US economic espionage trial over China allegations opens

SAN FRANCISCO (REUTERS) - A California businessman accused of stealing DuPont trade secrets to help China is the victim of an "unholy alliance" between the chemical giant and US authorities to wreck his company, his attorney said in federal court on Wednesday.

US prosecutors contend that Walter Liew paid former DuPont engineers to obtain trade secrets for the benefit of a state-owned Chinese company, Pangang Group. Mr Liew allegedly used those secrets to help Pangang develop a white pigment - chloride-route titanium dioxide, also known as TiO2 - used to make a range of white-tinted products, including paper, paint and plastics.

In opening statements on Wednesday, Mr Liew attorney Stuart Gasner said the investigation began when a disgruntled former employee of Mr Liew wrote an anonymous letter to DuPont accusing him of trade secret theft. DuPont filed a civil lawsuit against Mr Liew and alerted the FBI, Mr Gasner said, despite the fact that the materials in Mr Liew's possession were widely available and not trade secrets.

"DuPont engineers sat side-by-side with the FBI for weeks and weeks," Mr Gasner said. DuPont declined to comment on the case.

Assistant US Attorney John Hemann, meanwhile, said Mr Liew possessed four separate pieces of confidential DuPont materials, including a "recipe book" on how to build a TiO2 factory. "They used these keys to take advantage for themselves, and to help Chinese companies get ahead unfairly," Mr Hemann said.

Pangang paid Mr Liew's company US$28 million (S$35.5 million), he said.

Mr Liew, his wife and another man charged in connection with the events, Robert Maegerle, pleaded not guilty. His wife will be tried separately.

The United States has identified industrial spying as a significant and growing threat to the nation's prosperity.

DuPont is the world's largest producer of TiO2. Prosecutors also charged Pangang Group, a steel manufacturer in Sichuan province, in the case. However, the indictment against Pangang stalled after a US judge ruled that prosecutors'attempts to notify Pangang of the charges were legally insufficient.

The trial is expected to last about two months.