment, which charges Zheng with making false statements to the FBI during a voluntary interview, carries a maximum sentence of 5 years in prison, a fine of up to $250,000, and a term of supervised release of up to three years.      

The charges in the indictment are merely accusations.  The defendants are presumed innocent unless and until proven guilty.

This case is being investigated by the Federal Bureau of Investigation, and is being prosecuted by Assistant U.S. Attorney Rick Belliss, and National Security Division Trial Attorneys Jason McCullough and Matthew Chang.

Read more at the DOJ website.

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