Klaus Pflugbeil, 58, a Canadian national and resident of the People’s Republic of China (PRC), was arrested in Nassau County for conspiring with co-defendant Yilong Shao, 47, of Ningbo, China, to send trade secrets that belonged to Tesla, a leading U.S.-based electric vehicle company, to undercover law enforcement officers.
“The defendants stand accused of stealing valuable proprietary technology from a U.S. electric car manufacturer and using it to set up a rival business overseas,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division in a statement.
The defendants are alleged to have set up a company in China, stole trade secrets from Tesla important to manufacturing electric vehicles, and which cost many millions of dollars in research and development, and sold products developed with the stolen trade secrets, according to a report released by U.S. Attorney Breon Peace.
“Rather than invest their own resources into competitive technology, the defendants looted Tesla’s trade secrets for their own financial gain,” he said.
According to court documents, Pflugbeil and Shao are operators of a PRC-based business that sold technology used for the manufacture of batteries, including batteries used in electric vehicles. The defendants built their business using Tesla’s sensitive and proprietary information, and marketed their business as a replacement for Tesla’s products. Pflugbeil was arrested after he sent multiple Tesla trade secrets to an undercover agent and traveled to Nassau County for a meeting with who he believed to be Long Island-based businesspeople, but who in reality were undercover law enforcement agents. Pflugbeil’s co-defendant Shao remains at large.
Tesla is a U.S.-based leading manufacturer of battery-powered electric vehicles and battery energy systems. In 2019, Tesla acquired a Canada-based manufacturer of automated, precision dispensing pumps and battery assembly lines. Prior to its purchase by Tesla, the Canadian manufacturer 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: continuous motion battery assembly, the battery assembly trade secret.
The proprietary technology provided a substantial competitive advantage to Tesla in the battery manufacturing process. Tesla spent at least $13 million developing the technology.
Both Pflugbeil and Shao are former employees of the Canadian manufacturer. The complaint alleges that Pflugbeil and Shao planned to make use of Tesla trade secrets for their own business activities. For example, between October and November 2019, Pflugbeil and Shao discussed “set[ting] up” a company in Canada and China that would rely on the sensitive and confidential information needed to make and sell their own battery technology. Pflugbeil told Shao that he had “a lot of original documents” related to the technology and sought out more “original drawings” from Tesla that they could copy for their planned business. Shao subsequently confirmed that “we have all of original assembly drawings by PDF.”
In July 2020, Pflugbeil and Shao opened a business, which has since expanded to locations in China, Canada, Germany, and Brazil. The business makes the same precision dispensing pumps and battery assembly lines that Tesla manufactured using its proprietary technology. It was marketed by Pflugbeil as an alternative source for the sale of products that rely upon Tesla trade secrets, publishing online advertisements that state, for example, “Are you looking for Tesla Metering pumps and spare parts? Look no further.”
In September 2020, Pflugbeil emailed a series of drawings to a gears manufacturer in order to produce several parts and wrote “please keep the attached information confidential.” The attachment contained drawings belonging to Tesla related to the technology they allegedly stole. The drawings that Pflugbeil sent were identical to Tesla’s drawings, except the name of the company was changed, the date of the drawing was changed, and the drawing identifying number was written in reverse of Tesla’s drawing identifying number.
Around Sept. 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 to manufacture batteries at a facility on Long Island. The undercover agents were introduced to Shao at the trade show and later to Pflugbeil via email. In November 2023, Pflugbeil sent, via email, a detailed 66-page technical documentation proposal to an undercover agent. The proposal notes, “this technical documentation package contains [Pflugbeil’s business’] proprietary information which must be kept confidential.” In reality, the proposal contained the stolen trade secret information belonging to Tesla: at least half a dozen drawings Pflugbeil used in the proposal and sent to the undercover agent were, in fact, Tesla’s information.
If convicted, Pfugbeil faces a maximum penalty of 10 years in prison.
Photo: Steve Jurvetson, CC BY 2.0 <https://creativecommons.org/licenses/by/2.0>, via Wikimedia Commons
