Posted on: December 17, 2024 09:24 AM

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Resident of China sentenced to 24 months in prison for conspiring to send trade secrets belonging to leading US based electric vehicle company

Today, in federal court in Central Islip, Klaus Pflugbeil was sentenced by Judge Joan M. Azrack to 24 months’ imprisonment for conspiring to send trade secrets that belong to a leading U.S.-based electric vehicle company (Victim Company-1).  Pflugbeil, a resident of the People’s Republic of China (the “PRC” or “China”) and a Canadian and German national, and his co-defendant, Yilong Shao, who remains at large, are owners of a PRC-based business (Business-1) that sold technology used to make batteries, including batteries used in electric vehicles.  Pflugbeil and Shao, former employees of a company that was purchased by Victim Company-1, took trade secrets from their employer, and later used the trade secrets to build a business that they marketed as a replacement for Victim Company-1’s products.  Pflugbeil pleaded guilty in June 2024.

“The defendant built a business in China to sell sensitive technology that belongs to a U.S. company.  His actions were bold—he even advertised that he was selling the victim’s products—because he thought, incorrectly, that he was outside the reach of U.S. prosecutors,” stated United States Attorney Peace.  “Today’s sentencing sends a clear message to would-be offenders: my Office will do everything it can to protect American innovation and national security no matter where you try to hide.”

“In stealing trade secrets from an American electric vehicle manufacturer to use in his own China-based company, Pflugbeil’s actions stood to benefit the PRC in a critical industry with national security implications,” said Assistant Attorney General for National Security Matthew G. Olsen. “The Justice Department will mobilize every available resource to prevent our adversaries from advancing their global ambitions at the expense of U.S. national security.”

The conspirators took measures to obfuscate that they had stolen trade secrets. For example, Pflugbeil wrote to Shao about a document he created based on one that Shao had stolen from Victim Company-1, “[its] in a different format, so it looks very original and not like a copy.”

In or about July 2020, Pflugbeil joined Business-1, a company previously established by Shao, which has since expanded to locations in China, Canada, Germany and Brazil.  Business?1 makes the same precision dispensing pumps and battery assembly lines that the Canadian Manufacturer developed.  The battery assembly technology is related to the development of electric vehicles that can compete with U.S.-made vehicles.  The potential for Chinese automakers to swamp the U.S. and global market with vehicles like those that can be built using this stolen technology presents a potential national security risk.

On or about September 11, 2023, undercover agents attended a trade show for the packaging and processing industries (the “Trade Show”) in Las Vegas, Nevada.  The undercover agents posed as businesspeople who were interested in purchasing a battery assembly line from Business-1 to manufacture batteries at a facility in Long Island, New York.  The undercover agents were introduced to Shao at the trade show and later to Pflugbeil via email.

Subsequently, on or about November 17, 2023, Pflugbeil sent, via email, a detailed 66-page technical documentation proposal (the “Proposal”) to an undercover agent (UC-1).  The Proposal noted, “this technical documentation package contains [Business-1] proprietary information which must be kept confidential.”  In reality, the Proposal contained Battery Assembly Trade Secret information belonging to Victim Company-1:  at least half a dozen drawings Pflugbeil used in the Proposal and sent to UC-1 were, in fact, Victim Company-1’s information related to the Battery Assembly Trade Secret.  The business proposal quoted the battery assembly line at costing over $15 million to purchase.

From DOJ