Man Who Worked At Local Research Institute For 10 Years Pleads Guilty To Conspiring To Steal Trade Secrets, Sell Them In China

A former Dublin, Ohio, man pleaded guilty in U.S. District Court today to conspiring to steal exosome-related trade secrets concerning the research, identification and treatment of a range of pediatric medical conditions.

Yu Zhou, 50, also pleaded guilty to conspiring to commit wire fraud.

Zhou admitted to conspiring to steal scientific trade secrets related to exosomes and exosome isolation from Nationwide Children’s Hospital’s Research Institute for his own personal financial gain in China.

“Today’s plea underscores the Department of Justice’s commitment to protecting American research and trade secrets from those incentivized to steal them by Chinese Government programs,” said John C. Demers, Assistant Attorney General for National Security.  “China’s endemic efforts to rob, replicate and replace products that they do not have the ability to develop themselves will not go unchecked, and those who seek to profit from the theft of trade secrets will be held accountable.”

“The Chinese government has created a large-scale, sophisticated system to steal American ingenuity,” U.S. Attorney David M. DeVillers said. “We hope this conviction demonstrates that we will fight this system.”

“Zhou and his wife have both accepted responsibility for establishing a company in China to personally profit from the cutting-edge work done at Nationwide Children’s Hospital,” stated FBI Cincinnati Special Agent in Charge Chris Hoffman. “The FBI will continue to work closely with our partners to protect the innovations that have made America a global leader.”

Zhou and his wife, Li Chen, 47, worked in separate medical research labs at the Research Institute for 10 years each (Zhou from 2007 until 2017 and Chen from 2008 until 2018). They conspired to steal trade secrets related to exosome research from Nationwide Children’s Hospital.

Exosomes play a key role in the research, identification and treatment of a range of medical conditions, including necrotizing enterocolitis (a condition found in premature babies), liver fibrosis and liver cancer.

According to his plea agreement, Zhou and Chen conspired to steal and then monetize one of the trade secrets by creating and selling exosome “isolation kits.” Zhou’s research at Nationwide Children’s included a novel isolation method in which exosomes could be isolated from one drop of blood. This method was vital to the research being conducted in Zhou’s lab – because necrotizing enterocolitis is a condition found primarily in premature babies, only small amounts of fluid can safely be taken from them.

The defendants admitted to starting a company in China to sell the isolation kits. They received benefits from the Chinese government, including the State Administration of Foreign Expert Affairs and the National Natural Science Foundation of China.

Zhou and Chen were arrested in California in July 2019 and their case was unsealed in August 2019 when they appeared in federal court in Columbus. Chen pleaded guilty in July 2020 to conspiring to steal trade secrets and commit wire fraud.

As part of their pleas, the couple has agreed to forfeit property or gains associated with their crimes.  For Chen, this included approximately $1.4 million, 500,000 shares of common stock of Avalon GloboCare Corp. and 400 shares of common stock of GenExosome Technologies, Inc. The details of Zhou’s forfeiture will be finalized through the sentencing process.

David M. DeVillers, United States Attorney for the Southern District of Ohio; John C. Demers, Assistant Attorney General for National Security; and Chris Hoffman, Special Agent in Charge, Federal Bureau of Investigation (FBI), Cincinnati Division, announced the plea entered into today before U.S. District Judge Sarah D. Morrison. Assistant United States Attorneys S. Courter Shimeall, Peter K. Glenn-Applegate, Special Assistant United States Attorney J. Michael Marous and National Security Division Trial Attorney Matthew J. McKenzie, are representing the United States in this case.

