This article originally appeared in our San Franicsoc affiliate, The Recorder.
Federal prosecutors are trying to save a piece of a prized economic espionage case from unravelling over a technicality raised by defense lawyers at Quinn Emanuel Urquhart & Sullivan.
A rarely litigated rule over service of indictment–specifically how to serve a foreign entity–is at the heart of a defense bid to get four Chinese corporations, called the Pangang Group, out from under charges of conspiracy to steal trade secrets from American chemical company DuPont. And it appears U.S. District Judge Jeffrey White is giving it serious consideration.
“I haven’t decided what I’m going to do,” White said after hearing several hours of arguments over two days in his San Francisco courtroom. He suggested he may be forced to make new law to deal with the defense contentions.
The U.S. attorney’s office earlier this year indicted the Pangang entities, and a Bay Area couple, among others, in a plot to steal information about a DuPont chemical used in paints. It’s part of the government’s effort to combat what it sees as China’s “persistent” industrial spying. The problem, defense attorneys at Quinn argue, is that the government didn’t properly serve the Chinese companies. Prosecutors counter that the companies received actual notice through a New Jersey-based entity that is part of the Pangang Group. The corporate targets received summonses, hired attorneys and appeared in court, prosecutors argue.
The controversy centers on Rule of Criminal Procedure Rule 4. Quinn white-collar partner Robert Feldman argues the rule wasn’t followed because, in part, it requires the feds to mail the summons to the last known address of an organization’s “principal place of business” in the United States. That doesn’t exist, Feldman asserts. And the New Jersey company called Pan America Inc.–which is not a target of the probe–cannot stand in for the Pangang Group.
“By asking the court to find service is effective here, the government seeks to blaze a new trail–without support in the Federal Rules of Criminal Procedure or case law–that is a dangerous one with significant international ramifications,” Feldman wrote in a brief. “Were the government’s theories of criminal service applied by other countries, U.S. corporations could be hauled into foreign courts and subject to criminal sanctions around the world simply because their products entered the stream of commerce, even through independent distributors and regardless of any nexus between their ‘agents’ to the accused conduct.”
What’s at stake in what’s styled as simply a motion to quash service is not lost on White. The judge had counsel focus in on what becomes of the government’s case if he sides with the defense. “If the court were to grant motion to quash service, it is tantamount to a dismissal of indictment as to those defendants, from the government’s perspective,” Assistant U.S. Attorney Peter Axelrod, who is prosecuting the case along with AUSA John Hemann, told White on Friday. Though the government could theoretically start over and attempt service through other means, Axelrod said he didn’t know that it could do so in practice because of concerns about U.S.-China relations.
Prosecutors have indicated that their prime target is Walter Liew, an elderly Silicon Valley engineer represented by Keker & Van Nest. The indictment service issue wouldn’t affect the government’s case against Liew or the other individual defendants.
The service of indictment issue is rarely raised in criminal cases, lawyers say, but it could potentially come up more frequently. “As prosecutions focus more on international parties, issues of service or process become more important,” Feldman said after the hearing. “Congress may or may not choose to change the rules.”
