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United States of America v. Yan Zhu

August 4, 2011


The opinion of the court was delivered by: Pisano, District Judge.



A jury trial was held in this criminal case from March 14, 2011, until March 31, 2011. On April 6, 2011, the jury returned a verdict of not-guilty on one count of conspiracy to steal trade secrets (count one of the superseding indictment), not-guilty on two counts of theft of trade secrets (counts two and three of the superseding indictment) and guilty on seven counts of wire fraud (counts four through ten of the superseding indictment). After the verdict was announced by the jury, the Court polled all of the jurors, each of whom stated that they agreed with the jury's verdict.

Presently before the Court is a motion by the Defendant to set aside the guilty verdict pursuant to Federal Rule of Criminal Procedure 29(c) and a motion to grant a new trial pursuant to Federal Rule of Criminal Procedure 33. The United States of America (the "Government") opposes the motions. Oral argument was held on June 16, 2011.*fn1 For the reasons set forth herein, the Defendant's motions are denied.*fn2


The Defendant is a Chinese national with various educational degrees, including a Ph.D. in environmental engineering from Columbia University. In April of 2006, the Defendant was hired to work as a senior engineer at enfoTech, Inc., a company that develops and supports environmental software primarily for governmental entities ("enfoTech" or the "Company"). The Company arranged for the Defendant to receive an H-1 visa to work legally in the United States. In connection with his employment at enfoTech, the Defendant signed a confidentiality agreement (the "Confidentiality Agreement"), which prohibited the unauthorized disclosure of enfoTech's confidential business information.*fn3 During his employment at enfoTech, the Defendant reported directly to Tony Jeng ("Jeng"), a co-owner of the Company.

In August of 2006, the Defendant introduced Jeng to his cousin-in-law, Wanqi Tang ("Tang"), who had access to government officials in the Shaanxi Province in China. Several months later, Jeng and Tang signed a cooperation agreement with the goal of forming a joint venture company to develop and market environmental software to Chinese governmental entities. In connection with the cooperation agreement, Tang formed a company in China called Green Innovation Technology ("Green Innovation"), which was to be the Chinese counterpart to enfoTech.

In July of 2007, the Company entered into a contract with the Shaanxi Province in China to develop a software program called eWastePro. This software program would allow the Shaanxi Province to track chemical companies that produce hazardous waste, monitor the permits that the government issues to these chemical companies and predict the amount of hazardous waste that could be generated by a particular chemical company. According to the terms of the contract, the Shaanxi Province was supposed to make an initial payment, which was 25% of the total contract price, ten days after the contract was executed. That payment was not made until November of 2007 and no further payments were received by enfoTech.

Tang asked enfoTech for 800,000 Yen in "special marketing expenses" in connection with the Shaanxi Province contract. The Company agreed to this request and allocated that amount to Tang out of the first payment made by the Shaanxi Province in November of 2007. Jeng testified that the 800,000 Yen was deposited into an account in China and that Tang withdrew the money from that account. Jeng testified that Tang had told him previously that "it's custom, normal practice" to pay bribes to government officials in China. Jeng testified that he told Tang that such bribes were illegal and that he should not and cannot do that. At trial, Jeng stated: "I want to make it very clear. EnfoTech would not participate in any illegal activity, any bribe. So any gift given out need to be reasonable and need to be customary." [Trial Record at 798].

In October of 2007, the Defendant, Jeng and other enfoTech employees traveled to China to demonstrate the eWastePro software program to the Shaanxi Province officials. The parties submitted conflicting evidence at trial as to the functionality of the eWastePro software program at that time. The Defendant contends that, during this demonstration, he misrepresented the product as being fully functional when, in fact, over half of the program was inoperable and made to appear operable by the use of dummy data. [Trial Record at 1459-1461 and 1551]. The Defendant's expert witness testified that the permit and manifest modules were not operational. [Trial Record at 1459-1461]. The Government, on the other hand, presented evidence at trial showing that portions of the program were functional at the time of the demonstration. Sara Liu ("Liu"), a former enfoTech employee who worked on the eWastePro program and attended the demonstration, testified that the survey module was functional at the time of the demonstration, but she admitted that it suffered from certain deficiencies, which she explained was typical for the software development process. [Trial Record at 1180-1181].

