Three residents of South Korea have been charged with committing industrial espionage against Wickliffe-based Lubrizol Corp., and a fourth, a former Lubrizol employee, was sentenced Nov. 20 to 19 months in prison.
The charges revolve around trade secrets about the production of Estane-brand thermoplastic polyurethane.
The U.S. Department of Justice said Nov. 12 it has brought charges against South Korean resident nationals Sang Ho Shin, Dong Sik Kim and Yeon Hee Lee, former employees of SK Chemicals of Seoul, South Korea. The men each are charged with one count of conspiracy to steal trade secrets and two counts of theft of trade secrets.
Each count carries a maximum penalty of up to 10 years in federal prison and a $250,000 fine, said assistant U.S. Attorney Justin Roberts, the government's prosecutor in the case. However, most defendants receive lesser sentences, according to the Justice Department.
The fourth man a former senior research and development associate with Lubrizol named Kyung J. Kim pleaded guilty April 8 to conspiracy to steal trade secrets and two counts of theft of trade secrets. At that time, Kim agreed to cooperate with the government's continuing investigation of the case. He was sentenced to 19 months in prison and ordered to pay a fine of $188,700, which included the $170,000 in cash that Lubrizol competitor SK Chemicals allegedly paid Kim for the secrets.
Long ruse alleged
According to the U.S. Attorney's office, the four men met 17 times between 2001 and January of this year to gather trade secrets regarding confidential Lubrizol technologies for flame retardation and static control. Lubrizol makes a range of products including specialty coatings, lubricants and polymers.
According to the government indictment, the men met at hotels and condominiums in Tucson, Ariz.; Niagara Falls, Ontario; and in Suwon, South Korea. Lubrizol's Kim would download the company's trade secrets onto an external computer storage device, and fax the information to the other defendants and explain the technologies to the South Korean nationals at the secret meetings, the U.S. government contends.
In return, Kim was given envelopes containing $10,000 in cash at each meeting, and his travel expenses were paid by the South Koreans, according to the government.
Kim, a 62-year-old resident of Broadview Heights, Ohio, held the title of senior research and development associate when he was terminated by Lubrizol in October 2007.
He had joined BFGoodrich Co. in 1988 and stayed with BFG's Noveon plastics business after the firm sold it in 2000 to AEA Investors Inc., and when AEA sold it to Lubrizol in 2004.
While the case is nearing an end for Kim, the other men charged in the case remain in South Korea, and their fate is dependent upon extradition. Roberts said he is working with the Justice Department's Office of International Affairs to secure the extraditions.
Lubrizol officials declined to comment on the case and said they were asked not to talk to media while the case is pending.
Lubrizol acquired SK's TPU and conductive polymer business the same business that had been buying trade secrets from Kim - in October for an undisclosed price. The business has sales of about $30 million.
In an Oct. 13 news release, officials said that the deal includes ``all commercial, production and research and development assets'' of the business.
No further details were available, Lubrizol spokeswoman Julie Young said in a Nov. 24 phone interview.
Lubrizol already makes TPU in Asia at a resin plant in Shanghai and a compounding plant in Seremban, Malaysia. The Seremban plant opened earlier this year; capacity in Shanghai was doubled in 2007. The firm's North American TPU production is in Avon Lake, Ohio, and Wilmington, Mass. In Europe, it makes TPU in Oevel, Belgium.
Lubrizol's advanced materials unit including TPU, chlorinated PVC and various specialty chemicals had sales of $1.25 billion in the first nine months of 2008, representing about one-third of the firm's total sales.
Frank Esposito, a senior reporter for Plastics News, contributed to this report.