(Bloomberg Businessweek) -- On the evening of Aug. 8, 2017, Shannon You badged out of the Atlanta headquarters of the Coca-Cola Co. for one of the last times. Coke was struggling to retain its perch atop the world beverage market, as once-loyal consumers migrated to brands that evoked wilderness aquifers or herbal healing or masochistic sports workouts—not fizzy fun and mass culture. The new chief executive officer’s plan involved a restructuring. Twelve hundred employees would be let go, and You, a chemist in her mid-50s, had been informed several weeks earlier that she was among them.
Anytime a company lays someone off, there’s a possibility the person will take something with them. Coke, holder of the world’s most famous trade secret, was particularly attuned to that risk. It had an intelligence-bureau-style classification scheme, like other corporations that deal in proprietary information, and it had software that tracked employees’ data use. That summer, as more and more employees learned they were leaving, the data loss prevention system began to ripple with alerts. “To say that that activity blew up the DLP system” would be “a bit of an understatement,” a Coke information security manager later testified. Much of that activity resulted from employees reclaiming personal files they’d stored on their work computers—tax returns, kids’ school projects, bank loan information. But not all of it did.
Shannon You in particular had access to some of the most closely held information at the company: a set of detailed chemical recipes for the 2-micron-thick plastic liners inside the beverage cans Coke filled and sold. A federal prosecutor would later describe these as the company’s “other secret formulas.” Developed at great expense, they were likely even more important than the theatrically guarded recipe for Coke’s namesake soft drink—that sugary, acidic brew would, without a liner, devour the metal of its can. The liner formulas didn’t actually belong to Coke but to the multinational paint and coatings companies that were its partners. You was responsible for evaluating the formulas; she was one of only two people at Coke with access to many of the specifics.
An internal company report on the chemist’s activity that August evening begins at 6:02 p.m. You plugged a Western Digital hard drive into a USB port on a computer, then tried to move files onto the drive from a folder entitled BPANI—an abbreviation for a class of can liner. Because she was being laid off, however, she was flagged in the internal network, and the transfer was blocked. A pop-up on her screen reminded her that any file transfers off her work computer should go through a cloud storage account the company had set up with the software company Box Inc.
You ignored the message. At 6:08 she plugged a different hard drive into her computer and tried to move files onto it, again unsuccessfully. At 7:00, she plugged the original Western Digital drive back into her computer, but rather than drag and drop files, she opened Microsoft Excel and tried saving them onto the external drive through that. That didn’t work either. Nor did it work at 8:41 when she tried the same thing with Microsoft Word.
It wasn’t until the end of the month that she found a solution. On Aug. 25, You used her phone to take a series of photos of her work computer monitor with one file after another open. And around that time she learned, probably from colleagues, of another simple workaround. Late in the evening on Aug. 29, she uploaded several encrypted files from her computer to a personal Google Drive account. Coke’s information security system, set up to block transfers to USB devices, let these proceed. The next night she uploaded some more.
You had not left herself much time—the following day was her last at Coke. But the month had been a busy one. On Aug. 17, unbeknownst to her supervisors, she’d traveled to the Chinese city of Weihai. There she met with businessmen who were helping her start her own coatings company. To fund the venture, You was applying for millions of dollars in government money, and while in town she had an interview for a provincial grant program called Yishi-Yiyi.
A month later, she’d fly to Beijing to stand for another application, this time to a national grant program called the Thousand Talents. The money, she wrote in her application, would help the company she was co-founding “build the first BPANI coating production line in China,” breaking the “international monopoly” in the global food container coatings industry. The files from her Coke computer were central to the plan, and she apparently was aware of the legal jeopardy that put her in. “I’m the one taking all the risks in the end,” she complained in Mandarin to one of her fellow aspiring co-founders on a WeChat voice message. “If anything happens to me, the money I’ve made wouldn’t even be enough for the lawyer’s fee.”
Three years later, You did go on trial, for wire fraud, conspiring to steal and possessing trade secrets, and economic espionage. Federal prosecutors argued that the victims of her crimes were the seven companies that, at a cost of nearly $120 million, developed the coatings—companies against which her venture intended to compete. But You’s can coating conspiracy may have had another victim, too.
