Resident of China Pleads Guilty to Conspiracy to Send Leading Electric Vehicle Company’s Trade Secrets to Undercover U.S. Agent
Thursday, June 13, 2024
Defendant Stole Trade Secrets from His Employer and Used Them for His Own Business
Klaus Pflugbeil, 58, a Canadian and German national and resident of the People’s Republic of China (PRC), pleaded guilty today to conspiring to send trade secrets that belonged to a leading U.S.-based electric vehicle company (Victim Company-1). Pflugbeil and his co-defendant, Yilong Shao, who remains at large, are owners of a PRC-based business (Business-1) that sold technology used to make batteries, including batteries used in electric vehicles. Pflugbeil, a former employee of a company later purchased by Victim Company-1, stole trade secrets from his then employer and later used the trade secrets to build Business-1, marketing his business as a replacement for Victim Company-1’s products.
“Despite Pflugbeil’s agreement to protect what he knew was proprietary, sensitive technology, he chose to abscond with these trade secrets to China, where he sought an unfair and illegal advantage in critical industries such as electric vehicle manufacturing,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “With his guilty plea, Pflugbeil is now being held accountable for this unlawful conduct that jeopardized our national security.”
“The defendant boldly took what did not belong to him and used stolen trade secrets for his own personal profit knowing those valuable trade secrets were rightfully owned by an American company,” said U.S. Attorney Breon Peace for the Eastern District of New York. “Today’s guilty plea demonstrates how this office will swiftly bring to justice those who misappropriate intellectual property belonging to American companies particularly where the use of the technology poses a national security risk.”
“The defendant knowingly and illegally took trade secrets with no regard to the damage that would be done to the victim or the financial impact it would have on the U.S. economy,” said Assistant Director Michael Nordwall of the FBI’s Criminal Investigative Division. “The FBI and our partners will aggressively investigate and hold accountable anyone who seeks to profit by stealing technology from U.S. companies.”
According to court documents, Victim Company-1 is a U.S.-based leading manufacturer of battery-powered electric vehicles and battery energy systems. In 2019, Victim Company-1 acquired a Canada-based manufacturer of automated, precision dispensing pumps and battery assembly lines (the Canadian Manufacturer). Prior to its purchase by Victim Company-1, the Canadian Manufacturer sold battery assembly lines to customers who manufactured alkaline and lithium-ion batteries for consumer use. The battery assembly lines contained or utilized a proprietary technology now owned by Victim Company-1: continuous motion alkaline battery assembly (the Battery Assembly Trade Secret). The proprietary technology provided a substantial competitive advantage to Victim Company-1 in the battery manufacturing process.
Both Pflugbeil and Shao are former employees of the Canadian Manufacturer. As detailed in court documents, by no later than 2019, Pflugbeil and Shao planned to use Victim Company-1’s trade secrets for their own business activities. Pflugbeil told Shao that he had “a lot of original documents” related to the technology and sought out more “original drawings” of the trade secrets. Shao subsequently confirmed, among other things that, “we have all of original assembly drawings by PDF.”
The conspirators took measures to obfuscate that they had stolen documents. For example, Pflugbeil wrote to Shao about a document he created based on a document that Shao had stolen from Victim Company-1, “[its] in a different format, so it looks very original and not like a copy.”
In or about July 2020, Pflugbeil joined Business-1, a company previously established by Shao, which has since expanded to locations in China, Canada, Germany and Brazil. Business‑1 makes the same precision dispensing pumps and battery assembly lines that the Canadian Manufacturer developed. Business-1 was marketed by Pflugbeil as an alternative source for the sale of products that relied upon Victim Company-1’s trade secrets, publishing online advertisements on Google, YouTube and LinkedIn.
Pflugbeil purchased ads on Google for Business-1. These ads read, for example, “[Business-1] | Replacing [Canadian Manufacturer] Pumps & Parts | [Canadian Manufacturer] Identical Spare Parts. We manufacture precision metering pumps and fill tubes. | Contact Us for your [Canadian Manufacturer] replacement pumps and parts.” In any given week, this ad was shown tens of thousands of times.
Pflugbeil also repeatedly sent LinkedIn messages that said, “Hello [name], I used to work at [Canadian Manufacturer], and after [Victim Company-1] purchased and closed the company, I am now part of a company providing similar products and services. Pflugbeil’s LinkedIn profile background, pictured below, read:
Pflugbeil’s LinkedIn profile background.
On Sept. 11, 2023, undercover FBI agents attended a trade show for the packaging and processing industries in Las Vegas. The undercover agents posed as businesspeople who were interested in purchasing a battery assembly line from Business-1 to manufacture batteries at a facility in Long Island, New York. The undercover agents were introduced to Shao at the trade show and later to Pflugbeil via email.
Subsequently, on or about Nov. 17, 2023, Pflugbeil sent, via email, a detailed 66-page technical documentation proposal to an undercover agent (UC-1). The proposal notes, “this technical documentation package contains [Business-1] proprietary information which must be kept confidential.” In reality, the proposal contained Battery Assembly Trade Secret information belonging to Victim Company-1: at least half a dozen drawings Pflugbeil used in the Proposal and sent to UC-1 were, in fact, Victim Company-1’s information related to the Battery Assembly Trade Secret.
Pflugbeil pleaded guilty to conspiring to send trade secrets. He is scheduled to be sentenced on Oct. 9 and faces a maximum penalty of 10 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
The FBI is investigating the case. The Criminal Division’s Computer Crime and Intellectual Property Section provided valuable assistance.
Trial Attorney Scott A. Claffee of the National Security Division’s Counterintelligence and Export Control Section and Assistant U.S. Attorneys Ellen H. Sise and Samantha Alessi for the Eastern District of New York are prosecuting the case.
This action was coordinated through the Disruptive Technology Strike Force, an interagency law enforcement strike force co-led by the Departments of Justice and Commerce designed to target illicit actors, protect supply chains, and prevent critical technology from being acquired by authoritarian regimes and hostile nation-states. Under the leadership of the Assistant Attorney General for National Security and the Assistant Secretary of Commerce for Export Enforcement, the Strike Force leverages tools and authorities across the U.S. government to enhance the criminal and administrative enforcement of export control laws.
Updated June 14, 2024
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