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Lilly scientists stole $55 million in trade secrets, indictment alleges

October 8, 2013

Three former employees of Eli Lilly and Co. allegedly transferred trade secrets that Lilly values at more than $55 million to a competing Chinese drug company, according to an indictment unsealed Tuesday in federal court.

The indictment charges two Carmel residents, Guoqing Cao and Shuyu Li, with seven counts of theft and conspiracy to commit theft. It also describes the actions of a third man, referred to only as Individual #1, who also played a part in the alleged crime.

According to the indictment, Cao and Li, both of whom are scientists with doctoral degrees, e-mailed sensitive information about nine experimental drug research programs at Lilly to Individual #1, who is employed by Jiangsu Hengrui Medicine Co. Ltd., based in China.

U.S. Attorney Joe Hogsett and his deputy, Cynthia Ridgeway, characterized the alleged theft as a crime against the nation.

“If the superseding indictment in this case could be wrapped up in one word, that word would be ‘traitor,’” Ridgeway argued before Magistrate Judge Mark J. Dinsmore on Tuesday.

“Stolen trade secrets account for billions of losses for American companies throughout our nation,” Hogsett told reporters outside the federal courthouse downtown.

Cao and Li were arrested Oct. 1 in Indianapolis and appeared Tuesday in U.S. District Court in Indianapolis—handcuffed and dressed in striped jail uniforms.

The U.S. Attorney’s Office in Indianapolis sought a judge’s order to continue detaining the two men, arguing that they were flight risks and a “financial danger” to Lilly.

Bill Heath, the head of global product development for Indianapolis-based Lilly, testified at the hearing that the men’s knowledge could help Hengrui duplicate Lilly’s research. Those trade secrets involve drugs being developed to treat cardiovascular disease, diabetes and cancer.

“Because of their know-how and their continued access to the information, they would be in a position to direct others how to use the information,” Heath said.

Attorneys for each of the men argued that they should be let go, and that they would surrender their passports while the case against them proceded.

Scott Newman, a former Marion County prosecutor who is representing Li, said the U.S. Attorney’s office had failed to prove its case that the two men needed to be detained further.

“No, the word is not treason; the word is overreach,” Newman said.

Dinsmore eventually ruled that the two men would remain in custody until trial.

Lilly assisted the FBI and the U.S. Attorney’s office in the investigation of Cao, Li and Individual #1. Individual #1 is still under investigation, according to FBI agents, and has not been arrested.

In a statement, Lilly General Counsel Michael Harrington said the trade secrets allegedly stolen all involve early-stage research, and so their alleged theft does “not significantly jeopardize our overall research and development pipeline.”

“Lilly will aggressively pursue every legal remedy to protect and safeguard its scientific discoveries,” Harrington added. “This includes assisting law enforcement in prosecuting and holding accountable those attempting to steal Lilly’s valuable research.”
 

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