Western counterintelligence officials have long warned about Chinese grant programs such as Thousand Talents. Their stated purpose is to tap Chinese scientists and engineers who’ve gone abroad for educational and professional opportunities, luring them back to start businesses in China with the promise of generous financial support and freedom from bureaucratic hurdles. And that in part is what they do. But the grants can also work as bounties, inducing entrepreneurs to steal trade secrets from non-Chinese companies, then use them to start competitors. “The reality is it’s a complete facade for intelligence operations,” says Jay Tabb, a former executive assistant director of the FBI who headed its national security branch when You was indicted. “We know now from many, many, many cases that these programs are a way for the Chinese government and Chinese Communist Party to enlist people to illegally collect information.”
You’s case supports that idea up to a point. But it also suggests that if the Chinese government has created a system for incentivizing intellectual-property theft, it’s a balky, unpredictable one. You ripped off the multinational companies she worked for and worked with, but her confederates also appear to have scammed the Chinese government. Sometimes if you try to pay people to take things for you, they just take your money instead.
Most of the objects we touch, and many we don’t, have a coating. Computer keys have a special layer so they’re not smudged by skin oils. So do touchscreens. Specially developed paints protect suspension bridges from salty air, help stealth fighters evade radar detection and kill the barnacles that would otherwise encrust ship hulls. All of these are developed and sold by paint and coatings companies such as Akzo Nobel, Dow Chemical, PPG Industries and Sherwin-Williams.
Aluminum beverage cans are particularly tricky. The biggest factories stamp out 16 million cans a day; each requires a perfectly uniform inner coating, sprayed on in seconds. The liner recipes are calibrated to the recipes of the drinks, with their different levels of acidity, sugar, caffeine, oils and, in some cases, alcohol. The polymer, once dried, can’t react in any way with the beverage, even after months on a supermarket shelf, lest the precisely calibrated flavor profile of a Topo Chico strawberry hibiscus hard seltzer or a Monster Assault energy drink be corrupted.
All that complexity lends the industry a deep resistance to change. But You arrived at Coke at a rare moment of disruption, caused by concerns about a ubiquitous liner ingredient called bisphenol A, or BPA. A growing, if not unanimous, body of research has suggested that BPA can interfere with the body’s endocrine system, increasing the risk of a host of health problems including Type 2 diabetes and accelerated puberty. In 2010, France banned BPA in baby bottles, later expanding the ban to include any food packaging sold in the country. California, the European Union and China followed with baby bottle bans the next year, and California later added BPA to a list of chemicals that required warnings in consumer products.
The prospect of broader bans set off a scramble for new liner chemistries. But replacing BPA was a challenge; the chemical is exceptionally good at linking together other monomer molecules into tough, lightweight epoxy resins. It took coatings companies several years and multiple generations of liners to create formulations that didn’t compromise durability. The technical term for the category is BPANI, for “bisphenol A non-intent.” The last part, short for “non-intentionally,” reflects that even nominally BPA-free products may have absorbed trace amounts from their surroundings.
Coke, in the jargon of the packaged food chain, is a “filler,” buying its cans from such global canmakers as Ball Corp. It doesn’t make coatings or even apply them, but as the world’s biggest maker of carbonated soft drinks, its decisions essentially determine which liners will find a market.
You found herself in a position of great power over that process, as Coke continued to seek better BPANI formulations. She’d come to the US from China on an academic scholarship in 1990, earning a master’s degree from Kent State University in Ohio, then a Ph.D. in polymer science and engineering from Pennsylvania’s Lehigh University. She became an American citizen in 1999, settling with her daughter and husband, a mechanical engineer, in Delaware, where she had a job as a senior chemist in DuPont’s 3D printing business. Her DuPont manager later described her as one of the best scientists he’d ever worked with.
In 2004 she relocated her family to Massachusetts for a job with the French firm Cie. de Saint-Gobain, then, five years later, joined Honeywell International Inc. as a materials engineer. Over time she shifted her specialty to abrasion technologies, co-inventing sandpaperlike adhesives for industrial grinders and scratch-proof films that can block laser beams.
