"The Justice Department has been urged by representatives of a U.S. national security panel to consider economic-espionage charges against leaders of TuSimple Holdings Inc., a U.S. self-driving-truck company with ties to China, according to people familiar with the matter.
The recommendation for criminal charges, made late last year, stemmed from concerns that two founders and the current CEO of the San Diego company were improperly transferring technology to a Chinese startup, the people said. The concerns were based on material gathered as part of a national security review of TuSimple launched last year.
That review is conducted by the Committee on Foreign Investment in the United States. Cfius reviews foreign investments for national security concerns and can impose safeguards or recommend that the president block investments.
The Biden administration has ordered steps to try to prevent U.S. technology from advancing China's military power, and it is considering others. The Pentagon has pushed to increase the U.S. military's use of autonomous vehicles and to counter U.S. adversaries' technological advances in the field.
The recommendation didn't come from the full Cfius panel. Representatives who are part of the Cfius review process can make recommendations to law enforcement, according to lawyers familiar with the panel's workings. It couldn't be determined how the recommendation was received by the DOJ, which declined to comment.
TuSimple spokeswoman Megan Strader said Cfius hasn't raised with the company any allegations of economic espionage. "We have been and intend to continue communicating and cooperating with Cfius," Ms. Strader said.
A Treasury official said the panel is "committed to taking all necessary actions within its authority to safeguard U.S. national security."
The Wall Street Journal has reported that Cfius, the FBI and the Securities and Exchange Commission have been investigating whether TuSimple improperly financed and transferred technology to a Chinese startup, citing people with knowledge of the matter. The startup, Hydron Inc., was founded and is run by TuSimple's controlling shareholder and co-founder, Mo Chen.
Hydron operates in China and has said it is building hydrogen-powered semi trucks. Mr. Chen and his TuSimple co-founder, Xiaodi Hou, along with Chief Executive Cheng Lu, are the individuals recommended by the Cfius representatives for possible economic-espionage charges, according to the people familiar with the matter.
Representatives of Hydron didn't respond to a request to comment for this article.
Whether the probes are likely to result in any charges couldn't be determined. TuSimple has said it is unaware of any FBI or SEC investigations.
While the Cfius panel must seek a consensus when deciding whether to scuttle a deal, there is no such requirement for representatives who want to recommend charges, said Rick Sofield, a partner at Vinson & Elkins LLP who used to lead DOJ's Cfius team. "It doesn't matter to the criminal guys whether it's a single agency or the whole committee sending it," he said, adding: "I've never known it to be something from the whole committee."
Cfius began its scrutiny of TuSimple in 2021 because it became concerned about a Chinese shareholder's large investment and control of two board seats. In 2022, Cfius undertook a review focused on Hydron.
The Hydron review led the Cfius representatives to conclude that TuSimple's leaders' dealings with Hydron potentially violated U.S. laws prohibiting economic espionage and trade-secrets theft, among other possible offenses, according to the people familiar with the matter.
TuSimple's board in October fired then-CEO Mr. Hou in connection with the board's discovery that TuSimple had transferred confidential company information to Hydron and its partners, according to a TuSimple filing to the SEC.
The board's investigation found significant evidence of improper technology transfer to Hydron, according to the people familiar with the matter. The transfer included technical data, blueprints and schematics that would enable Hydron to replicate TuSimple's technology as well as specific information about TuSimple personnel who would be valuable to Hydron, according to one of the people.
TuSimple has said it has considered an agreement to buy freight trucks from Hydron but hasn't bought any and has no other financial relationship with the startup. Hydron has said TuSimple is a customer.
Mr. Hou has in prior comments criticized the board's decision to fire him as CEO and said he would be vindicated. "I want to be clear that I fundamentally deny any suggestions of wrongdoing," he said in an October statement. Through his spokeswoman, he declined to comment for this article.
Days after his dismissal, Mr. Hou teamed up with his co-founder and major shareholder, Mr. Chen, to fire the board, including one member who had been appointed as part of an agreement with Cfius. Messrs. Hou and Chen also reinstalled Mr. Lu, a previous chief executive, to run the company.
Messrs. Chen and Lu didn't respond to requests to comment.
After Messrs. Hou and Chen fired the TuSimple board, they brought on three independent directors. TuSimple's Ms. Strader said the new board members are continuing to investigate company interactions with Hydron and that it isn't accurate to draw any conclusions until that investigation is complete.
A conviction on a charge of economic espionage requires prosecutors to prove a foreign government benefited from the activity and carries a 15-year maximum prison sentence.
DOJ has brought a handful of such cases in recent years. Last year, a former Coca-Cola Co. employee was sentenced to 14 years in prison after being convicted of stealing the formulation for the coating inside BPA-free cans on behalf of a company that had received millions of dollars in Chinese government grants." [1]
1. U.S. News: Firm's China Ties Spur Spy Worry --- DOJ is urged to weigh charges against leaders of self-driving truck company TuSimple
O'Keeffe, Kate; Viswanatha, Aruna; Somerville, Heather. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 02 Feb 2023: A.5.
