Bail at $900,000 for Lucent’s server theft accused

Christine Gardner

NEWARK: A federal judge on Monday set bail at $900,000 apiece for two Lucent
Technologies Inc. scientists and a third man accused of stealing key trade
secrets from the telecommunications equipment giant's systems for transfer to a
state-owned Chinese company.

The three - two Chinese nationals and a US citizen arrested on May 3 - were
accused of conspiring to steal source code and software associated with Lucent's
PathStar Access Server. Lucent suffered an $80 million loss due to theft of the
PathStar server system, which facilitates transmission of voice communication
through the Internet while also providing call-waiting, speed dialing, and other
telephone-related features, prosecutors said.

Although Lucent no longer uses the PathStar system, its source code was
valuable to future Lucent products, they said. The case highlights the threat to
US companies of economic espionage, a growing preoccupation of spies around the
world since the end of the Cold War.

It also comes amid rising tensions between the United States and China,
strained by the recent US spy plane landing on a Chinese island, US arms sales
to Taiwan, and US President George W. Bush's pledge to defend Taiwan. The
accused are scientists Lin Hai and Xu Kai, who held high-level positions at the
Murray Hill, New Jersey-based Lucent, and Chang Yong-Qing, who was vice
president of Village Networks, an optical network vendor in Eatontown, New
Jersey.

Subject to monitored house arrest

The three remained in a New Jersey jail while friends and family tried to raise
bail, defense attorneys said. Once freed from jail, they would be subject to
electronically monitored house arrest, according to the conditions set by US
District Court Judge Stanley Chesler.

None of the three men, wearing orange jumpsuits and arm and leg shackles,
spoke at the court hearing. A FBI search of their homes turned up evidence
including thousands of documents, hundreds of CD-Roms and at least a dozen
computers, prosecutors said.

Several items were marked with PathStar labels, prosecutors said. No further
hearing date was set. The Pathstar technology generated revenues of about $100
million in fiscal 2000 at the $33.8 billion company, but it was discontinued in
January as part of Lucent's restructuring, the company said at the time of the
three men's arrest.

The alleged theft took place last fall and early this year, according to
court documents. The three men were each charged with one count of conspiring to
commit wire fraud and, if convicted, could face a maximum of five years
imprisonment and a $250,000 fine.

The men allegedly were trying to make a system identical to PathStar - they
called it CLX1000 - and had successfully transferred it out of Lucent systems,
officials said.

(C)Reuters Limited 2001.