In December 2012, Coca-Cola hired You as a principal engineer in its global research division, responsible for helping decide which BPA-free liner formulations would come before the company’s powerful Scientific and Regulatory Affairs group. The job made her the main contact between Coke and the coatings companies, and upon her arrival, those relationships immediately grew strained. Her professional persona, like her research interests, tended toward abrasion. “Dr. You was more aggressive in her approach than anyone else we had worked with,” Dan Leschnik, Akzo Nobel NV’s global technical services manager, would testify at her trial. “She was pushy for additional information, not only down to the component level, but specific amounts of each ingredient.”
The companies had never had to disclose this information before and were deeply reluctant to do so. But You was unafraid to use the leverage that came from representing one of the world’s biggest fillers. “She told us frequently that we were always behind, we were trailing our competitors, and she would tell us that she could help us,” testified Leschnik. It wasn’t just Akzo—she told multiple suppliers that they were the industry laggards and, therefore, in particular need of her help. She claimed “that she knew more about polymer chemistry than we did,” testified Tom Mallen, vice president for compliance and technology marketing for Sherwin-Williams Co.’s packaging division, “and that we needed to reveal our chemistry to her so that she could know whether the material was going to be worth looking at or not.” If she didn’t get the information she asked for, she told Mallen, “she was going to stop any qualifications of our material or prohibit them from ever occurring.”
On one level, it made sense for You to push for as much data as possible about a new packaging technology. But there were also suggestions that she was not acting purely in her employer’s interests. Executives at one prospective supplier, Japan’s Toyochem Co., were bewildered when she tried to get them to sign a one-way nondisclosure agreement, under whose terms they, not she, would be prohibited from revealing any proprietary information to anyone else. She told Takayuki Suzuki, a Toyochem marketing manager, it was a way to avoid the hassle of a traditional bilateral NDA. It would be better, she suggested, not to involve anyone else at Coke in the arrangement.
You’s focus at work didn’t always fit with her responsibilities, either. “She was obviously very, very interested in the chemistry to the exclusion of the performance of the coating,” Sherwin-Williams’s Mallen recalled, which was “a major step change from people that had held the position beforehand.” Chemistry rather than performance was the kind of thing that would interest someone making a liner rather than just approving one.
Eventually, Sherwin-Williams and some other suppliers came up with an unorthodox solution to their Shannon You problem: They created a custom NDA covering You by name, so she could then be given access to the details she demanded. That had the effect of entrusting some of their most valuable intellectual property to her individually. In two years, she had amassed a personal liner formula database worth tens of millions of dollars. Her computer at Coke’s headquarters was the only place in the world where all those trade secrets coexisted.
By 2016, Coke seems to have realized that it, too, had a Shannon You problem. Dana Breed was hired that year to oversee the approval of new materials used by the company. At Coke’s Atlanta headquarters, Breed, like other employees who sat within earshot of You’s cubicle, couldn’t help but hear her conversations with suppliers, and Breed was warned she would need headphones to tune You out. “On her phone calls, Shannon was very animated,” Breed recalled at trial. The contentiousness of the negotiations was impossible to miss.
Breed clashed immediately with You, who refused to provide even basic data about the formulations. Less than a year after Breed’s hiring, You was notified that she was being laid off as part of Coke’s “lean center initiative.” Even at this point, Coke’s attempts to deal with You’s liner formula hoard were ad hoc. The IT department was never informed that she had exceptionally valuable IP that should be subject to extra security. On Aug. 3, as Coke prepared to work with the chemical companies to undo the unusual NDAs, Breed gave You an external hard drive and instructed her to put the formulas on it—though, if You had tried to comply, she’d have triggered the same IP protection measures that would temporarily frustrate her after-hours data transfer attempts later that month. Breed followed up daily. You didn’t respond to the messages, nor could she be found at her desk.
By Aug. 31, her last day at Coke, You had found a job in Tennessee, at Eastman Chemical Co. There she would make $157,000 a year, a slight bump over her Coke salary, with a $15,000 signing bonus. Unable to reach her, Breed looked in You’s vacated cubicle and found the hard drive, still empty.