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    What GAO Found The Department of Labor's (DOL) Employee Benefits Security Administration's (EBSA) enforcement focuses on encouraging retirement and health plans to comply with the Employee Retirement Income Security Act of 1974, as amended, and restoring benefits that were improperly withheld from plan participants. To identify violations, EBSA investigates benefit plans and their service providers. Over two-thirds of investigation leads are identified by EBSA staff. EBSA prioritizes investigating cases that may result in large recoveries or affect many participants, such as restored retirement plan contributions or payment for incorrectly denied medical claims. When agreement cannot be reached, investigators can refer civil cases to DOL's Office of the Solicitor for civil litigation. Criminal cases are referred to Department of Justice. In fiscal year 2020, almost 84 percent of investigations were civil and more than 16 percent were criminal, resulting in over $3 billion in payments to participants and plans. EBSA uses a range of strategies to improve its investigative processes and seeks to ensure enforcement quality through training and oversight. For example, EBSA makes efforts to target investigations for greater impact, such as a 2013 change to prioritize cases with the potential to affect many participants and recover significant assets. As EBSA pursued more complex and technical investigations, the number of closed cases decreased, while monetary recoveries increased (see figure). To ensure investigation quality, EBSA provides training, documents procedures, and reviews open and closed cases to evaluate whether investigation procedures have been followed. Number of EBSA Investigations Closed and Monetary Recoveries, Fiscal Years 2011-2020 The COVID-19 pandemic created a number of immediate and long-term challenges for EBSA and benefit plans. For example, according to stakeholders, plans were initially concerned about how to implement provisions in the Families First Coronavirus Response Act and the CARES Act, but those concerns were addressed as the agency issued FAQs and notices. Similarly, EBSA officials reported that court closures temporarily slowed criminal cases, but as virtual hearings increased, litigation resumed. Stakeholders and EBSA officials also described potential long-term challenges, including difficulties locating the many participants who may have left a job due to the pandemic and may be unaware they left behind retirement funds. Why GAO Did This Study Millions of Americans rely on employer benefits for their health care and future financial security. Private sector retirement plans are a key source of income for many retirees and employer-sponsored group health plans cover over one-half of all Americans. Consequently, effective oversight and enforcement are critically important to ensure the integrity of the private employee benefit system, especially in light of the economic and health effects of COVID-19 on American workers and their families. EBSA is charged with protecting the rights of participants in employer-sponsored benefit plans. As of fiscal year 2020, this included about 154 million participants in 722,000 retirement plans and 2.5 million health plans with combined assets of over $10.7 trillion. This report examines (1) how EBSA manages its enforcement process, (2) EBSA's strategies to improve investigative processes and ensure enforcement quality, and (3) the immediate and long-term challenges of COVID-19 for EBSA and private sector retirement and health plans. GAO analyzed EBSA data and documents; and federal laws, regulations, and guidance, including the CARES Act and the Families First Coronavirus Response Act. GAO interviewed officials from EBSA's national office and three regional offices, selected for variation in investigations, and locations as well as stakeholders from nine organizations knowledgeable about benefits compliance requirements, the employer-sponsored benefit industry, and participants' benefit plan experiences. For more information, contact Tranchau (Kris) T. Nguyen at (202) 512-7215 or nguyentt@gao.gov.
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  • 2021 Annual Report: New Opportunities to Reduce Fragmentation, Overlap, and Duplication and Achieve Billions in Financial Benefits
    In U.S GAO News
    What GAO Found GAO identified 112 new actions for Congress or executive branch agencies to improve the efficiency and effectiveness of government. For example: The Office of Management and Budget should improve how agencies buy common goods and services—such as medical supplies and computers—by addressing data management challenges and establishing performance metrics to help save the federal government billions of dollars over the next 5 years, as well as potentially eliminate duplicative contracts. The Internal Revenue Service (IRS) could enhance third-party information reporting to increase compliance with tax laws and raise revenue. GAO has also previously suggested (1) providing IRS with authority—with appropriate safeguards—to correct math errors and to correct errors in cases where information provided by the taxpayer does not match information in government databases and (2) establishing requirements for paid tax return preparers to help improve the accuracy of tax returns they prepare. These actions could help reduce the substantial tax gap and increase revenues. The National Nuclear Security Administration could implement cost savings programs to operate more effectively at its nuclear laboratory and production sites to potentially save hundreds of millions of dollars over approximately a 5-year period. The Department of Defense's payments