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Insider Behind $1 Billion Trade Secret Theft Case Sentenced

by Chris Brook on Friday September 18, 2020

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The FBI on Wednesday shared details around a recent $1 billion trade secret theft case and reminded companies to report suspected crimes like trade secret theft.

An ex-employee of a petroleum giant who previously plead guilty to taking a billion-dollar trade secret has been sentenced to 24 months in a federal prison and ordered to pay $150,000 in restitution.

Following his release, he’ll be deported, the Federal Bureau of Investigation (FBI) confirmed this week.

Hongjin Tan, the employee in question, is a Chinese national who formerly worked as an associate scientist at a Oklahoma-based petroleum company. While the Justice Department declined to name the company, court documents indicate the company is Phillips 66, the $54 billion-dollar energy giant.

Tan worked for the company from June 2017 until December 2018, when he resigned and claimed he was planning to return to his native China to care for his aging parents. That ultimately wound up being a lie, as Tan had loose plans to join a company in China as long as he supplied it with information on battery technology from his ex-employer. This technology, according to court documents from the time, figured into a “research and development downstream energy market product.”

Tan, who was a U.S. legal permanent resident, plead guilty last November. While he was formally sentenced back in February, it wasn't until this week that the FBI shared some context around the case and how it approaches trade secret theft cases like it.

According to the FBI, Tan’s employer made a call to the FBI tip line to report a possible crime after Tan discussed his plans – that he was planning on leaving the U.S. for China not to take care of his parents, but to take a job at a new firm – with a co-worker over dinner.

The FBI said on Wednesday that Tan told his colleague that he had a job waiting for him at Xiamen Tungsten, a company in China that specializes in smelting, processing, and distributing tungsten, molybdenum and other metals. The company also supplies battery materials, which explains why it may have been interested in the next generation battery technology Tan was working on in the U.S.

Phillips 66 spent decades researching and developing its technology, according to the FBI. On top of that, it has a “secondary, and perhaps even more valuable, use,” when it comes to melting metal.

The company terminated Tan after discovering his plans and began to look into his activity, quickly seeing that he’d accessed sensitive documents around the technology but didn’t directly pertain to his day to day work for the company. Once the FBI stepped in, it discovered that Tan had began accessing the data around the time he applied to China's Thousand Talents Program, a plan designed to recruit individuals 55 years of age or younger who work in universities or R&D institutes who are willing to relocate to China and work. The program encourages participants to send research back to China in exchange for financial incentives.
When Tan returned a flash drive he acknowledged filling with some of the company's files on marketing the technology in China, he deleted five documents - documents that could have let a competitor manufacture the product.

The FBI worked with Phillips 66 to investigate further and ultimately identify the files Tan had stolen, stored at his home, and in turn, get an arrest warrant, the FBI says.

As the data was especially confidential - last year's criminal complaint claims the company has made $1.4-1.8 billion selling the product affiliated with it – it could have greatly benefited a fledgling competitor.

“If you got your hands on this information, you would be decades ahead of where you would have started out on this technology,” Rebecca Day, a Special Agent working with the FBI’s Oklahoma City Tulsa Resident Agency said Wednesday. “We won’t tolerate people who come into the United States to steal for the betterment of a foreign government or foreign company.”

The fact that someone at the company was so willing to report a potential crime aided it greatly, the FBI says.

“If we reach out,” FBI Oklahoma City Special Agent Quincy Barnett said this week, “it’s not a negative. We may have identified opportunities to engage,” adding that the FBI can supply briefings on insider threats, share tips for when workers travel to different countries, and ensure nondisclosure agreements are followed.

Barnett added that many companies, afraid reporting a crime like this would impact a stock price or the sentiment among shareholders, abstain from reporting.

“Companies can bring this information to the FBI, and we can work through those fears and hesitations,” said Barnett. “We are trying to send a message that this won’t be tolerated, but we have to find out about it first.”

Tags:  IP theft

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