By on November 18, 2010

Xiang Dong “Mike” Yu, 49, of Beijing, pleaded guilty in federal court in Detroit to two counts of theft of trade secrets. He will be sentenced in February 23, 2011. He’s looking at anywhere between 5 and 6 years in the slammer. He will also have to pay a fine of $150,000. After serving his sentence, he will be deported from the United States. That’s a lenient sentence, only reached through a plea bargain.

In case you ever want to spy on your employer, here is what not to do:

Mike Yu worked as a product engineer for Ford from 1997 to 2007.

According to a statement by the U.S. Department of Justice, in December 2006, Yu accepted a job of Foxconn PCE Industry Inc. On the eve of his departure from Ford, Yu copied some 4,000 Ford documents onto an external hard drive, including sensitive Ford design documents. The next day, he flew off to Shenzhen, China, and began his work at Foxconn a week later.

On January 2, 2007, Yu e-mailed his resignation to his supervisor at Ford.

According to a Grand Jury Indictment, Yu applied for a job at GM’s joint venture partner SAIC, and used “a document that he compiled from Ford proprietary documents, misappropriated at the time of his departure from Ford and containing Ford trade secret information, in his efforts to secured employment with SAIC.” SAIC wisely declined the job application.

Yu then secured a job with SAIC’s Beijing competitor BAIC. There were no allegations that any secrets were in play to get the BAIC job.

On October 14th 2009, Mike Yu flew back to the States, apparently to punch his green card. He didn’t get further than Chicago’s O’Hare Airport.

  • Mistake #1: You need to come back before having spent a year abroad, at least. Anything later will raise suspicions, and may result in loss of your coveted Green Card. This would have been the least of Yu’s problems.
  • Mistake #2: Thou shall not have stolen data on you on re-entry. The DHS can impound anything that contains data and may inspect it at their leisure without giving cause. They sure did.
  • Mistake #3: If you have stolen thousands of documents, make inquiries whether anybody is looking for you before going back to the U.S. Yu missed that important step.

First, Yu’s luggage, passport and laptop were seized. “His company laptop computer contained Ford design documents that the FBI learned had been accessed while Yu worked for Beijing Automotive,” writes Reuters. Then, Yu went straight to prison, and any bail was denied. If he would have stayed in Beijing, he’d be home by now.

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24 Comments on “Dumb And Dumber: How Not To Spy...”

  • avatar

    The tip of the iceberg.  He is the only one to have been caught red handed.
    Move along citizens.  There is nothing to see here.

  • avatar

    I’m sure that this guy is going to have 150k lying around to pay his fine. This is the type of thing that happens when you start giving out good jobs to people that are not American citizens. I’m sure Ford is real happy with the 10k they saved on his salary over hiring an American engineer.

    • 0 avatar

      Erm, not sure what makes Americans automatically more ethical than anyone else in the world by birth.
      -Other than China, HK, Taiwan, and perhaps a few others’ systemic disdain for things like Copyright, Trademark, IP rights, etc.
      *However, if they did hire an American, he would have been much easier to catch as a domestic if the spying+usage had been more clever and subtle.
      Maybe guys like Mike Yu will help US Cos rethink outsourcing. Yay jobs!

    • 0 avatar


      What you’re describing is illegal discrimination under the Immigration Reform and Control Act.  Ford (and every other employer) must treat all legally authorized to work job candidates equally and cannot give preferential treatment based on citizenship status or country of origin.  Since this guy had a green card, he was legally authorized to work, and (assuming he’s qualified) not giving him a job because he’s not a citizen or is from China is discrimination.

    • 0 avatar

      What makes you think they saved 10k hiring Yu?  Reality is that talent is priced at market prices.  If Yu’s communication skills (verbal) were as good as his US born counterpart, he’s making the same money so long as the skills are roughly equal.
      Institutional racism is not only stupid and illegal, it’s bad for the bottom line.  That’s why it doesn’t exist anywhere near where it used to.

    • 0 avatar

      Heh, the American probably would have been caught first (since he’d be too afraid to fly to China based on what Fox News said or something).

  • avatar

    In today’s political climate, especially between the U.S. and China, this will go away rather quickly. A deal will be struck where he will be deported and not allowed to return to the U.S.  A “scapegoat” might have to be produced if not he himself, but that’s O.K. Any other industrial “damage” will be covered over and declared that nothing of strategic value was stolen, thus, no harm done. That’s the way this stuff works. This will ensure that America’s gathering of military (and other) intelligence will continue without much feather-ruffling on the part of the Chinese government.

    As far as “industrial spying” is concerned, take a walk along Rodeo Drive in Beverly Hills sometime, you will see many, mostly Asians snapping photos of fashion items, especially women’s shoes in the expensive shops, sending them back home to be cheaply copied (if not already). Same old, same old.

    Sorry if that sounds defeatist, but that’s the world for you.

    OldandSlow nailed it perfectly: “Move along citizens.  There is nothing to see here.”

