Former Lucent Employees and Co-Conspirator Indicted in
Theft of Lucent Trade Secretsy
NEWARK – Three men, two of them former employees of Lucent Technologies,
were indicted today for conspiring to steal trade secrets from Lucent for
transfer to a joint venture with a Chinese government-owned telecommunications
company, U.S. Attorney Robert J. Cleary announced.
Charged in the one-count Indictment are Hai Lin and Kai Xu, both former Distinguished
Members of the Lucent staff developing the PathStar Access Server, and Yong-Qing
Cheng, who served as a Lucent consultant on the PathStar project.
Lin, 30, is of Scotch Plains; Xu, 33, is of Somerset, and Cheng, 37, is of
East Brunswick. All three are legal U.S. resident aliens from China.
Each of the defendants are expected to appear for arraignment on the Indictment
within the next two weeks before the U.S. District Judge to whom the case
is assigned.
The Indictment returned today by a grand jury in Newark comes four weeks
after the defendants were arrested on a criminal complaint charging conspiracy
to commit wire fraud. The Indictment charges each of the defendants with a
single count of Conspiracy to Steal Trade Secrets and to Possess Stolen Trade
Secrets, in violation of 18 U.S.C § 1832(a)(5). The charge carries a
maximum penalty of 10 years in prison and a $250,000 fine.
The Indictment, which closely mirrors the language in the criminal complaint,
describes how the defendants, via email, a password-protected website and
visits to China, conspired to steal and transfer the source code, software
and entire design of the PathStar server to the joint venture, according to
Assistant U.S. Attorney Scott S. Christie.
As in the criminal complaint, the Indictment alleges that Cheng, Lin and
Xu founded ComTriad Technologies, Inc. a New Jersey high-tech startup, in
January 2000, purportedly to develop products integrating the transmission
and reception of voice and date over the Internet.
ComTriad eventually entered into a joint venture with Datang Telecom Technology
Co., which agreed to provide a $1.2 million investment in ComTriad in exchange
for a significant ownership interest in ComTriad, according to the Indictment.
Using the stolen Lucent secrets to develop its own high-technology products,
the goals for the joint venture were for it to become the leading data networking
company in China – "the Cisco of China" – and to go public
in both the U.S. and China through initial public stock offerings, according
to the Indictment.
The Indictment adds the following new details and allegations, among others:
• that Cheng had served as a consultant to Lucent on the PathStar project;
• that all three of the defendants traveled to China in October 2000
to meet with representatives of Datang to further the joint venture between
Datang and ComTriad;
• that in November 2000, Xu, as president of ComTriad, signed a subscription
agreement with Datang, detailing incremental investment by Datang in exchange
for shares of ComTriad;
• that, to obscure their connection to ComTriad, the defendants started
using a commercial post box to receive mail rather than using ComTriad’s
prior company address at Lin’s or Cheng’s residence.
Following their arrests, bail was set by U.S. Magistrate Judge Stanley R.
Chesler in the amount of $900,000 (actually requiring the equivalent of $1.8
million in real estate equity). Yesterday, Cheng was released under a court
ruling requiring only a $900,000 bail to be secured in full by real estate
equity.
Xu was expected to be released today, after posting a $900,000 bond secured
by approximately $680,000 in real estate equity and the posting of $12,000
from one individual in a court escrow account. Also, as a further condition,
Xu, his wife and three others were to co-sign and personally guarantee the
$900,000 bond.
Lin, who remains in custody today, also had bail set at $900,000, to be secured
by approximately $400,000 in real estate equity and two individuals posting
$50,000 in a court escrow account. Lin, his wife and two others would also
be required to co-sign and guarantee the $900,000 bond.
Magistrate Judge Chesler further conditioned the release of each defendant
on house arrest with electronic monitoring; confinement to the residence except,
with prior approval of Pretrial Services, meetings with counsel or court appearances;
the singing of an irrevocable waiver of extradition; and the surrender of
passports by the defendants and their wives.
An Indictment is a formal charge made by a grand jury. Despite Indictment,
every defendant is presumed innocent, unless and until found guilty beyond
a reasonable doubt following a trial at which the defendant has all of the
trial rights guaranteed by the U.S. Constitution and federal law.
Cleary credited Special Agents of the FBI, under the direction of Special
Agent in Charge Kevin Donovan in Newark, with bringing the case against the
defendants.
The government is represented by Assistant U.S. Attorney Christie of the
U.S. Attorney’s Frauds and Public Protection Division and by David Goldstone,
trial attorney with the Department of Justice Computer Crime and Intellectual
Property Section.
Defense counsel:
Cheng: James A. Plaisted, Esq. Roseland
Xu: Katherine L. Pringle, Esq. New York
Lin: Robert J. Fettweiss, Esq. Newark
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