It’s unclear exactly when You began contemplating going out on her own, but correspondence with Fan Hongmei, her aunt, suggests that the two had been discussing it for nearly a decade. Fan lived in China—her text and voice memo exchanges with You were in Chinese and used You’s Chinese given name, Xiaorong. In the voluminous communications log submitted as evidence in You’s trial, Fan emerges as a cajoling, indefatigable presence—the idea of starting a state-subsidized Chinese company seems to have originated largely with her. You, with a sister and an ailing mother in China, found the idea appealing. Also, there was the money. In her Thousand Talents application, You estimated that the market for BPANI coatings in China, where there was no domestic supplier, was worth about 20 billion yuan ($2.9 billion) annually.
In early 2017, Fan connected her niece over WeChat with Liu Xiangchen, the general manager for a chemical company called Weihai Jinhong Group, based in Weihai, in Shandong province. A photo of Liu later uncovered by the FBI shows a man with a wary expression and a mop of hair swept across his forehead. The idea he proposed was for his company to make the coatings at first, then spin off an independent firm. In exchange for overseeing the process, he’d own 5% of the new company. You would be its chief technology officer and own a third of it. Much of the rest of the ownership would be a family affair: Fan would also own a large stake, as would her husband and two of Liu’s aunts.
Liu presented himself as an expert on getting government money; he said seven of Weihai Jinhong’s 800 employees had won talent grants. For the new venture, Liu applied on You’s behalf for national and provincial grants worth a total of 30 million to 50 million yuan.
From March through August 2017, as You’s time at Coke was coming to an end, Liu set about creating an alternative, more accomplished version of her for the grant applications. Some of the burnishing was purely cosmetic: In one WeChat message, Liu asked You to retake her application photo. “If you could straighten up your hair a little bit,” he wrote, “that would be great.” Other improvements were more significant. In March, Liu asked You for an employment verification letter from Coke that identified her as the company’s chief technology officer, a meteoric fictional promotion. She demurred at first, but in a PowerPoint later prepared for her Thousand Talents application, she identified herself as having “served as chief technology officer or technical director at six different Fortune 500 companies”—a description true only if one allowed for a very generous definition of “or.” Most significantly, You’s application claimed falsely that she herself had “manufactured the world’s most advanced second-generation BPANI coating production and preparation technologies.”
Just as important was the fiction created around the technology on which the new company would be built. Investigators would later find on You’s external hard drive a patent license from Coke giving Weihai Jinhong permission to use its BPANI coatings and manufacturing techniques. That license, cited multiple times in her Thousand Talents application, was fake—the relevant technologies weren’t even Coke’s to license. But the application was in all likelihood not read with a critical eye, thanks to an added measure Liu took. In a September WeChat message, Fan claimed that Liu had paid a 10,000-yuan bribe to facilitate the application process. There are hints of other bribes as well.
After You’s presentation in Weihai in August 2017 supporting her application to Shandong’s provincial grant program, Yishi-Yiyi, and then her defense, in a Beijing conference center a month later, of the Thousand Talents application, the early feedback was promising. Liu sent word in October that “reviews for the Yishi-Yiyi scientific and technological investment project were mostly good. Barring something unforeseen, the project should be officially approved.” Fan wrote that they could start preparations for the new company by late fall.
Other members of You’s family, however, began to worry about her venture. A sister in California sent You links to news stories about the FBI targeting Thousand Talents participants. Another, in China, expressed similar concerns: “The Americans are very bad! They are framing Chinese people everywhere!” she said in a WeChat audio message. Nor did she like the sound of her sister’s business associates: “These people are really shady! They are treating you like a fool, thinking you care about the fame, the little bit of money.”
You reassured her siblings, but she didn’t trust her partners, either. Her main concern wasn’t getting caught but getting bilked. In February 2018, Liu received official confirmation that You had won both the Thousand Talents and Yishi-Yiyi awards, entitling her to a total of 5 million yuan over four years. Not all the news was good: Weihai Jinhong had gotten a corporate award, too, but it was a fraction of what Liu had requested. And after the initial jubilation, months went by without You seeing any of the money. “All this excitement,” she said in a WeChat voice message to Liu. “Excitement is useless!” Suspicion came to dominate her correspondence. “If the money is not in my account, I won’t even begin,” she threatened in a series of voice messages to Liu. “I wouldn’t even discuss it. It’s not like I’m starving here like those Chinese people who went back because they couldn’t make it here.” On the contrary, she said, she was doing very well in America. “I’m making a lot of money here. You just want to talk nonsense? To scam me?”
