The company logo shines off the rear deck of a 2020 Model X at a Tesla dealership in Littleton, Colo., on April 26, 2020. American prosecutors say a Canadian citizen living in China stole trade secrets from a "leading U.S.-based electric vehicle company" to set up a competing battery business. THE CANADIAN PRESS/AP-David Zalubowski

American prosecutors say a Canadian living in China stole trade secrets from a leading U.S.-based electric vehicle company to set up a competing battery business.

The U.S. Attorney's Office in Brooklyn, N.Y., said Klaus Pflugbeil was arrested Tuesday after allegedly providing stolen trade secrets to an undercover agent who was posing as a business person.

Pflugbeil had travelled to Long Island to meet with a group of business people "who in reality were undercover law enforcement agents," American prosecutors said in a statement released Tuesday.

“As alleged, the defendants set up a company in China, blatantly stole trade secrets from an American company that are important to manufacturing electric vehicles," said Breon Peace, U.S. Attorney for the Eastern District of New York.

Peace said trade secret theft "places U.S. businesses at a competitive disadvantage, undermines innovation and creates a potential national security risk.”

A complaint filed in federal court said Pflugbeil and his co-accused Yilong Shao conspired to sell proprietary technology developed over years by a Canadian firm that specialized in "automated, precision dispensing pumps and filling systems."

Pflugbeil's LinkedIn profile says he was a vice-president for Hibar System Ltd. in Canada and China from 1995 to 2009, the same company based in Richmond Hill, Ont., that was later purchased by Tesla in 2019.

The complaint says the products developed by the Canadian company were used in battery assembly lines that could be run continuously at high speed, pumping out batteries at a much faster pace than firms without the technology.

Tesla was not immediately available to comment on the U.S. federal court complaint.

Prosecutors allege that Pflugbeil and Shao — who remains at large — set up an unnamed company with offices in China, Brazil, Germany and Canada using the stolen trade secrets.

Pflugbeil is identified as a global president of Hife Systems Ltd. on the company's website, which says it operates in those four countries.

Jay Shaw, a business unit manager with Hife Systems based in Ontario, declined to comment on Pflugbeil's arrest Wednesday.

Prosecutors allege in the complaint that Pflugbeil was "publicly marketing" the company's products as an alternative to Tesla through direct messages on LinkedIn. The complaint says Pflugbeil travelled from Hong Kong to New York for what he thought was a business meeting "to finalize negotiations about the sale of a battery assembly line to be used by a business on Long Island."

American prosecutors said in a statement that Pflugbeil faces up to 10 years in prison if convicted.

This report by The Canadian Press was first published March 20, 2024.

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