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Resident of China Pleads Guilty to Conspiracy to Send Leading Electric Vehicle Company’s Trade Secrets to an Undercover U.S. Agent Publisher: U.S. Attorney's Office, Eastern District of New York Byline: John Marzulli Date: 13 June 2024 Subjects: American Government  , Crime, Electric Vehicles
Topics: Klaus Pflugbeil, Yilong Shao, Tesla |
Defendant Stole Trade Secrets From His Employer and Later Used Them For His Own Business
Today, in federal court in Central Islip, Klaus Pflugbeil, a resident of the People’s Republic of China (the PRC or China) and a Canadian and German national, pleaded guilty to conspiring to send trade secrets that belonged to a leading U.S.-based electric vehicle company (Victim Company-1). Pflugbeil 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, a former employee of a company later purchased by Victim Company-1, stole trade secrets from his then employer, and later used the trade secrets to build Business-1, marketing his business as a replacement for Victim Company-1’s products. The proceeding was held before United States Magistrate Judge Arlene R. Lindsay. When sentenced, Pflugbeil faces up to 10 years in prison.
Breon Peace, United States Attorney for the Eastern District of New York, Matthew G. Olsen, Assistant Attorney General of the Justice Department’s National Security Division, and James Smith, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI), announced the guilty plea.
“Today, the defendant is guilty of boldly sending valuable trade secrets, detailed documents and drawings that he stole from a U.S.-based leading manufacturer of battery-powered electric vehicles to an undercover law enforcement agent expertly posing as a businessman on Long Island,” stated United States Attorney Peace. “Today’s guilty plea demonstrates how this Office will swiftly bring to justice those who misappropriate intellectual property belonging to American companies, to safeguard our economy and national security.”
Mr. Peace also thanked the Justice Department’s Computer Crime and Intellectual Property Section for their invaluable assistance on the case.
“Despite Pflugbeil’s agreement to protect what he knew was proprietary, sensitive technology, he chose to abscond with these trade secrets to China, where he sought an unfair and illegal advantage in critical industries such as electric vehicle manufacturing,” stated Assistant Attorney General Olsen. “With his guilty plea, Pflugbeil is now being held accountable for this unlawful conduct that jeopardized our national security.”
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 lines (the “Canadian Manufacturer”). 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 alkaline battery assembly (the “Battery Assembly Trade Secret”). The proprietary technology provided a substantial competitive advantage to Victim Company-1 in the battery manufacturing process.
Both Pflugbeil and his co-defendant Shao are former employees of the Canadian Manufacturer. 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 subsequently confirmed, among other things, that, “we have all of original assembly drawings by PDF.”
The conspirators took measures to obfuscate that they had stolen documents. For example, Pflugbeil wrote to Shao about a document he created based on a document 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. 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 purchased ads on Google for Business-1. These ads read, for example, “[Business-1] | Replacing [Canadian Manufacturer] Pumps & Parts | [Canadian Manufacturer] Identical Spare Parts. We manufacture precision metering pumps and fill tubes. | Contact Us for your [Canadian Manufacturer] replacement pumps and parts.” In any given week, this ad was shown tens of thousands of times.
Pflugbeil also repeatedly sent LinkedIn messages that said, “Hello [name], I used to work at [Canadian Manufacturer], and after [Victim Company-1] purchased and closed the company, I am now part of a company providing similar products and services.” Pflugbeil’s LinkedIn profile background, pictured below, read:
On September 11, 2023, undercover FBI agents attended a trade show for the packaging and processing industries (the “Trade Show”) 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 (the “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 government’s case is being handled by the Office’s National Security and Cybercrime Section and the Criminal Section of the Long Island Criminal Division. Assistant United States
Today’s actions 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.
The Defendant
KLAUS PFLUGBEIL
AGE: 58
Ningbo, China
E.D.N.Y. Docket No.
Updated June 13, 2024