Chinese-American scientist admits plot to steal medical trade secrets for firm in China

By Jeremy Roebuck

The Philadelphia Inquirer

PHILADELPHIA — One of the world’s leading biochemists pleaded guilty Friday to stealing proprietary information potentially worth millions from a GlaxoSmithKline research facility in Montgomery County to help a Chinese company launched with financial backing from that nation’s government.

Yu Xue, 48, told a federal judge in Philadelphia that she pilfered promising cancer research she had developed while working for the British pharmaceutical giant’s Upper Merion Township location between 2006 and 2016. She had hoped to market the potentially ground-breaking therapies through a business she set up in China with two other co-defendants.

The case is the latest in a string of recent prosecutions of Chinese-American scientists accused of purloining trade secrets from U.S. companies in hopes of bolstering China’s competitive edge.

But even as she admitted her guilt in court Friday, Xue, a naturalized U.S. citizen living in Wayne, raised questions about the value and importance of the research she was charged with stealing — an issue that augured a looming battle over the seriousness of her crimes that is sure to dominate her sentencing in December.

“You can find all of the patents in the public domains, so I think the information I sent is not a trade secret,” she told U.S. District Judge Joel Slomsky. “A trade secret to me is not a publicly available (document). The patents I sent to them is publicly available.”

Assistant U.S. Attorney Robert J. Livermore disagreed.

“There are vast differences between the parties as to the value and importance of the information stolen,” he said.

Still, despite that dispute, Xue’s guilty plea delivered a significant win to the U.S. Justice Department, which, prior to her case, had suffered a series of embarrassing setbacks in corporate espionage cases involving Chinese-American scientists.

Both the Trump and Obama administrations have accused Chinese spy agencies of encouraging their nation’s businesses to steal trade secrets from American corporations and made stanching that flow a priority. But recent high-profile blunders have prompted critics to accuse federal authorities of racial hysteria reminiscent of the red scares of the 1950s.

Prior to Friday’s hearing, Xue’s lawyer, Peter R. Zeidenberg, had likened her case to that of another scientist he represented —Temple University professor Xiaoxing Xi. Authorities charged Xi with stealing sensitive U.S. technology in the field of superconductivity in May 2015, only to withdraw the case four months later after his legal team proved that agents had “fundamentally misunderstood” the science and that the information they had accused Xi of stealing was not a trade secret.

In the 10 months preceding that decision, Justice Department lawyers also withdrew cases against four other Chinese American scientists across the country accused of passing along protected information, including allegations against two former senior biologists at GSK competitor Eli Lilly & Co.

Yet from the day FBI agents arrested Xue in late 2015, it was clear that they were confident this case would not end in another public embarrassment.

The 45-count indictment against her and five co-defendants —including her twin sister, a brother, and another colleague at GSK’s Upper Merion branch —contained long passages quoting the group’s email exchanges, including several in which they appeared to acknowledge what they were doing was wrong and worried what would happen if they got caught.

When news of the trade secrets case against the Lilly scientists broke in 2013, Xue sent a brief email to one of the conspirators.

“So scary,” she wrote, according to court filings. “Please do not send any doc containing GSK data out to others.”

Nonetheless, prosecutors allege that between 2012 and 2015 Xue and a GSK colleague —Lucy Xi, 38, of Westlake Village, Calif. —continued to sneak dozens of confidential documents out of the company over email or by downloading them onto external thumb drives. They shipped them to colleagues preparing to launch the rival firm, Renopharma, which Xue had launched to exploit the research with several of her co-defendants.

Xue and her fellow conspirators were not directly charged with corporate espionage —an offense that would require prosecutors to prove involvement of a foreign government. Instead, she pleaded guilty to one count of conspiracy to steal trade secrets, an offense punishable by up to 10 years in prison.

Still, prosecutors have said they believe there was at least some level of involvement by Chinese government officials in setting up and backing Xue’s company.

In one August 2012 message cited in the indictment, she identified two key Chinese officials whom she felt confident she could persuade to invest in Renopharma through a “special government fund,” and laid out plans to give them “expensive gifts” to cement their support.

U.S. economic officials have accused China of setting up heavily subsidized funds specifically to lure Chinese scientists working for U.S. companies back to their native country and to encourage them to bring privileged technology and science research with them.

Renopharma’s own financial records from March 2014 list the equivalent of about $300,000 the company received from various government-backed funds in China that year.

However, Zeidenberg has insisted there was nothing nefarious about those payments and likened them to economic development grants routinely doled out by state and local governments in the United States.

He declined to comment after Friday’s hearing, but suggested in court that investigators also had misunderstood his client’s intent and the significance of the information she stole.

“She sent documents that she knew belonged to GSK, many of which she knew were confidential,” he said. “What she didn’t appreciate at the time she sent them was that they in fact contained trade secrets.”

One of Xue’s co-defendants is expected to plead guilty in September. Three others are scheduled for trial in October.