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Federal fraud indictment: KU professor secretly worked for Chinese university (kansas.com)
57 points by mcenedella 22 days ago | hide | past | web | favorite | 38 comments



> Last year, a Chinese national who was a research professor at Kansas State University was arrested and sentenced to 10 years in federal prison for stealing valuable American rice seeds — a trade secret — that can be used to treat gastrointestinal disease, antibiotic-associated diarrhea, hepatic disease, osteoporosis and inflammatory bowel disease.

Wait, who are the bad guys here?


That is a different individual... and the story described https://www.kansascity.com/news/state/kansas/article20800977...

> Zhang, a lawful permanent resident in the U.S., was a rice researcher at Kansas State University and received a doctorate in rice genetics from Louisiana State University. He began working for Ventria in 2008 and was in charge of plant breeding and nursery operations.

> In 2012, Zhang and a co-defendant traveled to visit a crop research institute in China where Zhang once worked. The following year, the two made arrangements for a delegation from the Chinese institute to visit Kansas.

> ...

> Ventria invested about $75 million to develop this proprietary technology and is the only company in the U.S. that has it. The lab maintains seed banks in a climate-controlled environment. Only six employees had access to the storage area. Zhang was one of them.

----

The story here is:

> “Tao is alleged to have defrauded the US government by unlawfully receiving federal grant money at the same time that he was employed and paid by a Chinese research university — a fact that he hid from his university and federal agencies,” Assistant Attorney General John Demers said in a statement. “Any potential conflicts of commitment by a researcher must be disclosed as required by law and university policies.”

> The Kansas Board of Regents requires faculty and staff of its universities to file a conflict of interest report when they are hired and every year afterward for as long as they are employed.

> According to court documents, Tao “knowingly and intentionally submitted to the University false statements concerning his lack of a conflict of interest.”

> The indictment alleges that Tao “fraudulently received” more than $37,000 in salary paid for by the Department of Energy and the National Science Foundation.


I imagine OPs point was that someone was arrested for stealing trade secrets that could save/improve lives of (hundreds of) millions of people.

Just the other day in another part of HN there was a discussion about the collecting and continued use the HeLa cell line for research and (a lot of) profit. If you look this up the conclusion of every discussion tends to be "end justify the means in this case", "the needs of the many outweigh the needs of the few", etc. One has to wonder about the double standard here.


Ironically, if society adopts a viewpoint that blesses industrial espionage/IP theft of any technology which "improves lives," companies lose motivation to develop those same technologies.

The ability to profit off of innovation is necessary to pay for facilities, equipment, and researchers.


> Ironically, if society adopts a viewpoint that blesses industrial espionage/IP theft of any technology which "improves lives," companies lose motivation to develop those same technologies.

> The ability to profit off of innovation is necessary to pay for facilities, equipment, and researchers.

I'm sorry but lets not talk about incentives until the CEO and the entire board at Boeing, Equifax, and Wells Fargo are in prison. Our "justice" system openly pursues "viable" cases which means we only send people to prison who we think we can convict because we have "limited resources".

Lets not try to defend the prosecutors here by rationalizing what they do. I won't vilify them either because they are just doing what WE incentivized them to do but I won't throw any accolades their way either.


I'd be satisfied if the CEO, senior management and board members had to turn over all profits including stock options granted for the period of abuse. That would be more impressive to me than jail time and seriously discourage similar behavior.


I was just highlighting the double standard used depending on who is benefiting. I'm not here to "decide" which one is the correct approach. Just that either way the company with deep pockets will always be the one who gets the better end of the deal. Which is why companies shy away from sharing any of their profits off HeLa with the patient's descendants. But try to use any of their work without sharing the profits with them. A few seconds of a decades old song is assumed to deserve more protections.

Usually companies are allowed to use justifications that nobody else is allowed to.

> The ability to profit off of innovation is necessary to pay for facilities, equipment, and researchers.

The ability to profit is not a binary thing. Which is why patents aren't granted in perpetuity. Given that there's no upper limit to how much profit a company would like to make, I'm not sure you can reasonably support the point. How much profit is enough to motivate?


Companies are not, as far as I know, allowed to lie to the government about their conflicts of interest in order to get grant money. The HeLa thing seems very different; there everyone’s telling the truth, and the only question is about what the truth obligates them to do.


If someone steals something that has taken $75 million to develop that might save lives, the naive take is that they are the good guy. However, if we as a society accept that theft as okay in these circumstances, the collateral damage is that companies like Ventria no longer invest large sums of money to develop these life saving improvements and then society ends up without these life saving improvements because they are never developed.

From a first order effects perspective, the person stealing the seeds is a good guy. Once you take into account second and third order effects over the long haul, people stealing these developments are undermining the system that produced them in the first place. Without that system in place, society will be worse off long term.


