Error processing SSI file
FBI: Local execs stole secrets for Chinese
Former sales chief and engineer at parts supplier charged in million-dollar scheme.
Comment on this story
DETROIT -- The FBI arrested a former vice president of sales and another ex-employee of a Plymouth auto parts supplier Tuesday, accusing them of leaking trade secrets worth millions of dollars to a Chinese company.
A Chinese manufacturing company, Chongqing Huafu Industry Co., obtained trade secrets from Metaldyne Corp. in an effort to undercut the price the Plymouth supplier charges for a sophisticated metal rod used in truck engines, the FBI said.
"Substantial economic value ... from the Metaldyne trade secrets were compromised," FBI Agent Jeffrey Edwards wrote in an affidavit made public Tuesday as part of a criminal complaint filed in U.S. District Court.
Anne Lockwood, a former vice president of sales at Metaldyne and Fuping Liu, a company engineer, were charged Tuesday with conspiracy to steal and transmit trade secrets.
If convicted, both defendants face a potential prison sentence of 10 years and a fine of up to $250,000.
The affidavit included an Aug. 18 email sent from Lockwood, who left Metaldyne in February 2004, to an unidentified woman.
"I ended up getting a decent settlement from Metaldyne, which is helping me start my own business," Lockwood wrote. "I guess I wanted to get even with (Metaldyne) for their awful behavior."
The arrests come amid heightened concern over industrial espionage and the theft of intellectual property by firms in China, where manufacturing is booming with limited oversight. The United States has prosecuted several cases involving theft of trade secrets under the Economic Espionage Act of 1996.
"There's just outright thievery going on by people who know better," said David Hemmings, president of Pacific Rim Alliance, Ltd. In Grand Rapids, which helps U.S. companies establish operations in China.
Lockwood, 52, joined Taylor-based Masco Industries in 1989. Masco became one of three companies that were combined in 2000 to form Metaldyne. She became vice president of sales for Metaldyne in October 2003.
Lockwood, who was arrested Tuesday at her Rochester Hills home, was released on a $10,000 unsecured personal bond by U.S. Magistrate Judge Mona Majzoub and ordered to surrender her passport.
Lockwood's lawyer, Mark Kriger, declined to comment. She didn't return a message left at her home.
Liu, 41, a U.S. citizen living in Shanghai, was arrested at a hotel near Detroit Metro Airport on Tuesday. The FBI said he was scheduled to return to China today.
He joined Masco in 1998, working at its North Vernon, Ind., facility before he joined the company's Shanghai office. He left Metaldyne in April 2004.
After leaving Metaldyne, he became director of technology for the Shanghai office of GKN Sinter Metals, a competitor of Metaldyne based in Auburn Hills.
Liu also is accused of stealing confidential information from GKN and passing it along to Lockwood.
According to the affidavit, Metaldyne spent more than a decade and millions of dollars developing special metal connecting rods for large truck engines built by Chicago-based International Truck and Engine, a unit of Navistar International.
The rods generate millions in sales for the Metaldyne, the FBI said.
Metaldyne says although some trade secrets were compromised -- including the blueprints for a prototype for a high-tech 2007 truck engine -- it doesn't believe the Chinese company will be able to duplicate the rods, according to the affidavit and company spokeswoman Myra Moreland.
"We're not aware of any copycat products." Moreland said
The company is currently producing a new rod, which is in the prototype phase, that will go into production in June 2006.
The rods are made at the company's North Vernon, Ind., plant -- using special presses made by Germany-based Mueller-Weingarten and furnaces designed by Wixom-based Pacific Industrial Furnace Company. GKN is the only other company that produces comparable rods.
As described in the affidavit, Lockwood and Chongqing Huafu were planning not only to use Metaldyne's technology but also to utilize the same supplier network to produce the rods.
In August 2004, Chongqing Huafu Industry Co. sent a message to Mueller-Weingarten, seeking a proposal to build the German company a production line to build the rods, the FBI said.
In 2002, Metaldyne had approached Huafu about a joint venture to make another product, but it specifically rebuffed an overture by the Chinese company to build metal connecting rods, the FBI said.
Chongqing Huafu had sought to make the parts in 2002, but Metaldyne declined, saying the product was "too vital to its core business to outsource," the FBI said.
Huafu sent Mueller documents that "detail the set of capital equipment comprising Metaldyne's North Vernon production line that manufactures the International Connecting Rod," FBI Special Agent Edwards wrote in the court filing.
Another company, Abbott Furnace, also received unsolicted e-mails from the Chinese firm that contained Metaldyne's trade secrets.
The Chinese company had information that only a company insider could have -- and not an outside supplier, the FBI said.
Both suppliers contacted Metaldyne, who then contacted the FBI.
After Lockwood left the company in February, she created her own company, PP Sales and Engineering, which was based out of her home.
"One (of) the major products I will represent is direct competition against Metaldyne's largest and most profitable product," Lockwood wrote in an e-mail to an unidentified woman quoted in the criminal complaint. "They will not be able to compete with the Chinese!!!"
An April 26, 2004, e-mail from Lockwood to Liu contained a contract that designated PP Sales and Engineering as Chongqing Huafu's exclusive agent for selling powered metal components such as the engine rods in question. The seven-year contract stated that PP Sales and Engineering would receive a 5 percent commission on any products that Chongqing Huafu sold as result of the agreement.
The FBI obtained Lockwood and Liu's e-mail account information from Yahoo! through a federal grand jury subpoena. Lockwood's credit card statements show she traveled to Chongqing, China, from May 28 to June 6, 2004, the FBI said.
While in China, Lockwood contacted an employee at Metaldyne by e-mail and asked the employee to move some of her old company files to a place where they could be accessed by her husband, Michael Haehnel, a manufacturing engineer for Metaldyne at the time. Haehnel, who has not been charged, was fired Tuesday by Metaldyne, the company said.
"I know I have some old gems on my old files. I just have no clue where they are," Lockwood wrote in the June 2 e-mail. "Anyway, things went EXTREMELY well in China. Please do not share this with ANYONE."
Metaldyne isn't the first U.S. company to have trade secrets compromised in China. In May 2001, software giant Lucent Technologies Inc. discovered that two employees were passing sensitive information to Beijing's Datang Telecom Technology Co., a joint-venture partner, in an attempt to create the "Cisco of China." Both men were charged with conspiracy to commit fraud and faced maximum fines $250,000 and five years jail time.
Metaldyne, with 50 facilities worldwide and 7,500 employees, was alerted of the situation last year, and immediately took action, said Metaldyne spokeswoman Moreland said.
"We were informed by a third party that the possibility existed that some of our intellectual property secrets might be compromised," she said, declining to name who offered the tip. "Then, we turned it over to the FBI."
Metaldyne keeps its blueprints in a single office and access to those documents are available through a computer in that office only.
The company sent a memo to employees Tuesday to make them aware of the arrests, and to reassure them that the situation, while shocking, was a sign that the legal system works, Moreland said.
You can reach David Shepardson at (313) 222-2028 or dshepardson@ detnews.com.
Copyright © 2005
The Detroit News.
Use of this site indicates your agreement to the Terms of Service (updated 12/19/2002).