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2 Taiwanese Convicted in Economic Spy Case

Courts: Suit against the pair, who were accused of stealing Avery Dennison's adhesive secrets, was the first tried under a U.S. law meant to stem such thefts.

April 29, 1999|From Bloomberg News

Two Taiwanese executives who paid an Avery Dennison Corp. employee to pilfer corporate secrets from the Pasadena-based adhesives maker were convicted Wednesday of economic espionage in the first case tried under a U.S. law designed to combat trade-secret thefts.

Jurors in federal court in Youngstown, Ohio, deliberated for about 18 hours over three days before finding P.Y. Yang, chief executive of Taiwan-based Four Pillars Ltd., and his daughter, Hwei Chang "Sally" Yang, guilty of economic espionage. The pair were acquitted of mail fraud charges. The company also was convicted on the espionage charges.

The Yangs were accused of paying Ten Hong "Victor" Lee, a senior research engineer at Avery Dennison, $160,000 over eight years to steal adhesive formulas and innovations developed by Avery. Four Pillars and Avery Dennison compete in the Asian adhesive-label market.

"The message here is that the government will aggressively prosecute economic espionage, and anyone engaging in that activity is going to have to be prepared to go to jail," said James Bucknam, a former federal prosecutor and senior managing director at Kroll-O'Gara Co., an international security consulting firm.

The Yangs each face a maximum penalty of 10 years in prison and $250,000 in fines for violating the espionage law. Four Pillars could be fined up to $5 million.

U.S. District Judge Peter Economus hasn't set a date for the Yangs' sentencing. He allowed the Yangs to remain free on bond.

"We're very gratified by the jury's verdict of not guilty on the mail fraud claims," said Ralph Cascarilla, a Cleveland attorney who represented Sally Yang. "It disproves the extravagance of the claims made by Avery Dennison of a scheme to defraud." Defense attorneys immediately filed for a mistrial.

During the three-week trial, jurors heard testimony that Lee stole some of Avery Dennison's adhesive formulas and paper-coating innovations at the behest of the Yangs, who wanted to gain a leg up in the Asian adhesives market. Testimony in the case showed P.Y. Yang ran the business side of Four Pillars, while Sally Yang, a chemical engineer, handled research and development.

Jurors also watched P.Y. Yang clipping Avery Dennison logos and confidential stamps off documents turned over by Lee on a videotape made by FBI agents. Lee helped set up the sting while cooperating with the government.

The Yangs were arrested in 1997 as they tried to leave the U.S. with the documents.

According to FBI affidavits, the Yangs' scheme to steal Avery Dennison's secrets cost the company as much as $200 million in lost revenue. Avery Dennison has a civil suit pending against the Yangs and Four Pillars seeking unspecified damages. Avery Dennison shares rose $2.94 to close at $64.06 on the NYSE.

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