In a text to Fan, Liu defended himself, pointing to his year of work on the falsehood-ridden applications, the risks he had taken by knowingly misrepresenting the terms of You’s employment to the Chinese government, and his drafting of the 29-page fraudulent patent licensing authorization from Coke. After all that, he said, it was You, not he, who got the grant money, a reward that “bears no risk for her, only great fame and wealth.” Fan, for her part, tried to placate her niece: After decades in the US, she had forgotten how things got done in China. “It’s been so many years that people would call you ‘unacclimatized,’ ” Fan told her.
As for the intellectual property You would be bringing with her, there was no hurry with that, either. The plan was for the Weihai Jinhong spinoff to first form a partnership with an overseas supplier—the Italian company Metlac SpA, a major European coatings company, seemed like a good candidate—to legitimately license existing liner formulas to produce for the Chinese market. Then, over a few years, You and her team could quietly incorporate the BPANI formulas she had taken from Coke into their own products, shortcutting years of trial and error. The resulting product wouldn’t be exactly the same as, say, Akzo Nobel’s or Sherwin-Williams’s. “You are not stupid,” Fan said in a voice message in early 2018. “At the most, the technology will have some resemblance at a glance, but no one can prove it.” And there was plenty of precedent for the strategy, Fan said: “The scholars returning from overseas are all doing it this way.”
Less than a month later, You flew to Weihai to sign her employment contract with Weihai Jinhong. Her signature made the new coatings venture official, codifying her 33.5% stake and entitling her to a salary of 600,000 yuan per year. A trio of photos later recovered from You’s iPhone document the signing ceremony. In a coral-colored dress and black lace cardigan, You sits beside Weihai Jinhong’s CEO, Xu Dongguo, whose gray crew cut gives him a military air. They are at a table in a banquet hall, and a white wine rack in the shape of a double bass looms up behind them. In the last photo, You shakes hands with Xu and smiles, her left hand balled at her side.
You’s time at Eastman Chemical would prove shorter and even more tumultuous than her tenure at Coke. Eastman, spun off in 1994 from the once-mighty Eastman Kodak Co. and based in Kingsport, Tennessee, is a major producer of the polymers used by coatings companies. Impressed by You’s research background and experience at Coke, her new employers wanted her to help improve their compounds, not in beverage packaging, where the company had a strong research program, but in food—tuna and soup cans require their own types of polymer liners.
From the start, however, You showed a stubborn focus on drink cans. One of her Eastman supervisors was Deep Bhattacharya, at the time global director of technology for the company’s coatings and inks business. “It was not unusual to find her spending a lot of time trying to figure out what Eastman was doing on the beverage side,” he would later testify.
Nor had You changed her interpersonal style. She would “belittle people,” Bhattacharya said. “She took on a very aggressive and combative approach and also drove hard to indicate that she knew a lot more than the others because of her prior work experience.” She described herself, he recalled, as “very famous.”
That turned out to be true—within coatings chemistry, anyway. When Coke’s suppliers learned of her hiring by Eastman, several reached out to her new employer. Sherwin-Williams sent a letter advising the chemical company of its legal responsibility to ensure that she didn’t use the information from her special Coke NDA. “A lot of our customers actually shared a concern about having Dr. You work on some of those project teams because of the experience they had while she worked at Coke,” Bhattacharya testified.
Her work personality also made her extended absences that much more noticeable. The trip to Beijing to defend her Thousand Talents application came just two and a half weeks into the job. The following spring, in April 2018, she took a business trip to meet members of the company’s technical team in Shanghai and attend an industry conference in Guangzhou. The trip was supposed to last two weeks. While there, You met with prospective customers, ostensibly on behalf of Eastman, but she neglected to include her local Eastman colleagues in the meetings. She met with Weihai Jinhong and signed the partnership paperwork with the company’s CEO, Xu. All the while, she was parrying increasingly exasperated emails from her bosses at Eastman. “Greetings, Shannon,” one began, “quite a few concerns are being raised with this trip.” In the end she stayed for more than a month, then asked to work for an additional week from Atlanta, where she still had a house.
