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South Korea company penalized $360 million for plot to steal DuPont Kevlar trade secrets

Kolon Industries Inc. pleaded guilty Friday in federal court in Alexandria, Virginia to conspiracy to steal trade secrets involving E.I. DuPont de Nemours & Co.’s Kevlar technology. 

Federal judge Anthony J. Trenga ordered the South Korea fiber maker to pay $85 million in criminal fines and $275 million in restitution.

Kolon pleaded guilty to one count of conspiracy to convert trade secrets. It appeared in court through two successor companies.

From mid 2006 to early 2009, Kolon “conspired with former DuPont employees and others to steal DuPont’s trade secrets for making Kevlar, a high-strength, para-aramid synthetic fiber.”

Kevlar is a trademarked name for one of DuPont’s best-known products. It’s used for body armor, fiber optic cables, and automotive and industrial products. 

Kolon wanted the trade secrets to improve its own similar product known as Heracron.

“Kolon personnel met repeatedly with former DuPont employees, including Edward Schulz, 72, of Brownstown, Pennsylvania, and Michael Mitchell, 58, of Chesterfield, Virginia, to obtain confidential and proprietary DuPont information about Kevlar,” the DOJ said.

Schulz pleaded guilty to conspiracy to steal trade secrets in September 2014 and is scheduled to be sentenced on June 26.

Mitchell pleaded guilty to theft of trade secrets and obstruction of justice in December 2009 and was sentenced to 18 months in prison.

The DOJ said,

Kolon admitted that it obtained technical and business documents regarding Kevlar, including instructional materials that described DuPont’s “New Fiber Technology,” documents on polymerization, and a detailed breakdown of DuPont’s capabilities and costs for the full line of its Kevlar products and DuPont’s Kevlar customers.

In February 2009, DuPont filed a civil lawsuit against Kolon in the Eastern District of Virginia, alleging theft of trade secrets.

After the suit was filed, some Kolon employees tried to delete files and emails related to Mitchell, Schulz, and outside consultants hired to improve Kolon’s Heracron product. 

(DuPont won a $920 million verdict against Kolon in the civil litigation but the judgment was reversed on appeal.)

Kolon admitted Friday it also tried to steal trade secrets from an American subsidiary of Teijin Ltd. — a Japanese company that makes Twaron, another product similar to Kevlar.

The DOJ said: “This case represents the first time that foreign corporations with no direct presence in the United States were found to be successfully served with U.S. criminal process, over their objections, based on service pursuant to an international treaty.” 

Five former Kolon executives and employees, all South Koreans, were charged in an August 2012 indictment filed in the Eastern District of Virginia. None have appeared in the United States to face the charges.

The five defendants are:

Jong-Hyun Choi, 58, a senior executive who oversaw the Heracron business team

In-Sik Han, 52, who managed Kolon’s research and development related to Heracron

Kyeong-Hwan Rho, 49, the head of the Heracron technical team

Young-Soo Seo, 51, the general manager for the Heracron business team, and

Ju-Wan Kim, 42, a manager on the Heracron business team.

As the DOJ says, the charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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