I'm not convinced stuff that grows naturally should even qualify as protected intellectual property. Personally, I think that IP law has been extended with way too few checks on that expansion and we as a society are generally the worse for it. Patents are emphatically not used for their stated constitutional purpose and should be rolled back favoring trade secrets laws.

I also feel that foods/medications must have two distinct, separately owned sources in order to be broadly sold. That's just how I feel about it from a security stance.


The full text of the passage about the seeds:

> Last year, a Chinese national who was a research professor at Kansas State University was arrested and sentenced to 10 years in federal prison for stealing valuable American rice seeds — a trade secret — that can be used to treat gastrointestinal disease, antibiotic-associated diarrhea, hepatic disease, osteoporosis and inflammatory bowel disease.

So yes, this was prosecuted under trade secret and economic espionage law.


Regardless of the merits of his actions, 10 years in prison seems extreme here. It's this normal for IP theft?


The key part is:

> Last year, a Chinese national who was a research professor at Kansas State University was arrested and sentenced to 10 years in federal prison for stealing valuable American rice seeds — a trade secret — that can be used to treat gastrointestinal disease, antibiotic-associated diarrhea, hepatic disease, osteoporosis and inflammatory bowel disease.

This was a trade secret.

Theft of trade secrets is covered in 18 U.S. Code § 1832 - https://www.law.cornell.edu/uscode/text/18/1832

> Whoever, with intent to convert a trade secret, that is related to a product or service used in or intended for use in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly ... steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information; ... shall, except as provided in subsection (b), be fined under this title or imprisoned not more than 10 years, or both.

> Any organization that commits any offense described in subsection (a) shall be fined not more than the greater of $5,000,000 or 3 times the value of the stolen trade secret to the organization, including expenses for research and design and other costs of reproducing the trade secret that the organization has thereby avoided.

Economic espionage is in § 1831 - https://www.law.cornell.edu/uscode/text/18/1831

which reads much the same... though has a slight difference in subsection a.1. :

> Whoever, intending or knowing that the offense will benefit any foreign government, foreign instrumentality, or foreign agent, knowingly

> ...

> shall, except as provided in subsection (b), be fined not more than $5,000,000 or imprisoned not more than 15 years, or both.

---

http://www.mondaq.com/unitedstates/x/739680/Trade+Secrets/Re... has recent prosecutions

https://www.justice.gov/opa/pr/chinese-national-sentenced-ec... has one at 5 years for theft of source code.

The difference between the 5 and 10 years is likely related to the amount of investment in the trade secret and the degree of trust placed in that individual (one of six people).

https://www.justice.gov/usao-ndia/pr/former-dupont-employee-...

> On the same day Isler accepted a position with the competitor, the competitor’s Chief Operating Officer (COO) informed Isler that Isler would be servicing two particular ethanol plant customers, who had also been customers of DuPont, and asked Isler if he had seen “any baseline data” for those plants. Isler responded by stating, “let me see what I can before I can’t.” In a later message that day, the COO told Isler, “I think you made the right choice.”

> Isler submitted his resignation letter to DuPont the following day. However, Isler did not leave DuPont until two weeks later. During the intervening two weeks, Isler downloaded and sent to the competitor numerous electronic files that contained proprietary and trade secret information of DuPont. This included test, yield, and pricing information for products and customers of DuPont.

There you have three and a half years in prison and supervision for another three years for test, yield and pricing data.


> That is a different individual...

As your parent probably should have known from the fact that it was a story about a KSU professor, whereas the linked story is about a KU professor.


Well, it was theft by someone who was in a trusted position. That part is rather cut and dry.


I think you mean that stealing a cure to some disses isn't bad?


The guy who stole an invention that cost tens of millions of dollars to develop, to say nothing of its actual market value.


The guy that destroyed millions of research dollars and made it useless to sell obviously.

Innovation should always reap rewards, it's all dependant on how the owner wants it rewarded.

Some could share it as "open-source" if it was code, but at the end of the day. It's their choice, not from the thief.


Why is it when Indian companies steal patents to make generic medicine they are cheered for it, but when a Chinese company does it, they are vilified?


> Why is it when Indian companies steal patents to make generic medicine they are cheered for it, but when a Chinese company does it, they are vilified?

I can see personally defending both types of theft, and I agree that they are probably morally equivalent (all else being equal); but I'm not sure that one can make a blanket declaration that people generally do defend Indian patent theft. Do you have references?


International law specifically allows poor countries to manufacture their own medicines, bypassing patents that might otherwise apply.

Of course, the rice here was not patented -- according to the article, it was just a trade secret.


> International law specifically allows poor countries to manufacture their own medicines, bypassing patents that might otherwise apply.

> Of course, the rice here was not patented -- according to the article, it was just a trade secret.