The parties also presented conflicting evidence about how much work was done on eWastePro after enfoTech returned from the demonstration in China. The Defendant testified that, following the demonstration to the Shaanxi Province officials, Jeng told him that the software was complete and no further work would be done until additional payments had been made by the Shaanxi Province. [Trial Record at 1732]. The Defendant's expert testified that there was little change in the enfoTech product between October of 2007 and January of 2008. [Trial Record at 1554]. After the October 2007 demonstration, the Shaanxi Province officials asked enfoTech to enter data relating to approximately 400 companies in order to evaluate the practicality of the system. [G. Ex. 109T and 110T]. There is no evidence that this work was completed. The Government, on the other hand, presented evidence at trial showing that enfoTech continued to work on eWastePro after the demonstration in October of 2007. Liu testified that enfoTech created a list of all outstanding issues with the software program and that she worked on fixing the bugs in the program after the demonstration. [Trial Record at 1182- 1183]. Jeng testified that enfoTech devoted substantial resources to the development and completion of the software program. [Trial Record 568-569]. The Defendant was copied on emails in January of 2008 that show that enfoTech came up with a plan to complete development of eWastePro for delivery in March of 2008. [G. Ex. 166]. Jeng testified that he traveled to Shaanxi Province in January of 2008 to demonstrate portions of the program to government officials. [Trial Record at 564-572]. During that trip, Jeng also arranged for the Shaanxi Province officials to sign a contract extension past its original expiration date of February 21, 2008, so that the Shaanxi Province could have additional time to get funding for the money it owed to enfoTech. [Trial Record at 572]. According to Jeng, all the modules for the software were completed by March of 2008, and enfoTech only stopped work on the eWastePro program in April of 2008 because the Shaanxi officials would not accept delivery of the completed product. [Trial Record at 573 and 580].

Towards the end of 2007 and beginning of 2008, the Defendant asked Liu and other enfoTech programmers about the functionality of the eWastePro program. [Trial Record at 1740]. The Defendant claims that these programmers did not provide him with satisfactory responses, either telling him that the problem was an "easy fix" or indicating that if Jeng thought the program was complete, then it was complete. [Trial Record at 1741]. The Defendant testified that he then reached out to Tang to help him evaluate the functionality of the eWastePro software. [Trial Record at 1740-1741]. Tang subsequently introduced the Defendant to He Weiqi ("Weiqi"), who was a computer technician working for Green Innovation. [Trial Record at 1741].

The Defendant emailed Weiqi enfoTech's deployment guide, design documents and source codeon January 14, 2008, and January 28, 2008. [G. Ex. 421, 425, 425AH]. He emailed these documents to Weiqi from his personal email account. That same month, the Defendant told Weiqi that it was not convenient for him to talk about those documents while he was at the enfoTech offices. [G. Ex. 421T]. In March of 2008, the Defendant emailed Weiqi additional information relating to eWastePro, including design documents, waste profile design schema, logics and a preliminary functional requirement specification for the waste profile module, web page logics and form and user interface logics. [G. Ex. 431, 225, 433, 433AH1, 433AH2, 226, 227]. That same month, after Weiqi had emailed Zhu at his enfoTech email address, the Defendant wrote "maybe I used that address by mistake yesterday," and "please help me keep an eye on that." [G. Ex. 327T].

On April 20, 2008, Weiqi emailed a screen shot of the eWastePro log-in screen and home page to a graphic designer and asked him to "start your design work based on these." [G. Ex. 337T and 337AH]. On April 30, 2008, Weiqi emailed the same graphic designer, attaching "the latest source material package and the images of captured interfaces that need to be modified."

[G. Ex. 339T]. On May 11, 2008, the Defendant emailed Weiqi a document he had drafted entitled "Brief Introduction of Green Innovation Company's Pollution Source Information Management System." [G. Ex. 342T and 342AH]. Several days later, Tang emailed the Defendant describing the recent expenses incurred by Green Innovation. [G. Ex. 343T]. Later that same month, the Defendant told Weiqi that he was living at his ...

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