During this time, You was reaching out to the Italian supplier Metlac to set up meetings about collaborating in the Chinese market. She led Metlac to believe that Eastman’s CEO, Mark Costa, would be accompanying her. But then she reported that he regrettably had a conflict. She offered to speak to Metlac CEO Pier Ugo Bocchio herself, not necessarily about Eastman but about a Chinese company that was, as she put it in one text, “very interested in working together with you to get in this field.” Investigators would later find photographs she took with her phone, against company policy, of the specialized equipment in Eastman’s labs. They’d also find emails You sent to vendors from her Eastman email address inquiring about similar equipment for a lab in China. No one at Eastman had asked her to equip a lab there; no one at Eastman had any idea what she was doing.
On June 21, 2018, You received an email invitation for a meeting that afternoon with Bhattacharya, along with another of her supervisors and a human resources representative. A half-hour before the meeting was to start, she spent 11 minutes uploading files from her work computer to the same Google Drive account she’d used to circumvent Coke’s data loss prevention measures 10 months earlier. At the meeting, Bhattacharya handed her a printed list of Eastman’s concerns about her job performance. The conversation quickly deteriorated. “She refused to read through them,” he testified. “She flung it across the table back to me.” Ashley Angles, the HR manager, decided to stop the meeting. She asked You to work from home for the rest of the day to cool off.
What You did instead brought her career at Eastman swiftly to an end. She left the building that houses the company’s technology research division and its labs. Rather than go home, however, she crossed Eastman’s campus to the executive offices, where she spent the next two hours. She badged in and went looking for Bhattacharya’s supervisor. When she couldn’t find him, she demanded to meet with the chief technology officer, one of the most senior people at the 14,000-person company. When informed that the CTO was busy, she attempted to interrupt his meeting. She was asked to leave the building. Eventually, she did.
At that point, Eastman’s HR department decided to fire her, and had events unfolded differently, that might have been that. Despite the trail of alarmed business partners and shell-shocked colleagues behind her, You could have moved on, going down in Eastman office lore just as she had at Coke. But that night, after finally going home, she logged on to the company network and copied the documents she’d saved to her Google Drive to a personal hard drive connected to her work laptop. Eastman’s IT department, growing increasingly concerned about her, was on alert: The next morning a technician was able to reconstruct what she had done by remotely querying the operating system on You’s laptop.
That afternoon, June 22, You was invited to another meeting and informed of her termination. According to Angles, she took the news with surprising equanimity. Then Angles demanded the hard drive with the proprietary data on it. You seemed to grow nervous, Angles would recall at trial, and said the device was back at her condo. Unwilling to let her out of their sight until they had the hard drive, Angles, along with a company security manager and an IT manager, followed You home in an improvised caravan and waited outside her house while she retrieved it.
Back on campus, an Eastman IT security technician examined the hard drive, where he found some of You’s personal files and the Eastman data she’d taken. He also found her Coke documents, organized neatly in folders bearing the names of the chemical companies she’d gotten them from. Eastman’s lead global investigator, a former FBI agent, reached out to his former colleagues there and handed over You’s devices.
In the meantime, You quickly found yet another job, as a principal engineer at XG Sciences, a nanomaterials maker in Lansing, Michigan. (It ceased operations last year.) She traveled again to China, where Liu gave her some cash, and Xu walked her through the process of buying a luxury waterfront apartment so she could have a place in China to park her grant money. And the three of them accompanied Weihai city government officials to Italy to meet with Metlac.
