Three Charged In Tech Theft
Federal authorities charged two Lucent Technologies scientists and a third person with stealing software to copy a Lucent product for a Chinese company largely owned by the Communist government.
The trio — all Chinese born — formed a joint venture with the Chinese company to market the product and boasted it would become "the Cisco of China," referring to a leading data networking company, according to criminal charges filed by the FBI.
U.S. Attorney Robert Cleary said there are no allegations that the Chinese company, Datang Telecom Technology Co. of Beijing, was aware of the theft.
The software was for Lucent's now-discontinued PathStar system, which enables Internet service providers to offer low-cost voice and data services. PathStar has over 90 percent of the market for such services, and generated $100 million for Lucent last year, according to court papers.
"A substantial amount of the source code, which is the crown jewel, has been transferred" to Datang, said Assistant U.S. Attorney Scott S. Christie.
"They were ready to roll out with it in September of this year," Cleary said.
They planned for the joint venture to eventually issue stock both in China and the United States, the filing said.
Lucent spokesman Bill Price said the company notified the FBI and U.S. attorney's office in February of "the theft of company equipment and intellectual property" and have been cooperating.
Price said the theft was discovered before it could be commercially deployed, but declined to comment on how much material was stolen, or if it was sufficient to build a system.
PathStar was discontinued with Lucent's restructuring in late January and early February, before the theft was discovered, Price said.
Arrested were Hai Lin, 30, and Kai Xu, 33, the Lucent scientists, and Yong-Qing Cheng, 37, who works for Village Networks, an optical networking vendor in Eatontown.
The federal complaint charges the three with conspiracy to commit wire fraud, which carries up to five years in prison and a $250,000 fine. But they will likely face additional charges when an indictment is returned.
All three were ordered held without bail by U.S. Magistrate Judge Stanley R. Chesler pending arraignment Tuesday. Christie said he would request no bail be granted, saying all three posed a risk of flight.
Lin and Xu are Chinese nationals who were in the United States on business visas, while Cheng is a naturalized citizen who was born in China, Christie said. Each has been in the United States since the mid-1990s, he said.
The scientists were designated as "distinguished members" of Lucent's technical staff at the Murray Hill headquarters for the telecommunications giant that was once part of AT&T Corp. They will probably be fired, Price said.
Both were represented at Thursday's hearing by a public defender. Responding in English to questions from Chesler, Lin said he would hire his own lawyer.
Xu and Cheng each asked for court-appointed lawyer. Chesler denied those requests when they disclosed they make more than $120,000 a year.
The case is the latest bad news for Lucent, which last month denied rumors that it plans to file for Chapter 11 bankruptcy reorganization.
The company also faces class-action lawsuits by shareholders who claim they lost money last year due to company wrongdoing. Lucent lost about $80 billion in market value under former chairman and chief executive officer Richard McGinn, who was fired in October.
Shares of Lucent closed down 57 cents, or 5.1 percent, at $10.70, on the New York Stock Exchange, where it was the most actively traded issue on Thursday.
According to its year 2000 annual report, the company took in $33.5 billion in revenues and had $48 billion in assets.
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