Defendant made over $1.3 million on stolen trade secrets that stood to benefit China in a critical industry with national security implications
Central Islip, N.Y.—Klaus Pflugbeil was in federal court this month and sentenced to 24 months’ imprisonment for conspiring to send trade secrets that belong to a leading U.S.-based electric vehicle company. The United States Attorney for the Eastern District of New York did not name the OEM.
Pflugbeil, a resident of China and a Canadian and German national, and his co-defendant, Yilong Shao, who remains at large, are owners of a China-based business 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 the OEM, took trade secrets from their employer, and later used the trade secrets to build a business that they marketed as a replacement for OEM’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 Breon Peace.
Assistant Attorney General for National Security Matthew G. Olsen added, “In stealing trade secrets from an American electric vehicle manufacturer to use in his own China-based company, Pflugbeil’s actions stood to benefit [China] in a critical industry with national security implications.”
The OEM is a U.S.-based leading manufacturer of battery-powered electric vehicles and battery energy systems. In 2019, the OEM acquired a Canada-based manufacturer of automated, precision dispensing pumps and battery assembly lines. Prior to its purchase by the OEM, the Canadian Manufacturer sold battery assembly lines to customers who manufactured alkaline and lithium‑ion batteries for consumer use. The battery assembly lines contained or utilized a proprietary technology now owned by the OEM: continuous motion battery assembly (trade secret). The proprietary technology provided a substantial competitive advantage to the OEM in the lithium-ion battery manufacturing process.
Both Pflugbeil and his co-defendant Shao are former employees of the Canadian Manufacturer, and Shao also worked for the OEM. As detailed in court documents, by no later than 2019, Pflugbeil and Shao planned to use the OEM’s trade secrets for their own business activities. Pflugbeil told Shao that he had “a lot of original documents” related to the technology and sought out more “original drawings” of the trade secrets. Shao confirmed, among other things, that, “we have all of original assembly drawings by PDF.”
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 the OEM, “[its] in a different format, so it looks very original and not like a copy.”
In or about July 2020, Pflugbeil joined a company previously established by Shao, which has since expanded to locations in China, Canada, Germany and Brazil. The company 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.
Shao’s company was marketed by Pflugbeil as an alternative source for the sale of products that relied upon the OEM’s trade secrets, publishing online advertisements on Google, YouTube and LinkedIn. Pflugbeil repeatedly sent LinkedIn messages that named the OEM and said Shao’s company was not infringing on any intellectual property:
On or about Sept. 11, 2023, undercover agents attended a trade show for the packaging and processing industries n Las Vegas. The undercover agents posed as businesspeople who were interested in purchasing a battery assembly line from Shao’s company to manufacture batteries at a facility in Long Island, N.Y. The undercover agents were introduced to Shao at the trade show and later to Pflugbeil via email.
Subsequently, on or about Nove. 17, 2023, Pflugbeil sent, via email, a detailed 66-page technical documentation proposal to an undercover agent. The proposal noted, “this technical documentation package contains [Shao company’s] proprietary information which must be kept confidential.” The business proposal quoted the battery assembly line at costing over $15 million to purchase.
The investigation and prosecution were coordinated through the Justice and Commerce Departments’ Disruptive Technology Strike Force. The Disruptive Technology Strike Force is an interagency law enforcement strike force co-led by the Departments of Justice and Commerce designed to target illicit actors, protect supply chains and prevent critical technology from being acquired by authoritarian regimes and hostile nation states.
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