United States v. Xiaojian Tao

• Decision Date: 30 November 2022
• Docket Number: SA-22-CR-170-XR
• Parties: UNITED STATES OF AMERICA v. XIAOJIAN TAO AND YU LANG
• Court: U.S. District Court — Western District of Texas

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UNITED STATES OF AMERICA v. XIAOJIAN TAO AND YU LANG

No. SA-22-CR-170-XR

United States District Court, W.D. Texas, San Antonio Division

November 30, 2022

ORDER

XAVIER RODRIGUEZ, UNITED STATES DISTRICT JUDGE

On this day came on to be considered the following: (1) Dr. Tao's motion for a bill of particulars (Dkt. No. 73); (2) Dr Tao's Motion to Dismiss Counts 3 through 12, 19, and 20 for Failure to State an Offense (Dkt. No. 71); (3) Ms Lang's Motion to Join Dr. Tao's Motion to Dismiss as to counts 3 through 12 (Dkt. No. 74); (4) Ms. Lang's Motion to Dismiss Count 22 (Dkt. No. 81); (5) the Government's Motion in Limine (Dkt. No. 88); and (6) Defendants' Motion to Stay Briefing on Government's Motion in Limine (Dkt. No. 90). After careful consideration of the parties' briefing and their oral arguments at the hearing held on November 11, 2022, the Court issues the following order.

BACKGROUND

Defendant Xiaojian Tao, Ph.D. was employed by Southwest Research Institute (SWRI) from 1994 to about November 2019. His field of research at SWRI was in “fuel systems and contamination control research, where he worked on projects which included the design, development and testing of automotive air, fuel, and oil filters and filtration systems industrial filtration and process control, and engine component wear studies using surface layer activation and bulk radioactive tracer techniques.” Dkt. No. 3 Indictment ¶ 2.

“During Tao's tenure at [SWRI], he served as a member of [SWRI]'s Internal Research and Development (IR&D) committee. The IR&D committee controls all of [SWRI's] internal research and development projects and determines which projects will be funded and pursued, and which ones will not. Tao's position on the IR&D committee permitted Tao unrestricted access to the latest unclassified innovations for which [SWRI] scientists and engineers sought approval and funding. Some of these projects may contain proprietary information and some may be subject to export control restrictions requiring a license before being exported from the United States.” Id. ¶ 3.

Defendant Yu Lang is the wife of Defendant Tao. Id. ¶ 4.

The Government alleges that “Tyletech was created by Defendants Tao and Lang on or about 1997 to provide engineering consulting, specialty sensors development, smart controllers development and prototyping, and experiment and test equipment development. Defendant Lang served as the named head of Tyletech. Defendant Tao's role was to provide the knowledge, consulting, and expertise to allow the Defendants to operate in direct competition to [SWRI].” Id. ¶ 4.

On April 6, 2022, Dr. Tao and Ms. Lang were charged in a twenty-two-count indictment. Counts 1 and 2 allege export-related offenses involving only Dr. Tao; Counts 3-12 allege fraud related offenses; Counts 13-18 allege tax-related offenses; and Counts 19-22 allege false statements. See id. at 3-26. Dr. Tao has filed a motion for a bill of particulars clarifying the allegations in Counts 1 and 2 (ECF No. 73) and a motion to dismiss Counts 3-12, 19 and 20 (ECF No. 71), which Ms. Lang seeks to join (ECF No. 74). Ms. Lang has moved separately for the dismissal of Count 22 (ECF No. 78).

On November 11, 2022, the Court heard oral arguments on Defendants' motions and a motion in limine filed by the Government (Dkt. No. 88), which Defendants asked be stayed pending the Court's rulings on their motions to dismiss (Dkt. No. 90).

ANALYSIS

I. Defendant Tao's Motion for Bill of Particulars (Dkt. No. 73)

Dr. Tao seeks a bill of particulars specifying the allegations charged in Counts One and Two of the Indictment. Dkt. No. 73. The purpose of a bill of particulars is to inform the accused of the charge against him with sufficient precision to enable such defendant to prepare his defense, to avoid or minimize the danger of surprise at trial or enable such defendant to plead his acquittal or conviction in bar of further prosecution of the same offense. Wong Tai v. United States, 273 U.S. 77 (1927); United States v. Ivey, 949 F.2d 759, 765 (5th Cir. 1991).

In Count One, the Indictment alleges that, on or about May 15, 2019, Dr. Tao “did willfully and knowingly export from the United States to China, a defense article, to-wit: [a Qualification Test Procedure for a F38 aircraft] without having first obtained from the Department of State a license for such export or written authorization for such export. In violation of Title 22, United States Code, Sections 2778(b)(2) and 2778(c), and Title 22, United States Code of Federal Regulations, Sections 121.1, 123.1, 127.1, and 127.3.” Dkt. No. 3, Indictment at 5.

