A former GE Power engineer and a Chinese businessman conspired to steal General Electric (GE) trade secrets related to gas and steam turbine technologies to benefit China, the U.S. Department of Justice (DOJ) has alleged in an indictment unsealed on April 23.
The 14-count indictment charges Xiaoqing Zheng, 56, of Niskayuna, New York, and Zhaoxi Zhang, 47, of Liaoning Province, China. It alleges that while Zheng was employed as a GE Power senior sealing engineer in the steam turbine design group in Schenectady, New York, between 2008 and 2018, he stole “multiple electronic files,” including proprietary files involving design models, engineering drawings, configuration files, and material specifications having to do with various components and testing systems associated with GE gas and steam turbines.
Zheng then allegedly e-mailed and transferred many of the stolen GE files using steganography—which is a tactic used to hide a data file within the code of another data file—to Zhang his business partner in China. “Zheng and Zhang used the stolen GE trade secrets to advance their own business interests in two Chinese companies—Liaoning Tianyi Aviation Technology Co., Ltd. (LTAT) and Nanjing Tianyi Avi Tech Co. Ltd. (NTAT), companies which research, develop, and manufacture parts for turbines,” the DOJ said.
The FBI opened its investigation after GE Power in December 2017 discovered a large number of encrypted files on Zheng’s work computer. Zheng, who worked on various leakage containment technologies in steam turbine engineering (including advance brush seals and tip brush seals, as well as next-generation products, including rotating brush seals and carbon seals), had disclosed to GE Power in 2016 that he was operating an aviation parts supply business in China, seeking confirmation that his participation did not violate GE’s conflict of interest policies. GE counsel advised Zheng to proceed with his business with limitations, including to ensure that it did not pose conflicts with GE policies.
But the indictment goes a step further and alleges that Zheng and Zhang conspired to commit economic espionage to benefit China. The DOJ notes that the Chinese government’s “Made in China 2025” initiative announced in 2015 seeks to enhance the country’s innovation, productivity, quality, digitalization, and efficiency in ten sectors, including power generation and aviation.
“[T]he thefts of GE’s trade secrets surrounding various turbine technologies were done knowing and intending that the thefts would benefit the People’s Republic of China and one or more foreign instrumentalities, including LTAT, NTAT, Shenyang Aerospace University, Shenyang Aeroengine Research Institute, and Huaihai Institute of Technology,” it says.
“The defendants, through LTAT and NTAT, received financial and other support from the Chinese government and coordinated with Chinese government officials to enter into research agreements with Chinese state-owned institutions to develop turbine technologies.”
According to Assistant Attorney General for National Security John C. Demers, the indictment’s allegations are “a textbook example of the Chinese government’s strategy to rob American companies of their intellectual property and to replicate their products in Chinese factories, enabling Chinese companies to replace the American company first in the Chinese market and later worldwide,” he said on Tuesday.
“We will not stand idly by while the world’s second-largest economy engages in state-sponsored theft. As part of the Attorney General’s China Initiative, we will partner with the private sector to hold responsible those who violate our laws, and we urge China’s leaders to join responsible nations and to act with honesty and integrity when competing in the global marketplace.”
In a statement, U.S. Attorney Grant C. Jaquith for the Northern District of New York noted thefts of trade secrets to benefit China are “serious crimes” against GE. U.S. Assistant Director John Brown of the FBI’s Counterintelligence Division on Tuesday said in a statement that China “continues to support behavior” that violates the rule of law.
“This case demonstrates the FBI will continue to pursue China’s efforts to steal American technology,” Brown said.
Six of the 14 counts in the indictment relate to economic espionage, which carry a maximum sentence of 15 years in prison, a fine of up to $5 million, and a term of supervised release of up to three years. Seven counts are related to trade secret thefts, which carry a maximum sentence of 10 years in prison. One count charges Zheng with making false statements to the FBI during a voluntary interview.
The DOJ noted, however, the charges in the indictment are “merely accusations.” The defendants are presumed innocent unless and until proven guilty, it said.
“We have been in close cooperation with the FBI and the U.S. Attorney’s Office for some time on this matter,” a GE Power spokesperson told POWER on April 25. “At GE, we aggressively protect and defend our Intellectual Property and have strict processes in place for identifying these issues and partnering with law enforcement.”
—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)
Updated (April 26): Adds GE’s comments. Updates headline to reflect engineer’s employment status more accurately.