Resident of China Sentenced to 24 Months in Prison for Conspiring to Send Leading Electric Vehicle Company’s Trade Secrets

Klaus Pflugbeil, 59, of Ningbo, China, was sentenced today to 24 months in prison 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.

"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 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," said U.S. Attorney Breon Peace for the Eastern District of New York. "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."

Victim Company-1 is a U.S.-based leading manufacturer of battery-powered electric vehicles and battery energy systems. In 2019, Victim Company-1 acquired a Canada-based manufacturer of automated, precision dispensing pumps and battery assembly. Prior to its purchase by Victim Company-1, 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 Victim Company-1: continuous motion battery assembly. The proprietary technology provided a substantial competitive advantage to Victim Company-1 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 Victim Company-1. As detailed in court documents, by no later than 2019, Pflugbeil and Shao planned to use Victim Company-1'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 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.

Business-1 was marketed by Pflugbeil as an alternative source for the sale of products that relied upon Victim Company-1's trade secrets, publishing online advertisements on Google, YouTube, and LinkedIn. Pflugbeil repeatedly sent LinkedIn messages that named Victim Company-1 and said Business-1 was not infringing on any intellectual property:

Hello [name], I hope to get some of your busy time. As I like to introduce our company to you. We already have supplied companies such [a]s [list of U.S. Fortune 500 Companies by name] . . . We engineer and manufacture all of our products in-house, and we warrant that none of our products infringe any patents, copyrights, or other intellectual property rights of any third party.

The above reflects a blatant lie, told over and over-that Business-1's products did not infringe on intellectual property rights of a third party. Pflugbeil also advertised products based on stolen trade secrets on Google. These ads were shown tens of thousands of times per week.

On or about September 11, 2023, undercover agents attended a trade show for the packaging and processing industries 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 to an undercover agent (UC-1). The proposal notes, "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 over $15 million.

Assistant U.S. Attorneys Ellen H. Sise and Samantha Alessi for the Eastern District of New York and Trial Attorney Scott A. Claffee of the National Security Division's Counterintelligence and Export Control Section prosecuted the case.

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.