TULSA – A Chinese national has admitted to stealing proprietary information from an American multinational energy company founded in Oklahoma.
Hongjin Tan pleaded guilty in the Northern District federal court in Tulsa earlier this year to three felony counts: theft of trade secret, unauthorized possession of trade secret, and unauthorized transmission of trade secret.
U.S. District Judge Gregory K. Frizzell sentenced Tan to three concurrent two-year prison terms and ordered the defendant to pay $150,000 restitution to his former employer, Phillips 66. Tan is expected to be banished for life from the U.S. upon completion of his prison term, court records indicate.
Tan had been jailed for 14 months by the time he was sentenced on Feb. 27, a court document shows.
Tan, 36, is described in an affidavit as “a citizen of The People’s Republic of China”. On his resumé Tan said he received a bachelor’s degree in physics from Nanjing University in China in 2006, and master’s and doctorate degrees from the California Institute of technology in Pasadena in 2011.
He is “a legal permanent resident of the United States” who has lived in this country for 14 years and worked at several jobs in California for many years.
‘PRODUCT A’ VALUABLE
An affidavit filed by an FBI special agent describes Phillips as “a large international independent energy and petroleum corporation whose business focuses on exploration and development of petrochemical products and by-products, and exploration and development of oil and natural gas.”
Phillips 66 has a refinery in Bartlesville that is one of only two in the world that manufacture a “specified
Research and Development Downstream Energy Market Product” referred to in the FBI agent’s affidavit as “Product A”.
A separate document refers to it as “premium coke product”. In this context that’s not a reference to the popular soda. This type of coke is a fuel used in industrial processes.
Phillips informed the FBI that the company “has earned an estimated $1.4 to $1.8 billion” from its sales of Product A,” and that the company “considers its methods of developing Product A to be trade secrets.”
Tan was hired by Phillips 66 on April 21, 2017, to work as a research engineer at Bartlesville, court documents show. He was responsible for research and development of the company’s battery program operation, “with the purpose of developing technology” using Phillips’s proprietary processes, the FBI agent reported in his affidavit.
PROPRIETARY DOCUMENTS COPIED BY DEFENDANT
A Phillips representative called the FBI on Dec. 13, 2018, to report the theft of trade secrets, the affidavit relates.
The day before, Tan advised his supervisor that he was resigning from the company and gave two weeks’ notice. “Tan told his supervisor he was returning to China to be with his family, as he is the only child to aging parents.”
According to the supervisor, Tan said he did not have a job awaiting him in China but he was negotiating with “a few battery companies” in China.
Tan’s resignation prompted the company to revoke his access to company systems and to conduct a systems access review of his computer activity.
That review confirmed that he had accessed hundreds of files, including research reports, the FBI agent wrote. The reports included “not only how to make Product A, which...is a complicated and technically difficult process,” but also the company’s “plans for marketing Product A in China and in cell phone and lithium-based battery systems.”
The review also showed that Tan downloaded restricted files to a personal thumb drive; the company has no record of having issued a USB flash drive to Tan, the FBI agent said. “In the course of his regular duties and responsibilities, Tan should have used his company-issued laptop,” and he did not have authorization to use a thumb drive to download the company’s files, the company told the FBI.
Files on the flash drive contained research documents “which would have a tremendous impact” to Phillips “in terms of technological and economic loss if they were to be shared or given to a competing company,” the company alleged. Each page of the accessed documents was marked “confidential” and “restricted.”
Furthermore, the files were deleted on Dec. 11, 2018, the day before Tan tendered his resignation. Nevertheless, the company recovered and reviewed the files using commercially available software.
DEFENDANT SIGNS CONTRACT WITH CHINESE COMPANY
Two days later Tan had dinner with a former Phillips 66 coworker. He told his former colleague that he had been in “constant contact” with Xiamen Tungsten Corp. (XTC) ever since he was in graduate school in California, and had applied for a job with the Chinese company.
XTC has developed two production lines, one for Li-ion battery cathode materials (such as lithium cobalt oxide, ternary cathode material, lithium manganese oxide, lithium iron phosphate, etc.) and the other for NiMH battery anode material (hydrogen storage alloy), the company’s public website reports.
The affidavit relates that Tan had signed a nondisclosure agreement when hired by Phillips 66, and the company had a policy stipulating that all activity on company electronic resources was subject to monitoring.
The laptop computer issued to Tan by Phillips was forensically examined by FBI computer analysts. On the computer, they found a letter dated in October 2018 in which XTC offered Tan a job at a salary of 800,000 Chinese yuan renminbi (more than $110,000 U.S equivalent). The letter bore Tan’s signature, contrary to his claim during his exit interview with Phillips 66 that he did not yet have a job in China.
Tan’s Tulsa attorney noted that although the defendant is a Chinese national who admitted theft of intellectual property for personal gain, “there is no ... evidence in this case to support the conclusion that there were any ties between Mr. Tan and the Chinese government.”