In Count Two, the Indictment alleges that on or about May 15, 2019, Dr. Tao “did knowingly and willfully export and cause the export from the United States to China [various items listed in the Indictment] without having first obtained an export license from the Department of Commerce, and with knowledge that said items were destined for China, a controlled country for which exports of items are controlled for national security and regional stability reasons. In violation of Title 50, United States Code, Sections 4819(2)(B) and 4811 et seq.” Id. at 7.

Dr. Tao argues that the Indictment fails to specify how or in what manner he supposedly exported documents, and how he did so willfully and knowingly. He also argues that he is in the dark about whether the Government is simply alleging that he traveled to China with his laptop, which may have contained controlled documents, or whether the Government is alleging that he actually transferred any controlled documents to a foreign national. In addition, Dr. Tao argues that the Government should have to disclose whether his former employer, SWRI, had a license under the International Traffic in Arms Regulations (ITAR) and/or other Controlled Information, that would have authorized him to “cover” his alleged export of SWRI controlled documents to China. Finally, Dr. Tao argues that the Government should provide the specific statutory citations (including subsections) for the alleged violations in Counts 1 and 2.

The Government responds that an amended indictment is unnecessary because it has already provided Dr. Tao with 8.5 TB of digital data that was seized pursuant to various search warrants, as well as 4.5 TB of data the Government has otherwise seized in this investigation. And the Government has clarified that it has not charged Dr. Tao with giving any controlled items to anyone in China-any such conduct would be prosecuted under other criminal statutes. As elaborated at the hearing held on November 10, 2022, with respect to Counts 1 and 2, the Government alleges that Dr. Tao travelled to China with the controlled documents on his laptop; that act alone constitutes the crime. Defense counsel represented at the hearing that this acknowledgment and the discovery provided satisfied his concerns about Counts 1 and 2. Accordingly, the motion for a bill of particulars (Dkt. No. 73) is dismissed as moot.

II. Defendants' Motion to Dismiss Counts 3-12, 19 and 20 (ECF No. 71)

Dr. Tao moves to dismiss Counts 3-12, 19 and 20 of the Indictment. Dkt. No. 71. Ms. Lang has moved to join Dr. Tao's motion as to Counts 3-12. Dkt. No. 74. To the extent that Ms. Lang merely seeks to join in the motions and arguments asserted by Dr. Tao (Dkt. No. 74), that motion is granted.

A motion to dismiss an indictment pursuant to Rule 12(b)(3)(B)(v) for failure to state an offense “is a challenge to the sufficiency of the indictment.” United States v. Masha, 990 F.3d 436, 443 (5th Cir. 2021). Courts therefore “take the allegations of the indictment as true and to determine whether an offense has been stated.” United States v. Daniels, 316 F.Supp.3d 949, 953 (N.D. Tex. 2018) (granting motion to dismiss where indictment failed to state an offense) (internal quotations and citations omitted). Dismissal based on flaws in the Indictment are appropriate where “the alleged infirmity is a legal question requiring no determinations of fact.” United States v. Braun, 453 F.Supp.3d 883, 885-86 (M.D. La. 2020).

A. Counts 4 and 5

To begin, Defendants argue that Counts 4 and 5, which charge Defendants with wire fraud in violation of 18 U.S.C. § 1343, are barred by limitations. The Government agrees. Accordingly, Counts 4 and 5 are dismissed.

B. Counts 3, 6-12

The Government alleges that “in competition with [SWRI] and contrary to [Tao's] employment contract with [SWRI] and the required [SWRI] Standards of Conduct, Tyletech was created by Defendant Tao and Defendant Lang on or about 1997 to provide engineering consulting, specialty sensors development, smart controllers development and prototyping, and experiment and test equipment development.” Dkt. No. 3, Indictment at 9.

The Indictment alleges that Defendants engaged in this conspiracy by the following manner and means: (1) Dr. Tao violated his employment contract by engaging or participating in other work or activities for compensation or profit without first obtaining the written approval of [SWRI]'s President or his designated representative in direct competition with [SWRI] in order to defraud [SWRI]; (2) Dr. Tao falsely certified each year that he would abide by SWRI's Standards of Conduct, Conflict of Interest policy and immediately notify his immediate supervisor or [SWRI's] Compliance Officer of any potential conflict when in fact he continued to work in direct competition with [SWRI] and earned outside compensation to defraud [SWRI] and take potential clients from [SWRI]; (3) Dr. Tao used SWRI's resources to solicit business claiming the business was for SWRI, when in truth Dr. Tao was soliciting and keeping these clients for Defendants' personal business, Tyletech, which directly...