The Washington PostDemocracy Dies in Darkness

Houston businessman convicted of conspiring to steal trade secrets, acquitted of economic espionage for China

An American flag is flown next to the Chinese national emblem during a 2017 welcome ceremony for President Donald Trump in Beijing. (Andy Wong/Associated Press)

A federal jury convicted a Chinese-American businessman of conspiring to commit trade secret theft against a Texas oil drilling equipment maker on Monday, but acquitted him of conspiring to commit economic espionage for the benefit of China and to launder money.

Jurors in Washington deliberated three days after a three-week trial before returning a split verdict against Shan Shi. Shi is a 54-year-old naturalized U.S. citizen and entrepreneur in Houston who founded a company to research how to make casings for drilling pipes that help keep them afloat and not sink attached oil rigs.

“The jury’s verdict makes clear that Shan Shi conspired to steal trade secrets by poaching employees from a U.S. company and enticing them to bring technical data to his company,” Assistant Attorney General John C. Demers of the Justice Department’s national security division said.

“Like our many other prosecutions implicating China’s economic aggression, this case exemplifies both the threat to American companies and our commitment to confront it,” Demers said.

Shi’s defense team said it was “deeply disappointed” in the verdict and would appeal for the married father of two, who has lived in the United States since 1990.

“The government’s own cooperating witnesses testified that there was no conspiracy to steal anything,” said lead defense attorney Peter Zeidenberg of the Arent Fox law firm in Washington. “We are mystified why a jury would disagree with the government’s witnesses on this point. We will continue to fight to clear Dr. Shi’s good name.”

Shi and six others were indicted in June 2017 and charged with conspiring to steal trade secrets from Trelleborg Offshore, a Houston-based U.S. subsidiary of the Swedish engineering giant Trelleborg.

Prosecutors allege that from 2013 until Shi’s arrest in May 2017, his firm, CBM International, received $3.1 million from its private Chinese parent company to help make and sell syntactic foam in China, using information stolen by former Trelleborg employees in Houston hired by Shi’s firm.

The mixed verdict came as the Trump and Obama administrations have emphasized Justice Department prosecutions to combat what they deem a systematic campaign by China to steal its way to economic dominance, with FBI Director Christopher A. Wray recently estimating to the Senate Judiciary Committee that officials have “probably about a thousand-plus investigations all across the country involving attempted theft of U.S. intellectual property, whether it’s economic espionage or counter proliferation, almost all leading back to China.”

Scrutiny of Chinese American scientists raises fears or ethnic profiling

However, some defense lawyers and activists say the government has unduly targeted Chinese Americans whose work or scientific research exposes them to suspicions that they are spying on behalf of Beijing, even when their efforts are neither directed by the Chinese government nor involve military or export-controlled technology, as Shi’s defense claimed in his case.

Frank Wu, a former dean of the University of California Hastings College of the Law, said Americans of Chinese descent trying to conduct research and do business in China are being singled out in an intensifying economic cold war.

“There is a difference between aggressive competition that is inappropriate, and a conspiracy for a foreign government,” Wu said.

He pointed to findings that between 1997 and 2015, people of Asian heritage were twice as likely to be charged with — but not convicted of — economic espionage as non-Asian defendants. Study author Andrew Chongseh Kim, a visiting scholar at South Texas College of Law in Houston, reported his conclusions in a 2018 Cardozo Law Review article drawn from 166 cases, which included 63 Asian or Asian American defendants.

Prosecutors presented evidence in Shi’s case that his Chinese parent firm hoped to supply buoyancy products to China’s navy as well as its civilian-led, state-owned oil and shipbuilding industries. The parent firm received state-funded research grants and partnered with state-run Harbin Engineering University, which specializes in research for China’s navy, prosecutors said.

China’s central planners made developing that kind of technology a priority to help tap oil offshore and cut its dependency on foreign oil.

Shi acted “against the backdrop of China’s strategic plan to close the gap between China and U.S. in buoyancy technology and with the benefit of millions of dollars of funding from China,” Demers said.

The charge on which Shi was found guilty carries a maximum punishment of 15 years in prison.

Of six co-defendants in the case, four have pleaded guilty to conspiring to commit theft of trade secrets, and two who have been sentenced have received probation.

China’s Huawei secretly helped build North Korea’s wireless network, documents show.

Chinese bank involved in probe of North Korean sanctions and money laundering faces financial ‘death penalty’

Local newsletters: Local headlines (8 a.m.) | Afternoon Buzz (4 p.m.)

Like PostLocal on Facebook | Follow @postlocal on Twitter | Latest local news