In September 2018, You flew back to the US and was met at the Atlanta airport by agents from Customs and Border Protection. The CBP agents didn’t say so, but they were acting at the behest of the FBI. Agents at the FBI’s Knoxville, Tennessee, field office had obtained a search warrant for the hard drive Eastman had recovered, and they would go on to obtain warrants for You’s Yahoo! and Google accounts. Agents had sent the files they found on You’s devices to the chemical companies whose names appeared on the files; the companies confirmed the information was proprietary. At the Atlanta airport, You was led to a small interview room, while agents down the hall inspected her laptop, two phones and a hard drive. She had more than $10,000 in cash. When a CBP agent began asking her questions from a list he had in front of him, she took it, read it herself, and wrote her answers directly onto the paper. The agent had never had anyone do that, he later testified.
When You got her devices back, she deleted her WeChat history, which the agents had already copied. She pressed on with her plans. In November 2018 she took another trip to Italy with her Chinese partners and Weihai officials to meet again with Metlac. The company had been noncommittal before. This time, it was definitive: It wanted no part of the proposed deal, and it did not want to work with You. Without a partner already established in the industry, the Weihai Jinhong team was at an impasse. They apparently balked at the prospect of building an entire research and development team around You’s expertise and pilfered IP.
There’s another possibility, though, and it’s the one You seems to have come around to: that the fabricated applications were part of a larger, more cynical scam. At some point, Liu and Xu may have realized that, rather than invest their government money in a chancy venture with a volatile personality, they could just pocket it. “The main problem right now is that I don’t know what shenanigans Liu Xiangchen is up to,” You said at one point in a WeChat message to family members. “He just utters nonsense all the time! You know?! All shenanigans!”
You’s aunt had voiced similar concerns. Once Weihai Jinhong had some of its grant money from the government, Fan warned on WeChat, it didn’t need to do anything for the venture. Liu could spend the money on himself and write it all off as the cost of trying to start a business, a palatable explanation should any authorities decide to look. He could, she said, “use it however he wants, like dine-and-wine, buying gifts, work on personal connections, and it will be enough for everyone to submit their invoices.” It would be just one more example of a Chinese government-backed venture failing. Perhaps the whole thing was, indeed, shenanigans.
The evidence uncovered by federal investigators, while suggestive, doesn’t settle the question one way or the other. Attempts by phone and email to reach Liu and Xu were unsuccessful. Weihai Jinhong didn’t reply to a query conveyed via its official website, and calls to the company’s legal office went unanswered. couldn’t find contact information for Fan.
There is evidence, though, that the Chinese government itself has begun to worry about widespread fraud in its tech funding programs. After the failure of several major government-backed chip projects in recent years, Chinese anticorruption authorities announced investigations into a cabinet official in charge of industrial policy and three executives from the National Integrated Circuit Industry Investment Fund Co., China’s main investment vehicle for building domestic chipmaking capabilities. These investigations may be a way to place blame for the disappointments of failed high-profile technology efforts, but they aren’t the only example. There are also allegations of widespread fraud in the electric vehicle market, an industry with extensive government support. Chinese investigators have found that some domestic automakers, to qualify for extra subsidies, were inflating their sales by selling cars to shell companies, then stripping them for parts.
On Feb. 12, 2019, a federal grand jury in Tennessee returned wire fraud and trade secret theft charges against You and Liu. Two days later, the FBI arrested You at her apartment in Lansing. Agents also searched her town house outside Atlanta and interviewed her husband at their home in Massachusetts—he would lose his job after her arrest. The agents noted that You’s Michigan home, where she’d been living for months, was barely furnished, with a mattress on the floor, TV trays for shelving and, in the living room, a bankers box containing a Western Digital hard drive. In a kitchen cabinet was a locked briefcase whose combination she claimed not to know. When agents got it open, they found about $4,000 in Chinese yuan, euros and other foreign currencies. All of her important personal documents were there, too, including her passport, Social Security card, diplomas and marriage certificate, as well as her daughter’s birth certificate. “She was intending to run away,” Assistant US Attorney T.J. Harker said at trial.
Agents took You to the FBI’s Grand Rapids, Michigan, office and spoke with her for a little over two hours. In a video recording of the session, she faces the camera, wearing a pink sweater and glasses. Sitting across the table from her is Bill Leckrone, the lead investigator on the case, and a second agent who speaks little except to mention that he is a chemical engineer. When Leckrone asks You about Weihai Jinhong, she insists at first that she was merely a matchmaker, helping Metlac break into the Chinese market. There was, she says, no money involved. Asked about her aunt’s role, she says that Fan probably wanted to give her niece an excuse to come back to China so they could spend time together.