    • 0 avatar

      Here is a question worth pondering: Is the very concept of “intellectual property” inherently selfish?  (The answer depends a lot on your cultural perspective.)
      Rephrase: If I invent something that can make people’s lives better, how much should I personally gain from that invention versus how much am I morally obliged to share it freely.  Corollary: Is intellectual property theft even a crime?
      Not trying to come across as touchy-feely or capitalist self-loathing, let alone inspire lively debate.  It’s just a grown-ups’ version of the old “finders/keepers” kids’ game.  They did it because they thought it was OK and because they thought they could get away with it.

    • 0 avatar

      Here is a question worth pondering: Is the very concept of “intellectual property” inherently selfish?  (The answer depends a lot on your cultural perspective.)

      Rephrase: If I invent something that can make people’s lives better, how much should I personally gain from that invention versus how much am I morally obliged to share it freely.  Corollary: Is intellectual property theft even a crime?

      OK, let’s say you and I are in a design consortium along with 4 other individuals. Let’s say we’ve been working part-time but consistently on an idea for the past several years. Let’s say we have all contributed not only time, but also money. Let’s say the patent just issued. Let’s say we’ve paid for prototypes and testing. Other than the fact that you are not in my little design consortium, the above is factual.
      If you appropriate our idea, you are a crook.  Hope this clears things up for you.

      And by you, I mean a generic, not specific, you.

  • avatar

    This guy is going to be mincemeat in the federal “pound me in the ass” prisons

  • avatar

    When China takes over the US in a few short years, they’ll let him out of prison and he’ll go back to work at Ford, or GM or any other former US car company. *adjusts tinfoil hat*

  • avatar
    John Horner

    “If he would have stayed in Beijing, he’d be home by now.”
    Is that a good thing?

  • avatar

    Chinese and Koreans steal everything. It’s just the culture they’re embedded into since birth. Russians used to be like that too (remember the joke about sewing machines). What’s funny though, Chery is going to try and sell their stolen RAV4 in Europe. I’m curious what Toyota is going to do about it.

    • 0 avatar

      A guy I know that supplies tools/equipment for my industry set up a plant in Communist China, after 3 years the local hires had learned the programs , plans and fabrication tickets for most of his equipment. They all quit en-mass and went to work for a new start-up in the same business, about 2K up the road. Owned by Chinese, citizen and government. They are now flooding the market with the same equipment for about 2/3rds of the price on average.
      My personal experience was a labour contract signed with a Communist China company for my project in HK. After 3 weeks they came back and asked for a large increase. When I mentioned we signed a contract, they said, “So?”. They made it clear that if it went to the courts…owned and run by the same Communist government… My company stood no chance.

    • 0 avatar

      There are so many of these types of stories that it’s a puzzle why companies are in a rush to do business with the Chinese… I guess the short term money to be made is worth it.  Seems like capital costs would be cost prohibitive knowing there’s a short runway to make your money, but what do I know.

    • 0 avatar

      LALoser: Always ask me first. And never forget the following clause:

      st1:*{behavior:url(#ieooui) }

      /* Style Definitions */
      {mso-style-name:\"Table Normal\";
      mso-padding-alt:0in 5.4pt 0in 5.4pt;
      font-family:\"Times New Roman\";

      Arbitration. Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, shall be settled by binding and final arbitration in accordance with the UNCITRAL Arbitration Rules as at presently in force and as may be amended by the rest of this clause. The appointing authority shall be the Hong Kong International Arbitration Centre. The place of arbitration shall be in Hong Kong at the Hong Kong International Arbitration Centre (HKIAC). There shall be only one arbitrator. Any such arbitration shall be administered by HKIAC in accordance with HKIAC Procedures for Arbitration in force at the date of this Agreement including such additions to the UNCITRAL Arbitration Rules as are therein contained.
      Actually, with a HK business and a contract that specifies HK as the jurisdiction, it would have ended up in a HK court, which is totally different than a Chinese court, It’s like a British court with many salty old British judges left.
      You can request binding arbitration in HK even if you do a contract on the Chinese mainland. We do that all the time. I never sign a Chinese contract without an arbitration clause.
      With a proper employment contract, the hires of your friend could have been prevented from working fro the competition. Non-competes are fairly easy in Chinese employment contracts.
      Remember: PRC stands for “Price. Relationship. Contract.”

    • 0 avatar

      Jacross22: These stories are mostly about naive business people who think that things work the same in China as back home., They don’t. If you operate in China, you need to familiarize yourself with the lay and law of the land. You need good Chinese lawyers, best Chinese lawyers who went to U.S. law-school. For each horror story there are 100 stories about people who worked successfully in China for many, many years. They are just smarter, and willing to learn.
      When I came to the U.S. 30 years ago and started my business, I had to learn U.S. law, and the U.S. way of doing business, which was quite different from the German way. You need to do the same when coming to China. Don’t complain about a trademark or patent infringement if you didn’t bother to register your trademark or patent in China. Don’t complain about slap on the wrist awards if you haven’t written contractual damages into your contracts,  Don’t complain about vague or ambiguous Chinese contracts if you have signed something in Chinese which you can’t read. Write your contract in English, and don’t forget: “In the event that this Agreement is translated into any language other than English, the English language version of this Agreement shall be controlling and govern.”

