Fei Ye and Ming Zhong Indicted for Economi Espionage and Theft of Trade Secrets

December 4, 2002

U.S. Department of Justice
United States Attorney
Northern District of California

Fei Ye and Ming Zhong Indicted for Economic Espionage and Theft of Trade Secrets

Pair from Cupertino and San Jose, California, Indicted for Economic Espionage and Theft of Trade Secrets From Silicon Valley Companies The United States Attorney’s Office for the Northern District of California announced that two people were indicted today for economic espionage, possession of stolen trade secrets, transportation of stolen property, and conspiracy. The charges stem from a conspiracy allegedly carried out by the defendants to take trade secrets stolen from four Silicon Valley companies to the People’s Republic of China (PRC). Fei Ye, a/k/a Ye Fei, age 36 of Cupertino, California, and Ming Zhong, a/k/a Zhong Ming, a/k/a Andy Zhong, age 35 of San Jose, California, were indicted by a federal grand jury on a total of 10 counts, including one count of conspiracy in violation of 18 U.S.C. §§ 371, 1831(a)(5) and 1832(a)(5), two counts of economic espionage in violation of 18 U.S.C. § 1831(a)(3), five counts of possession of stolen trade secrets in violation of 18 U.S.C. § 1832(a)(3), and two counts of foreign transportation of stolen property in violation of 18 U.S.C. § 2314. Fei Ye is a citizen of the United States; Ming Zhong is a permanent resident. Both defendants are originally from China.

The indictment does not charge that the Chinese government was a conspirator. According to the indictment, it is alleged that Fei Ye and Ming Zhong conspired to commit the offenses of economic espionage, possession of stolen trade secrets, and foreign transportation of stolen property. The trade secrets were allegedly stolen from four companies: Transmeta Corporation (Transmeta); Sun Microsystems, Inc. (Sun); NEC Electronics Corporation (NEC); and Trident Microsystems, Inc. (Trident), all high-tech companies in Silicon Valley. Both defendants are former employees of Transmeta and Trident. Fei Ye also worked at Sun and NEC. Some of the stolen trade secrets were seized from the defendants at the San Francisco International Airport (SFO) while they were attempting to fly to China. Other trade secrets were seized from the defendants’ residences and Ming Zhong’s Transmeta office in the County of Santa Clara. The indictment alleges that the stolen trade secrets were possessed in connection with a project known as Supervision, Inc., to produce and sell microprocessors. More specifically, the indictment alleges that defendants Fei Ye, Ming Zhong and others established and promoted Supervision, Inc., a/k/a Hangzhou Zhongtian Microsystems Company Ltd., a/k/a Zhongtian Microsystems Corporation, to produce and sell microprocessors in China. The defendants attempted to recruit others, including engineers, to participate in and work for the Supervision project. The defendants made representations to others they were recruiting for the Supervision project. They told others that: (1) funding for the Supervision project was being provided by Hangzhou, a city in China; (2) Supervision was also applying for funding from the 863 Program, a Chinese government high technology research and development program; and (3) Supervision was working with a professor from a University in the PRC, who was assisting in obtaining funding from the 863 Program. On November 23, 2001, the defendants are alleged to have possessed trade secrets belonging to Transmeta and Sun in their luggage at SFO while attempting to board an aircraft bound for China. On November 23 and 24, 2001, defendant Fei Ye is also alleged to have possessed trade secrets belonging to Sun, NEC, and Trident at his residence in the County of Santa Clara. On November 23, 2001, defendant Ming Zhong is alleged to have possessed trade secrets belonging to Trident at his residence and at his Transmeta office. On or about November 23 and 24, 2001, defendant Fei Ye is alleged to have possessed a corporate charter for Hangzhou Zhongtian Microsystems Company Ltd. at his house which states that the joint-venture will raise China’s ability to develop super-integrated circuit design, and form a powerful capability to compete with worldwide leaders’ core development technology and products in the field of integrated circuit design.

On November 23 and 24, 2001, defendant Fei Ye is alleged to have possessed a feasibility report review regarding Zhongtian Microsystems Corporation at his house. The report suggests that the project receive the support of the Chinese government. On or about November 23, 2001, defendant Ming Zhong is alleged to have possessed a project application form for the National Special Foundation for Importing Knowledge of Software and Integrated Circuits printed by the National Bureau of Foreign Experts at his house. This application states that the project is of tremendous significance to the Chinese integrated circuitry industry and that the project should receive the support of the government.

Both defendants were arrested on November 23, 2001, at the airport. They were released on bail after appearing before a U.S. Magistrate Judge. Fei Ye’s bail was set at $500,000, and Ming Zhong’s bail was set at $200,000.

In announcing the indictment, U.S. Attorney Kevin V. Ryan noted that theft of trade secrets and economic espionage are among the most important cases prosecuted by the Computer Hacking and Intellectual Property (CHIP) Unit in the U.S. Attorney’s Office. Theft of trade secrets and economic espionage represent a significant threat to the Silicon Valley and the nation’s economy. We will use the resources of the federal government to protect the integrity of the economy, particularly where there are allegations of economic espionage.

The maximum statutory penalty for each of the violations charged is as follows: 18 U.S.C. §§ 371, 1831(a)(5), and 1832(a)(5)(conspiracy) 15 years and a fine of $500,000 or twice the gross gain or loss, whichever is greatest, plus restitution if appropriate; 18 U.S.C. § 1831(a)(3)(economic espionage) same as the conspiracy count; 18 U.S.C. § 1832(a)(3)(possession of stolen trade secrets) 10 years and a fine of $250,000 or twice the gross gain or loss, whichever is greatest, plus restitution if appropriate; and 18 U.S.C. § 2314(foreign transportation of stolen property) same as the possession of stolen trade secrets counts). However, any sentence following conviction would be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and would be imposed in the discretion of the Court. An indictment simply contains allegations against individuals and, as with all defendants, Fei Ye and Ming Zhong must be presumed innocent unless and until convicted. The defendants’ next scheduled appearance is at 1:30 p.m. on December 6, 2002, before U.S. Magistrate Judge Patricia V. Trumbull for arraignment on the indictment. The prosecution is the result of an investigation by the San Francisco Division of the Federal Bureau of Investigation and its agents located in the Palo Alto Resident Agency. Ross W. Nadel, Chief of the U.S. Attorney’s Office’s Computer Hacking and Intellectual Property (CHIP) Unit is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Ji-yon Yi. A copy of this press release may be found on the U.S. Attorney’s Office’s website at www.usdoj.gov/usao/can. Related court documents and information may be found on the District Court website at www.cand.uscourts.gov or on http://pacer.cand.uscourts/gov. All press inquiries to the U.S. Attorney’s Office should be directed to Assistant U.S. Attorney Ross W. Nadel at (408) 535-5035 or Matthew J. Jacobs at (415) 436-7181.