to privatized housing projects have lessened the financial effects of the housing allowance rate reductions for these projects, but revising the calculation for these payments could potentially result in millions of dollars of savings. Federal agencies could improve coordination of fragmented cybersecurity requirements and related assessment programs for state agencies, potentially minimizing the burden on states and saving millions of dollars in associated federal and state costs. The Department of Health and Human Services (HHS) could improve coordination of its infectious disease modeling efforts to better identify any duplication and overlap among agencies, which could help them to better plan for and more efficiently respond to disease outbreaks. From 2011 to 2021, GAO has identified more than 1,100 actions to reduce costs, increase revenues, and improve agencies' operating effectiveness. GAO's last report in May 2020 said progress made in addressing many of the actions identified from 2011 to 2019 had resulted in approximately $429 billion in financial benefits, including $393 billion that accrued through 2019 and $36 billion that was projected to accrue in future years. Since May 2020, at least tens of billions of dollars in additional financial benefits have been achieved. For example, based on GAO's updates for spring 2021, HHS's changes to spending limit determinations for Medicaid demonstration waivers further reduced federal spending by about $30 billion in 2019. GAO estimates that tens of billions of additional dollars could be saved should Congress and executive branch agencies fully address open actions, including those that have potential financial benefits of $1 billion or more. Why GAO Did This Study The federal government has made an unprecedented financial response to the COVID-19 pandemic. Once the pandemic recedes and the economy substantially recovers, Congress and the administration will need to develop and swiftly implement an approach to place the government on a sustainable long-term fiscal path. In the short term, opportunities exist for achieving billions of dollars in financial savings and improving the efficiency and effectiveness of a wide range of federal programs in other areas. GAO has responded with annual reports to a statutory provision for it to identify and report on federal programs, agencies, offices, and initiatives—either within departments or government-wide—that have duplicative goals or activities. GAO also identifies areas that are fragmented or overlapping, as well as additional opportunities to achieve cost savings or enhance revenue collection. This report discusses the new areas identified in GAO's 2021 annual report—the 11th in this series—and examples of open actions recommended to Congress or executive branch agencies with potential financial benefits of $1 billion or more. To identify what actions exist to address these issues, GAO reviewed and updated select prior work, including matters for congressional consideration and recommendations for executive action. For more information, contact Jessica Lucas-Judy at (202) 512-6806 or lucasjudyj@gao.gov or Michelle Sager at (202) 512-6806 or sagerm@gao.gov.
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    In Crime News
    The Justice Department, in an announcement by Assistant Attorney General for the Civil Rights Division Eric S. Dreiband, Principal Deputy Assistant Attorney General of the Office of Justice Programs (OJP) Katharine T. Sullivan, and U.S. Attorney for the District of Minnesota Erica H. MacDonald, unveiled a new National Response Center Initiative and offered the assistance to the Minneapolis Police Department (MPD) to support law enforcement, and review, enhance and reform policies and practices to prevent the use of excessive force. The BJA Law Enforcement Training and Technical Assistance Response Center will be a national resource for all state, local, and tribal law enforcement agencies.
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    In Crime News
    A member of the Aryan Circle (AC) pleaded guilty Thursday to his role in an October 2016 violent assault, as well as conspiring to sell firearms to a convicted felon. Another individual pleaded guilty on April 19, to conspiring with members of the AC to sell methamphetamine.
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    In Crime News
    A Florida man was sentenced today to 21 months in prison for filing a false tax return. Jami Kopacz, of Fort Lauderdale, pleaded guilty to filing a false corporate tax return on Dec. 16, 2020. According to court documents and statements made in court, Kopacz worked as a paid escort for clients across the United States. Kopacz received payments directly from his escort clients, and from a private business for whom he worked as an independent contractor. From 2015 to 2018, Kopacz used his corporation, JK Training LLC, to receive income, and then filed false corporate tax returns (Forms 1120S) that substantially underreported the company’s gross receipts and total income.
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  • Lakeway Regional Medical Center LLC And Co-Defendants Agree To Pay Over $15.3 Million To Resolve Allegations They Fraudulently Obtained Government-Insured Loan And Misused Loan Funds
    In Crime News
    The Department of Justice announced today that Lakeway Regional Medical Center LLC (LRMC) agreed to pay $13,580,822.79, and Surgical Development Partners LLC, Surgical Development Partners of Austin Enterprises LLC, G. Edward Alexander, Frank Sossi, and John Prater collectively agreed to pay $1.8 million, to resolve allegations they violated the False Claims Act and other statutes in connection with the development of Lakeway Regional Medical Center, a hospital in Lakeway, Texas.  LRMC was formed to develop and operate the hospital.  The other settling parties assisted in the development of the hospital and the management and operations of LRMC. 
