Jurors in a federal courtroom in Madison heard opening statements Monday in a case in which prosecutors allege a Chinese company conspired to steal wind turbine software from the Middleton branch of a Massachusetts company, which ultimately cost the firm hundreds of millions of dollars.
Federal prosecutors, bringing to trial a case that was initially charged more than 4½ years ago, allege that Sinovel Wind Group, headquartered in Beijing, orchestrated the theft of source code that’s key to operating components of energy-generating wind turbines. The software, prosecutors said, was stolen at Sinovel’s behest in 2011 from the Middleton office of AMSC, formerly known as American Superconductor, by a disgruntled Serbian engineer working for an Austrian subsidiary of AMSC.
Assistant U.S. Attorney Timothy O’Shea told the jury that the theft has cost the company $800 million in equipment that AMSC sent to Sinovel but was never paid for and equipment that Sinovel had signed contracts to buy but canceled. He showed the jury photos of that equipment sitting idle in a warehouse.
O’Shea said that the losses caused AMSC to close its Middleton division in 2014 and reduce staff by two-thirds at AMSC’s New Berlin location, and also caused staff cuts at AMSC’s headquarters in Massachusetts.
Ultimately, O’Shea said, the software that was stolen from AMSC ended up being incorporated into Sinovel wind turbines that were installed in Massachusetts.
Sinovel is charged with conspiracy, theft of trade secrets and wire fraud. According to a U.S. Department of Justice statement, issued when the charges were filed on June 27, 2013, Sinovel faces a maximum penalty of up to five years of probation on each count, along with a fine on each count of twice the loss to AMSC. With an $800 million loss, the fine could reach $1.6 billion on each of the three counts.
“The United States will prove that Sinovel knew exactly what it was doing the whole time,” O’Shea told the jury. “Fundamentally, this case is about stealing the fruit of another person’s work.”
But Jeffrey Tsai, one of the lawyers representing Sinovel, told the jury that the disgruntled engineer, Dejan Karabasevic, who worked for AMSC Windtec in Austria, worked alone and for himself, not on behalf of Sinovel, when he downloaded the source code for the wind turbines from a Middleton-based AMSC server. He said that while Sinovel had sought to recruit Karabasevic to solve a vexing problem with temporary sags in the flow of electricity from wind turbines to the power grid, the theft of AMSC’s “Low Voltage Ride Through” software was not something Sinovel had asked Karabasevic to do.
“Dejan Karabasevic cared about Dejan Karabasevic,” Tsai said.
Tsai said Su Liying, a Sinovel deputy director, was “careless” in accepting the software when Karabasevic emailed it to her after he stole it. But while Tsai said it was a “mistake” for Sinovel to receive it, “mistake is not the same as criminal intent.”
The case was delayed for two years while Sinovel fought the indictment on jurisdictional grounds, until pre-trial discovery began in earnest in early 2016. Karabasevic was also indicted on the same charges, along with Su and another Sinovel employee, Zhao Haichun. They are not being tried at this time.
O’Shea told the jury that Karabasevic was angry at reorganization within Windtec, resulting in his demotion, and said that Sinovel exploited his anger and “seduced” Karabasevic to steal the source code that operated the turbine components that AMSC had been selling to Sinovel.
But Tsai said there was already a growing rift between Sinovel and AMSC, as Sinovel was “unimpressed” with AMSC’s inability to solve the temporary sag issue, and once it had solved the issue with the Low Voltage Ride Through software, AMSC refused to cover the cost of retrofitting its earlier equipment with the new software.
“This, ladies and gentlemen, was about money,” Tsai said. “When AMSC and Windtec had no choice but to provide the right solution, they tried to pass the cost on to Sinovel.”