Houston-area engineers allegedly partnered with the Chinese government to steal trade secrets from a local offshore drilling company — and are now accused of participating in an elaborate scheme that ultimately may have benefited the Chinese military.
That's according to an FBI investigation that wrapped up this week, resulting in federal charges of conspiracy to steal trade secrets and a civil forfeiture complaint against the apparently conniving but very lazy masterminds who would rather illegally piggyback on someone else's innovation than do it themselves.
Shan Shi of Houston, Uka Kalu Uche of Spring, Samuel Abotar Ogoe of Missouri City and Johnny Wade Randall of Conroe, all American citizens, have been arrested and charged with conspiring to steal trade secrets. Kui Bo, a Canadian citizen in Houston and Gang Liu, a Chinese national in Houston, also were charged. Huang Hui, also a Chinese national but living in China, also has been charged.
According to the FBI, Shan Shi set up a company in Houston called CBM International in 2012 (CBMI), a company that almost exclusively received its funding from China's own CBM Future New Material Science and Technology (CBMF). That year, China had made it a national goal to develop its marine engineering industry —specifically to find a way to manufacture "syntactic foam," a material that can either be used for oil exploration or for military purposes, in submarines, aerospace technology and stealth technology. Only four companies in the world dominate the industry — and CBMF intended to be the fifth.
But instead of doing the work itself, China allegedly tasked Shan Shi and company to just steal the information from the Houston firm that already spent countless dollars and hours figuring out how to manufacture the rare material. China intended to use the information for both military and civilian purposes, according to the FBI.
“In all aspects, China has no 'own' innovations; that’s why theirs are much cheaper," Shi reportedly told colleagues at a dinner in 2016, according to the FBI. "They save lots on research money because it will be so costly in the beginning. The first model will cost so much. Just to take a look at it, China will understand it immediately and will not do research by themselves. The U.S., for example, is like a locomotive, driving its own train, selling tickets and showing others around. China will either pay to ride in that train or drive its own train.” (The Department of Justice did not respond to questions about how authorities obtained this conversation, or about the Houston company that was targeted.)
Shi and his colleagues soon began poaching employees from the Houston company (which is unidentified in court filings) by offering them pay raises and benefits — all courtesy of the People's Republic of China, whether the employees knew it or not.
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Despite signing agreements with the unidentified company, in which Uche, Ogoe, and Wade Randall agreed to never share the expensive and secret information about their work on the syntactic foam, they nevertheless spilled the beans to Shi and CBMI, ultimately allowing the China-based CBMF to set up its own factory and start producing the marine technology.
As it turns out, once the China factory was up and running, Shi and his Chinese colleague, Hui Huang, even tried to "sell [the Houston company] the same trade secret technology that CBMF had stolen from it," the FBI wrote in the affidavit. They offered to produce materials used to make syntactic foam "at a significantly lower price than what it cost [the Houston company] to make them." An official from the Houston firm "noted he had been surprised by how quickly CBMF had been able to develop quality products."
The FBI cited a paper trail of emails and bank transactions showing that the Chinese government funded CBMF, which funded CBMI — which used the money to buy property in Houston. The federal government has filed a civil forfeiture complaint in order to seize that property, located at 7 Buckingham Court and 13601 Farm to Market 529.
The Houston Press reached out to the People's Republic of China's consulate in Houston for comment on allegations that China essentially sanctioned the theft of trade secrets for its gain, but we did not hear back by press time.