Couple Pleads Guilty to Stealing Children’s Hospital Trade Secrets for China

Lab technicians dedicated to the vaccines formulation, wearing Personal Protective Equipment (PPE), prepare stainless steel tanks for manufacturing vaccines preparations before the syringe filling phase, at a French pharmaceutical company Sanofi's world distribution centre in Val-de-Reuil on July 10, 2020. (Photo by JOEL SAGET / AFP) (Photo by JOEL SAGET/AFP …
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A Chinese woman and her husband pleaded guilty in U.S. District Court on Thursday to conspiring to sell scientific trade secrets to the Chinese government and to wire fraud focused on research, identification, and treatment of a wide range of pediatric medical conditions.

Li Chen, 46, and her husband, Yu Zhou, 49, made the plea via video conference. The couple both worked at the National Children’s Hospital’s Research Institute in Columbus, Ohio, for a decade before being arrested in California in July 2019. The case was unsealed in August 2019 when they appeared in federal court in Ohio.

“Chen admitted to stealing scientific trade secrets related to exosomes and exosome isolation from Nationwide Children’s Hospital’s Research Institute for her own personal financial gain,” the Department of Justice press release on the case said. “They are charged with conspiring to steal at least five trade secrets related to exosome research from Nationwide Children’s Hospital.”

“Exosomes play a key role in the research, identification, and treatment of a range of medical conditions, including necrotizing enterocolitis (a condition found in premature babies), liver fibrosis and liver cancer,” the press release said.

“Once again we see the People’s Republic of China (PRC) facilitating the theft of our nation’s ingenuity and hard work as part of their quest to rob, replicate and replace any product they don’t have the ability to develop themselves,” said John C. Demers, the assistant attorney general for national security. “Far from being an isolated incident, we see the PRC implicated in around 60 percent of all trade secret theft cases. This continued economic belligerence runs contrary to the values and norms that facilitate the success of our industries and countering it remains among our highest priorities.”

“Nationwide Children’s Hospital’s Research Institute took reasonable measures to protect its cutting-edge intellectual property and trade secrets regarding exosomes, and I commend the cooperation of Nationwide Children’s throughout this investigation,” U.S. Attorney David M. DeVillers said in the DOJ announcement. “Chen betrayed her employer of 10 years by stealing trade secrets from this American institution and transferring them to China after receiving payments from the Chinese government.”

“Li Chen was a trusted researcher at Nationwide Children’s Hospital, conducting cutting-edge U.S. government-funded research,” FBI Cincinnati Special Agent in Charge Chris Hoffman said in the DOJ announcement. “With her guilty plea, she admits that she abused this trust to establish a company in China for her own financial gain. The FBI is committed to working closely with partners such as Nationwide Children’s Hospital to protect the innovations that make America a world leader in science and technology.”

DOJ explained how Chen worked with the Chinese government and other details of the plea agreement:

Chen received benefits from the Chinese government, including the State Administration of Foreign Experts Affairs and the National Natural Science Foundation of China.  Chen also applied to multiple Chinese government talent plans, a method used by China to transfer foreign research and technology to the Chinese government.

As part of her plea, Chen has agreed to forfeit approximately $1.4 million, 500,000 shares of common stock of Avalon GloboCare Corp. and 400 shares of common stock of GenExosome Technologies Inc.

The case is the latest in a series of cases of Chinese nationals caught attempting to smuggle sensitive American intellectual property into China. According to FBI Director Christopher Wray, the FBI is engaging with over 1,000 open cases against Chinese nationals for this type of crime.

In July, Wray spoke again about this threat, confirming that China systematically uses academic exchange programs like the “Thousand Talents” initiative to steal American trade and scientific secrets.

“To achieve its goals and surpass America, China recognizes it needs to make leaps in cutting-edge technologies. But the sad fact is that instead of engaging in the hard slog of innovation, China often steals American intellectual property and then uses it to compete against the very American companies it victimized—in effect, cheating twice over,” Wray said at the Hudson Institute in Washington, D.C. “They’re targeting research on everything from military equipment to wind turbines to rice and corn seeds.”

“Through its talent recruitment programs, like the so-called Thousand Talents Program, the Chinese government tries to entice scientists to secretly bring our knowledge and innovation back to China — even if that means stealing proprietary information or violating our export controls and conflict-of-interest rules,” Wray said.

“Take the case of scientist Hongjin Tan, for example, a Chinese national and American lawful permanent resident. He applied to China’s Thousand Talents Program and stole more than $1 billion— that’s with a “b” — worth of trade secrets from his former employer, an Oklahoma-based petroleum company, and got caught,” Wray said. “A few months ago, he was convicted and sent to prison.”

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