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Agriculture spies target seed technology, feds say

7:34 PM, Dec 12, 2013   |    comments
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By Jens Manuel Krogstad
USA TODAY

DES MOINES, Iowa - A corporate agriculture espionage case announced Thursday by federal prosecutors offered a glimpse into how at least seven Chinese men allegedly traveled across the Midwest to steal millions of dollars in seed technology.

The investigation revealed how the men used counter-surveillance techniques to shake FBI tails, but still had the seeds confiscated by law enforcement authorities as they tried to leave the country.

Mo Hailong, also known as Robert Mo, is accused of stealing trade secrets worth at least $30 million to $40 million, said Nicholas Klinefeldt, U.S. Attorney for the Southern District of Iowa. It's the first corporate agriculture espionage case of its kind in Iowa, officials said.

"The point is to call people out on this type of activity," Klinefeldt said. "So that people know about it, and so companies can take the right precautions to prevent it from happening again."

Mo, the only person charged or arrested, used an alias to tour DuPont Pioneer's headquarters in Johnston, Iowa, and Monsanto's research facility in Ankeny. He also attend a state dinner in which Iowa Gov. Terry Branstad welcomed Xi Jinping, the then-future president of China, back to the Iowa. Mo and others often met at farm in Illinois bought by Kings Nower Seed, a Chinese seed company for which they were spying, court documents show.

The charge against Mo comes in a state that has pushed to increase trade with China. In October, trade agreements worth an estimated $1 billion were signed by companies from Iowa and China's Hebei Province.

Mo allegedly stole inbred corn seeds from fields in Iowa and Illinois between September 2011 and October 2012 that represented several years worth of research, according to a criminal complaint. Inbred seeds are valuable because they pass on drought- and pest-resistant traits to planting seeds that will be grown and harvested.

Mo, a Chinese citizen and permanent U.S. resident, faces up to 10 years in prison and a $5 million fine, officials said. He works for a company that's a part of DBN Group, a Chinese conglomerate with a corn seed company, Kings Nower Seed.

Additional charges may be filed against the other men who helped Mo try to steal the seed technology, officials said.

The federal investigation began in June 2011 when DuPont Pioneer officials told FBI agents they had spotted Mo in one of the company's fields near Tama. A farm manager had seen Mo on his knees in a recently planted field. Monsanto also reported suspicious activity in fields near Bondurant.

In February 2012, Mo used an alias to tour Pioneer and Monsanto facilities with a group, in the days leading up to the state dinner for Xi, who was then China's vice president.

DuPont Pioneer security alerted the FBI to Mo's visit. Agents followed Mo to a symposium at the World Food Prize building in Des Moines, where he used the same alias as in the tours - Hougang Wu, chairman of the Dalian Zhangzidao Fishery Group.

After the symposium, Mo spoke to a man with close connections to DuPont Pioneer. Mo and Wang Lei, vice chairman of Kings Nower Seed, met at a sports bar near their hotel in Urbandale. Xaoming Bao, a Chinese seed executive and former DuPont Pioneer employee, joined them. Xaoming's wife is a corn geneticist at DuPont Pioneer, according to court documents.

DuPont Pioneer declined to answer questions about the case. In a statement, a spokeswoman said the company is cooperating with the investigation.

Seeds with genetic traits that make plants resistant to drought and pests are worth billions of dollars, said Jeff Wolt, an Iowa State University agronomy professor.

"It's really the foundation for Iowa agriculture, so it's really something that we need to protect," Wolt said.

China has accelerated its development of seed technology in recent years, Wolt said.

Despite record harvests in recent years, China can't grow enough corn. Chronic water shortages, less arable land and other constraints will pressure production, experts say.

As a result, China has begun buying U.S. corn and is expected to buy much more. By 2022, China is forecast to import six times the amount of corn it does now and become the world's largest importer of the grain, according to a 2012 U.S. Department of Agriculture report.

FBI teams tracked Mo and five others with connections to Kings Nower Seed across the U.S. They observed Mo buying nearly $3,000 in Pioneer and Monsanto seeds in Dallas Center, Iowa, and northern Missouri.

The FBI saw Mo drop seeds off at a rented storage facility near Adel. It was near the facility that the FBI saw Mo use driving maneuvers designed to detect and evade anyone following him: He made several U-turns and backed into parking lots, documents show.

Mo also drove slowly on the interstate for long stretches and suddenly accelerated, another counter-surveillance technique, according to documents.

A farm purchased by Kings Nower Seeds for $600,000 appeared to serve as a base of operations. Mo and others unloaded seeds there and may have planted test crops, documents show.

Mo shipped 15 packages weighing 341 pounds to his home in Boca Raton, Fla. UPS packing slips listed the contents as "corn samples," documents show.

GPS data and audio secretly recorded in rental cars confirm the Chinese men made several stops next to research fields belonging to seed companies including DuPont Pioneer and Monsanto, documents show. FBI teams observed several of them drive slowly by farm fields in Illinois and Indiana.

On Sept. 30, 2012, FBI teams stopped three of the men as they left the country. Authorities seized corn seeds tucked into envelopes and napkins, and confiscated other evidence.

At O'Hare International Airport in Chicago, authorities found envelopes hidden in a popcorn box stored in the luggage of Li Shaoming, believed to be CEO of Kings Nower Seed, documents show. Li's travel companion, Ye Jian, a Kings Nower Seed employee, had seeds wrapped in 30 Subway restaurant napkins in his luggage. Ye had more napkins in his pockets, according to documents.

North of Burlington, Vt., a man named Wang Hongwei was crossing into Canada by car. He had lost an FBI tail by suddenly turning into a parking lot. Authorities found 44 bags with envelopes containing corn kernels, a notebook with GPS coordinates and a camera with hundreds of pictures of corn fields, documents show.

A search warrant later allowed authorities to test the seeds. Results showed several samples were the valuable inbred seeds.

Contributing: Lynn Hicks of The Des Moines Register; Krogstad also reports for The Register

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