Judge orders S. Korean company caught stealing secrets of Kevlar to pay $360M

A South Korean company pleaded guilty to conspiring to steal the secrets of Kevlar, a synthetic fiber used in lightweight body armor among other products, the Justice Department announced last month.

Kolon Industries Inc., which appeared in front of a Virginia federal court at the end of April, was sentenced to pay $85 million in criminal fines and $275 million in restitution.

According to court documents, Kolon met repeatedly with former DuPont employees and others from June 2006 to February 2009. The former employees, Edward Schulz, 72, and Michael Mitchell, 58, have both pleaded guilty to similar charges and are now serving prison sentences.

Mitchell exchanged numerous telephone calls and e-mails with Kolon personnel. On more than one occasion, Mitchell advised Kolon personnel that some of the information they sought was proprietary and that DuPont considered such information to be trade secrets.

Mitchell also coordinated a meeting at a hotel in Richmond, at which Kolon personnel were introduced to a cooperating witness who pretended to be a disgruntled scientist from DuPont. During the Richmond meeting, Kolon personnel indicated that they would only be comfortable communicating with the cooperating witness in a manner that was confidential and that would not leave an evidentiary trail.

The company 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. Thereafter, certain Kolon personnel attempted to delete files and e-mails related to Mitchell, Schulz and outside consultants hired to improve Kolon’s para-aramid fiber, and urged other Kolon personnel to search for such materials and mark them for deletion.

Kolon also admitted that certain employees approached a former employee of an American subsidiary of Teijin Ltd. — a Japanese company that makes the para-aramid fiber called Twaron — in an unsuccessful effort to obtain information about Twaron

Five former Kolon executives and employees, all of South Korea, were charged in an August 2012, however, none appeared in the U.S. to face the charges. Individuals include: 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.

This case represents the first time in the U.S. that a foreign corporation with no direct presence in the U.S. was successfully served through the U.S. criminal process.

“Each year, billions of U.S. dollars are lost to foreign competitors who pursue illegal commercial short cuts by stealing valuable advanced technologies,” said Adam Lee, special agent in charge with the Federal Bureau of Investigation.