Kolon pleads guilty to stealing DuPont trade secrets

By Shahrzad Pourriahi, Crain News Service

ALEXANDRIA, Va. (May 4, 2015) — South Korea's Kolon Industries Inc. has pleaded guilty in federal court in Alexandria  to conspiracy to steal trade secrets involving DuPont Co.'s Kevlar para-aramid-fiber technology, the Federal Bureau of Investigation (FBI) reported.

Kolon, which markets its aramid fiber under the trade name Heracron, was sentenced to pay $85 million in criminal fines and $275 million in restitution. Among the uses of aramid fibers is as a tire reinforcement material.

Kolon Industries Inc. pleaded guilty to one count of conspiracy to convert trade secrets.

According to the statement of facts filed with the plea agreement, from June 2006 to February 2009, Kolon conspired with former DuPont employees and others to steal DuPont's trade secrets for making Kevlar para-aramid synthetic fiber. Best known for their use in bullet-proof armor, p-aramid fibers also widely applied as reinforcements in tires and industrial rubber goods.

Kolon admitted that it was attempting to improve the quality of its own para-aramid fiber.

According to the FBI report, Kolon personnel met repeatedly with former DuPont employees, including Edward Schulz, 72, and Michael Mitchell, 58, to obtain confidential and proprietary DuPont information about Kevlar.

Mr. Schulz pleaded guilty to conspiracy to steal trade secrets in September 2014 and is scheduled to be sentenced on June 26, the FBI said. Mr. Mitchell pleaded guilty to theft of trade secrets and obstruction of justice in December 2009 and was sentenced to 18 months in prison.

Kolon admitted that it obtained technical and business documents regarding Kevlar, including instructional materials that described DuPont's “new fiber technology,” documents on polymerization, and a detailed breakdown of DuPont's capabilities and costs for the full line of its Kevlar products and DuPont's Kevlar customers.

In February 2009, DuPont filed a civil lawsuit against Kolon, alleging theft of trade secrets. Thereafter, certain Kolon personnel attempted to delete files and e-mails related to Messrs. Mitchell and Schulz and outside consultants hired to improve Kolon's para-aramid fiber, and urged other Kolon personnel to search for such materials and mark them for deletion.

Kolon also admitted that certain employees approached a former employee of an American subsidiary of Teijin Ltd. – a Japanese company that makes the para-aramid fiber called Twaron — in an unsuccessful effort to obtain information about Twaron.

Five former Kolon executives and employees, all of South Korea, also face charges in the case.

DuPont originally won the case against Kolon in 2011 with a U.S. district court ordering Kolon to pay the company $920 million in damages.

However, a court of appeal overturned the judgement in April 2014 due to evidence provided by another court case involving AkzoNobel.

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Shahrzad Pourriahi is a reporter for European Rubber Journal, a sister publication of Tire Business