This seems to have little to do with my question, which was:

> > I can see personally defending both types of theft, and I agree that they are probably morally equivalent (all else being equal); but I'm not sure that one can make a blanket declaration that people generally do defend Indian patent theft. Do you have references?

Did you perhaps intend to reply to my parent (https://news.ycombinator.com/item?id=20788203)?


I intend the exemption to patent protection for poor countries as an example of people defending Indian patent theft.


> The guy that destroyed millions of research dollars

:)

How? Want explain how that works?

Elaborate your viewpoint


Numbers made up to illustrate a point:

Company invests $75 million. Gross revenues of $150 million. Net profit $75 million. Companies exist in perpetuity, so that net profit gets reinvested in new research to develop more advances.

Alternate scenario: Company invests $75 million. IP stolen and company recoups $0. Company goes out of business and a successful research organization that took years to build is destroyed.


But wait, how is the company getting "destroyed" if nothing really happens to it?


Where does the money come from for continued operations?


Well, it doesn't in that scenario, but also in god knows how many others.

You can equally well blame competitors for "criminally" driving you out of business.

Is driving a company out of business be now a crime for anybody else?


So the accusation against Tao is:

> According to the federal indictment, in May 2018 Tao signed a five-year contract with Fuzhou University in China as a Changjiang Scholar Distinguished Professor and full-time employee.

and not disclosing this while seeking grants worth $37000?

Am I missing something or is this behind ridiculous? I’m pretty sure I had professors who were similarly “employed” by a vast variety of universities and didn’t always disclose that, not out of malice, but because they just didn’t care. In fact, my college recently had a couple of high profile professors fired for the same issue, without the Feds barging in.

I also find it interesting that this article references a completely different case, where someone was actually accused of theft, but has absolutely no connection to this individuals case at all.


Online certifications are no joke.

https://www.justice.gov/opa/press-release/file/1197256/downl...

> On or about September 25, 2018, in the District of Kansas, the defendant, for the purpose of executing the scheme described above, caused to be transmitted by means of wire communication in interstate commerce an online certification that he (1) read and understood the Kansas Board of Regents policy concerning conflicts of interest, (2) understood that any external personal professional activities in which he engaged that take time away from the University must not interfere with him meeting his faculty teaching and research responsibilities at the University, and (3) agreed to secure approval prior to engaging in any such external activities; all of which was in violation of Title 18, United States Code, Section 1343.

The indictment doesn't say whether the fraud was that (1) he didn't read or understand the conflict of interest policy (presumably not, since that would indicate this wasn't intentional); (2) he didn't understand that external activities must not interfere with his University work (same); so it must be (3) that he agreed to secure approval prior to engaging in any such activities.

So the fraud is that he agreed to secure approval, but didn't follow through.

The indictment also claims:

> Tao certified to KU that he did not labor under any conflict of interest.

But the only certification mentioned in the indictment was that he agreed to secure approval, not that he lacked any conflict of interest.

Regardless, the result of this failure to secure approval for a conflict of interest was a four count indictment for wire fraud and theft by receiving salary, plus a forfeiture request. He allegedly "embezzled, stole, and obtained by fraud" grant money that funded his University salary, by virtue of continuing to receive that salary.


So every civil breach of contract is also criminal fraud? “You indicated to your counterparty that you would obey the contract, but did not.”


Fraud requires intentional misrepresentation. "You indicated to your counterparty that you would obey the contract, when you had no intention of doing so" is what may be criminal fraud. Simply failing to perform is not fraud.


I don't see the conflict as long as he did the work. Thinking he takes it to trial and wins.

Now Iowa State University ECpE, they have full on corrupt faculty working full time for their private company, showing just up for lectures to read out of the book. Their TA's do all grading. Their RA's must sign NDAs and take forever to graduate because he won't let them publish his "proprietary" stuff. That is fraud.


90% of federal cases end in a guilty plea, and only 17% of federal cases that do go to trial end in an acquittal.

https://www.pewresearch.org/fact-tank/2019/06/11/only-2-of-f...

Most likely he looks at the 20 years he's facing if convicted of wire fraud and decides to take a plea deal involving a couple years in prison.


Hm, the wire fraud count is always tacked on to everything.

Out of curiosity, can you be charged with wire fraud if you personally only transact in cryptocurrencies completely on chain? value sent to you is in crypto, value you pay out to others is in crypto?

(I've run several businesses for several years that do that and have never needed to "cash out", even easier now with stablecoins which don't fluctuate in value)


Yes. The statute:

"Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both." [18 U.S.C. 1343]

"Money or property" includes cryptocurrencies, and "wire" has been repeatedly interpreted to include the internet, email and text messages.


comprehensive one!


> Out of curiosity, can you be charged with wire fraud if you personally only transact in cryptocurrencies completely on chain?

It doesn't matter what or how he benefited from the fraud but what he have stolen. So I guess using crypto won't change anything.




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