    • 0 avatar

      Just curious, what kind of rate/budget should I expect from a competent Chinese lawyer who went to a U.S. law school?
      Also, how do their credentials work?  If s/he passed the U.S. bar exam, does that mean s/he can practice in all common law jurisdictions, including HK?  Does s/he also need to pass the bar in mainland to practice on both sides?

    • 0 avatar

      Excellent question. You are ahead of the crowd.
      1.) A good lawyer who can practice law both in the USA and China will cost you a pretty Yuan, similar to the U.S. $300 an hour and up are quite common. Everything in China is negotiable, including lawyer’s fees. Try to negotiate flat fees. The art of running up the clock is performed masterfully here as well.
      2.) If they passed the U.S. bar, they definitely are NOT qualified to represent you in court in China. They need to be licensed in China. China is full of foreign lawyers who suddenly turn out as “consultants”, and full of Chinese lawyers who lack the proper credentials. A “lawyer” alone is good for nothing, he or she also must be employed by a licensed lawfirm. HK and mainland are completely different with different systems.
      3.) A good question to ask and a good answer to get in writing is “Can you represent me in a Chinese court of law, at CIETAC (China International Trade And Arbitration Commission) and at HKIAC?”
      4.) HK lawyers can be even more expensive. Their rates will look VERY familiar to U.S. eyes.
      5.) For low level trademark and patent work, you don’t need a lawyer, a “Trademark Agency” will suffice. Even lawyers usually use them and mark them up by 100% to 200%.
      6.) For contract work, you don’t need an expensive lawyer, unless you are buying a company or real estate. Clauses must be “reasonable” to stand up in court, have a lawyer write a boilerplate contract once, then edit. Or tag it on in 4 point type as “standard terms and conditions.” A contractual damage of 50,000 yuan per trademark violation will sound reasonable (big deal, $7,500), but oops, every piece with your mark on it counts as one violation, and if he makes a million pieces, it’s a million violations, and he’s done. “Punitive” damages don’t exist, unless you write them into the contract. Compensatory damages must be proven. “Loss of future business” doesn’t cut it. PRC. Price, Relationship, Contract.
      7.) For business registration in mainland China, a well connected CPA is usually better than a lawyer. Business registration needs numerous approvals. It can go smoothly or get entangled in red tape, depending on who it does and where. The scope of a business is usually narrowly defined, the broad “may engage in any and all” does not exist. Be careful.
      8.) A business in HK can be up and running in a week with a broad scope, done by a CPA for $1500. A HK registration is usually a good first step into China. Scratch on many Chinese companies, and you find them owned by a HK company. Details on request.
      9.) Before hiring people in China, definitely have a lawyer draw up a standard employment contract and have it signed. Contrary to lore, you cannot exploit a Chinese worker. The new employment law is pretty much like the German (where I believe they received inspiration.) If you hire someone without a contract, it can turn into a lifelong and/or expensive affair. There ARE social security payments, and you better make them. You may not hire anybody without a legal presence in China. Even a lowly “Representative Office” suffices, but you need to be legit.
      For more advice, ask. My company helps companies source merchandise in China, and sourcing often turns into establishing a business presence here. We have helped many companies, without the horror stories. We’ve taken Chinese companies to arbitration, and won awards. Chinese courts? Never.

    • 0 avatar

      Wow, very thorough reponse!
      I had no idea about the difference in “scope” limitations, and the ways compensations work.
      Regarding a separate HK parent company, what are its advantages specific to doing businesses on the mainland?  Am I correct to assume that because a lot of mainland companies also have HK presences, you can settle matters directly in HK, which is less messy?

    • 0 avatar

      The reason for a HK parent is not to avoid messy lawsuits. You can write binding arbitration in HK (or even in Switzerland or wherever …) into any Chinese contract. The Chinese courts have a good record of enforcing the decisions of arbitration panels.
      The reason for a HK parent is that it becomes the parent of a WFOE (Wholly Foreign Owned Enterprise) in China. As far as that is concerned, HK is foreign, even “overseas.” HK is one of the world’s last and best tax havens. It’s one huge duty free shop.Having your parent in HK and the production a short taxi (or even subway) ride across the border opens interesting opportunities …

    • 0 avatar

      Thanks, that clarifies it a lot.

  • avatar
    George B

    I achieved victory against theft of electronic circuit design by the Koreans.  The successful strategy is to let them steal flawed designs that can never work.  Through the prototype and small volume production leave some wrong component values in the documentation and designs that go to outside contract manufacturers and swap components by hand in the lab.  That way the stolen copy will be inferior than the original.  I also helped create a fake RF amplifier design that was almost guaranteed to make smoke and flames when first powered up.  They probably wasted more time copying the bad design than if they had started from scratch.

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