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    In Crime News
    Acting United States Attorney General Monty Wilkinson, FBI Director Christopher Wray and President Joe Biden’s Homeland Security Advisor Dr. Elizabeth Sherwood-Randall represented the United States Government’s official delegation today at the funeral service for fallen FBI Special Agent Daniel Alfin in Fort Lauderdale, Florida. 
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  • Chemical Security: Overlapping Programs Could Better Collaborate to Share Information and Identify Potential Security Gaps
    In U.S GAO News
    Eight federal programs addressing chemical safety or security from four departments or agencies that GAO reviewed contain requirements or guidance that generally align with at least half of the Department of Homeland Security's (DHS) 18 Chemical Facility Anti-Terrorism Standards (CFATS) program standards. At least 550 of 3,300 (16 percent) facilities subject to the CFATS program are also subject to other federal programs. Analyses of CFATS and these eight programs indicate that some overlap, duplication, and fragmentation exists, depending on the program or programs to which a facility is subject. For example, six federal programs' requirements or guidance indicate some duplication with CFATS. CFATS program officials acknowledge similarities among these programs' requirements or guidance, some of which are duplicative, and said that the CFATS program allows facilities to meet CFATS program standards by providing information they prepared for other programs. more than 1,600 public water systems or wastewater treatment facilities are excluded under the CFATS statute, leading to fragmentation. While such facilities are subject to other programs, those programs collectively do not contain requirements or guidance that align with four CFATS standards. According to DHS, public water systems and wastewater treatment facilities are frequently subject to safety regulations that may have some security value, but in most cases, these facilities are not required to implement security measures commensurate to their level of security risk, which may lead to potential security gaps. The departments and agencies responsible for all nine of these chemical safety and security programs—four of which are managed by DHS, three by the Environmental Protection Agency (EPA), and one each managed by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the Department of Transportation (DOT)—have previously worked together to enhance information collection and sharing in response to Executive Order 13650, issued in 2013. This Executive Order directed these programs to take actions related to improving federal agency coordination and information sharing. However, these programs have not identified which facilities are subject to multiple programs, such that facilities may be unnecessarily developing duplicative information to comply with multiple programs. Although CFATS allows facilities to use information they prepared for other programs, CFATS program guidance does not specify what information facilities can reuse. Finally, DHS and EPA leaders acknowledged that there are differences between CFATS requirements and the security requirements for public water systems and wastewater treatment facilities, but they have not assessed the extent to which potential security gaps may exist. By leveraging collaboration established through the existing Executive Order working group, the CFATS program and chemical safety and security partners would be better positioned to minimize unnecessary duplication between CFATS and other programs and better ensure the security of facilities currently subject to fragmented requirements. Facilities with hazardous chemicals could be targeted by terrorists to inflict mass casualties or damage. Federal regulations applicable to chemical safety and security have evolved over time as authorizing statutes and regulations established programs for different purposes, such as safety versus security, and with different enforcement authorities. GAO has reported that such programs may be able to achieve greater efficiency where overlap exists by reducing duplication and better managing fragmentation. GAO was asked to review issues related to the effects that overlap, duplication, and fragmentation among the multiple federal programs may have on the security of the chemical sector. This report addresses the extent to which (1) such issues may exist between CFATS and other federal programs, and (2) the CFATS program collaborates with other federal programs. GAO analyzed the most recent available data on facilities subject to nine programs from DHS, EPA, ATF, and DOT; reviewed and analyzed statutes, regulations, and program guidance; and interviewed agency officials. GAO is making seven recommendations, including that DHS, EPA, ATF, and DOT identify facilities subject to multiple programs; DHS clarify guidance; and DHS and EPA assess security gaps. Agencies generally agreed with six; EPA did not agree with the recommendation on gaps. GAO continues to believe it is valid, as discussed in the report. For more information, contact Nathan Anderson at (206) 287-4804 or AndersonN@gao.gov.
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  • Indiana Man Pleads Guilty to Lacey Act Violations
    In Crime News
    An Indiana man pleaded guilty today to three felony counts of illegally harvesting American paddlefish and its roe.
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