Fei Ye, Ming Zhong Guilty Of Economic Espionage Against Sun, Transmeta

December 17, 2006

United States Attorney Kevin V. Ryan announced that Fei Ye and Ming Zhong pleaded guilty to two counts each of economic espionage. Ming and Zhong were arrested at the San Francisco International Airport on November 23, 2001, with stolen trade secret information in their luggage while attempting to board an aircraft bound for China. The defendants admitted to possessing stolen trade secrets from Sun Microsystems and Transmeta with the intent to benefit the Peoples Republic of China. These guilty pleas mark the first convictions in the country for economic espionage under 18 U.S.C. § 1831, and are the result of an investigation by the Federal Bureau of Investigation, with assistance from U.S. Immigration and Customs Enforcement and Customs and Border Protection.

U.S. Attorney Kevin V. Ryan stated, “These guilty pleas represent the first convictions in the country under this section of the Economic Espionage Act of 1996, a law that was enacted by Congress against a backdrop of increasing threats to corporate security and a rising tide of international and domestic economic espionage. Silicon Valley generates so many of the ideas and innovations in technology that give this country an economic edge and we are committed to working with and protecting the companies who are robbed of their valuable trade secrets.”

Mr. Ye and Mr. Zhong admitted that they intended to utilize the trade secrets in designing a computer microprocessor that was to be manufactured and marketed by a company that they had established, known as Supervision, Inc. In pleading guilty, Mr. Ye and Mr. Zhong admitted that Supervision was to have provided a share of any profits made on sales of chips to the City of Hangzhou and the Province of Zhejiang in China, from which Supervision was to receive funding. Mr. Ye and Mr. Zhong further admitted that their company had applied for funding from the National High Technology Research and Development Program of China, commonly known as the “863 Program.”

“Preventing the theft and illicit export of trade secrets vital to the economy of the United States is a priority for the FBI. One of the most useful tools in accomplishing this goal is the successful investigation and prosecution of individuals involved in such economic espionage. Today’s landmark convictions represent a significant victory in the fight to protect our Nation’s critical intellectual property.”

“One of ICE’s top enforcement priorities is preventing sensitive technology, products and corporate trade secrets from falling into the wrong hands and possibly being used to inflict harm upon America or its allies,” said San Francisco ICE Special Agent in Charge Charles DeMore.

Mr. Ye, 40, of Cupertino, California, and Mr. Zhong, 39, of Sunnyvale, California, were indicted by a federal grand jury on December 4, 2002. They were charged with a total of ten counts, including: one count of conspiracy, in violation of 18 U.S.C. §§ 371, 1831(a)(5) and 1832(a)(5); two counts of economic espionage, in violation of 18 U.S.C. § 1831(a)(3); five counts of possession of stolen trade secrets, in violation of 18 U.S.C. § 1832(a)(3); and two counts of foreign transportation of stolen property, in violation of 18 U.S.C. § 2314.

The sentencing of Mr. Ye and Mr. Zhong is scheduled for April 23, 2007, at 1:30 p.m. before Judge James Ware in San Jose. The maximum statutory penalty for each count in violation of 18 U.S.C. § 1831 is 15 years and a fine of $500,000, plus restitution if appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

The case is one of the many cutting-edge cases prosecuted by the Computer Hacking and Intellectual Property (CHIP) Unit of the United States Attorney’s Office. The CHIP Unit, which is based in the San Jose branch of the U.S. Attorney’s Office, was established in 2000 and was the first federal specialized prosecution unit in a U.S. Attorney’s Office. This model has been followed in other offices and there are now about twenty-five CHIP Units in U.S. Attorney’s Offices around the country.