As Leckrone reveals how much of You’s digital life he has seen, she does admit to a greater and greater role. But the plans for a company were “just talking,” she says. The contract she signed with such fanfare was “just paper” and came to nothing. “I have never had any intention to develop anything,” she says. Nor, she insists, did she have any intent to share her secrets with anyone. It does seem to be the case that she ended up keeping the coatings formulas to herself—one of her refrains to her partners was that they had to pay up before she would deliver anything. The FBI is convinced that there is at least one additional device of hers that they were not able to recover.
In August 2020 a federal grand jury returned a superseding indictment adding economic espionage charges, because You allegedly acted to benefit a foreign government through a business it supported, and adding her aunt as a defendant. (Like Liu, Fan presumably remains in China, beyond the reach of US law enforcement.) At You’s trial, held in Greeneville, Tennessee, in April 2021, her lawyers contested that the coatings formulas she was accused of stealing were trade secrets at all and put a patent attorney named J.D. Harriman on the stand. A reasonably skilled chemist could have come up with the formulas on their own based on publicly available data, he argued, contradicting the coatings company executives whose testimony had preceded his. The defense also put the Coke executive Yu Shi on the stand; You and the company’s broader coating research effort had been under her supervision at the time. Under questioning, she said that Coke had been on a tight deadline to approve the new coatings and that the sensitive files Coke received from its suppliers weren’t always clearly marked as such.
The defense’s other witness was You’s daughter, Linda Xu, a computer scientist at Google. Xu described a frugal, itinerant upbringing, the small family sometimes having to be apart as her parents found and lost work. Once her mom got her job at Coke, her parents fell in love with Atlanta and wanted to retire there. “She doesn’t always express herself well,” Xu would later write to the judge, “but you won’t find anyone as caring.”
At trial, Xu recalled two vacations in Italy, when she was in college and her mom still at Coke. The family was hosted by the Bocchios, the family that owns Metlac. “There were a lot of toasts that I remember,” she said, “where we were celebrating they got some approval for something, and we’re talking excitedly about opening the market somewhere in the US, some places in Europe and Asia.”
On April 22, 2021, the jury returned a verdict of guilty on all counts. In May 2022, You was sentenced to 14 years in federal prison. Coca-Cola and Eastman declined to comment on the case. You’s lawyer, Corey Shipley, didn’t return messages, nor did Metlac representatives.
China’s Ministry of Foreign Affairs declined to comment directly on the case but said the government has instructed the relevant entities to abide by international laws and ethics when participating in overseas talent programs.
“The government completely fabricated my case,” You says. It’s a few minutes before 5 p.m. on Oct. 13, and she is calling from the phone bank of the low-security penitentiary in Aliceville, Alabama, where she’s serving her sentence. She is responding to a letter asking to speak for this story, which she received the night before. She would have called earlier in the day, she says apologetically, but she was at her job in the prison factory.
“It’s profiling,” she says of the case against her. “I’m a naturalized citizen, I’m well educated and well known in the field, and I traveled to China to do business. So that’s the reason that they targeted me.” It was all just political. Tennessee is “a red state,” she adds. “The judge is completely, completely on the government’s side.” And the jury didn’t understand the nuances of trade secrets. “This is not like something like robbery, drugs or murder. I had some files in my home that somebody else sent to me,” she says. “They claim that’s proof.”
The conversation isn’t long—inmate calls at Aliceville are limited to 15 minutes. You proposes a second call the next evening, and perhaps more after that. She has so many arguments to make; she’s working closely on her appeal and mentions that she’s speaking with her lawyer the next day. At the appointed hour the next evening she doesn’t call, though. Months later, responding to a follow-up email, she writes that her lawyer has discouraged her from speaking to the press for the time being. “I will contact you after appeal,” she writes. “I look forward to telling you the truth.”
(Updates with comment from China's Ministry of Foreign Affairs in 63rd paragraph.)
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