The Department of Justice announced that Klaus Pflugbeil, 59, of Ningbo, China, received a 24-month prison sentence for conspiring to send trade secrets that reportedly belonged to electric vehicle maker Tesla. The DOJ release referred to the affected company as “Victim Company-1” and described it as “a leading U.S.-based electric vehicle company.” However, multiple publications, including the New York Times and Reuters, identified “Victim Company-1” as Tesla.
Pflugbeil, a resident of China and a Canadian and German national, and his co-defendant, Yilong Shao, who remains at large, previously worked for a company identified by the Times as Hibar Systems, which Tesla acquired in 2019. Shao also worked or Tesla.
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According to the DOJ, the pair took trade secrets from their employer to create “Business-1,” a China-based company that sold technology used to make batteries, including batteries used in electric vehicles. The two marketed their business as a replacement for Tesla’s products.
Prior to its purchase by Tesla, Hibar Systems sold battery assembly lines to customers who manufactured alkaline and lithium‑ion batteries for consumer use. The battery assembly lines contained or utilized a proprietary technology, now owned by Tesla, called continuous motion battery assembly.
As detailed in court documents, by no later than 2019, Pflugbeil and Shao planned to use Tesla’s trade secrets for their own business activities. Pflugbeil told Shao that he had “A lot of original documents” related to the technology and sought out more “original drawings” of the trade secrets. Shao confirmed, among other things, that, “We have all of original assembly drawings by PDF.”
The conspirators took measures to obfuscate that they had stolen trade secrets. For example, Pflugbeil wrote to Shao about a document he created based on one that Shao had stolen from Tesla, “[Its] in a different format, so it looks very original and not like a copy.”
In or about July 2020, Pflugbeil joined China-based Business-1, which has since expanded to locations in China, Canada, Germany and Brazil. Business‑1 makes the same precision dispensing pumps and battery assembly lines that Hibar Systems developed.
Business-1 was marketed by Pflugbeil as an alternative source for the sale of products that relied upon Tesla’s trade secrets, publishing online advertisements on Google, YouTube and LinkedIn. Pflugbeil repeatedly sent LinkedIn messages that named Tesla and said Business-1 was not infringing on any intellectual property.
On or about September 11, 2023, undercover agents attended a trade show for the packaging and processing industries in Las Vegas, Nevada. The undercover agents posed as businesspeople who were interested in purchasing a battery assembly line from Business-1 to manufacture batteries at a facility in Long Island, New York. The undercover agents were introduced to Shao at the trade show and later to Pflugbeil via email.
Subsequently, on or about November 17, 2023, Pflugbeil sent, via email, a detailed 66-page technical documentation proposal to an undercover agent (UC-1). The proposal notes, “This technical documentation package contains [Business-1] proprietary information which must be kept confidential.”
In reality, the proposal contained battery assembly trade secret information belonging to Tesla. At least half a dozen drawings Pflugbeil used in the proposal and sent to UC-1 were, in fact, Tesla’s information related to the battery assembly trade secret. The business proposal quoted the battery assembly line at over $15 million.
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