Industrial Espionage at Dow Chemical

February 9, 2011

This starts off as one of those quintessential American success stories. It finishes with a criminal conviction. In between is not merely a story but a life - which may well end in prison.

A Quarter of a Century on the Job

In the 1960s, Wen Chyu Liu, aka David W. Liou, came to the United States from China as a graduate student. In 1965, Liu started working as a research scientist at Dow Chemical Company's Plaquemine, La., facility.   At Plaquemine, Liou worked on various aspects of the development and manufacture of Dow elastomers, including Tyrin CPE.

Dow is a leading producer of chlorinated polyethylene (CPE), an elastomeric polymer.  Dow's Tyrin CPE is used in a number of worldwid applications, such as automotive and industrial hoses, electrical cable jackets and vinyl siding.

By 1992, after more than a quarter of a century in Dow's employ, Liou resigned. This should have been a time for sitting back, taking it easy, and enjoying the fruits of a lifetime of hard work.  Instead, the government alleges that Liou embarked upon a second career that would take him down a very dark and twisted road. 

Indictment

On March 24, 2005, a federal grand jury indicted Liou on 15 counts that charged him with conspiracy, receipt and possession of stolen trade secrets, wire fraud, illegal monetary transactions, and perjury. On August 22, 2006, Liou was arrested in Seattle, WA on an intercontinental flight from Taipei, Taiwan. If fully convicted on all counts, he faced up to 300 years in prison, and nearly $10 million in fines or twice his gross gain (whichever is greater).

According to the indictment, Liou conspired with at least four current and former employees of Dow's facilities in Plaquemine and Stade, Germany, who had worked in Tyrin CPE production. This conspiracy's goal was to misappropriate trade secrets in an effort to develop and market CPE process design packages to various Chinese companies.  As part of the enterprise, Liou traveled extensively throughout China to market the stolen information, and he paid current and former Dow employees for Dow's CPE-related material and information.   In one instance, Liou bribed a then-employee at the Plaquemine facility with $50,000 in cash to provide Dow's process manual and other CPE-related information.

Perjury

When eventually confronted during a deposition as part of a Dow federal civil suit against him, Liou falsely denied under oath that he made arrangements for a co-conspirator to travel to China to meet with representatives of a Chinese company interested in designing and building a new CPE plant.  Thereafter, federal criminal charges ensued.

Conviction

On February 7, 2011, after a three-week trial, a federal jury in Baton Rouge, La. convicted Liou, 74, of one count of conspiracy to commit trade secret theft and one count of perjury in connection with his theft  trade secrets from Dow Chemical Company and selling them to companies in the People's Republic of China. He now faces a maximum of 10 years in prison on the conspiracy to commit trade secrets theft charge, and a maximum of five years in prison on the perjury charge.   Each count also carries a maximum fine of $250,000.