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June 15, 2000
CONTACT: 214/659-8707
INTERNATIONAL ECONOMIC ESPIONAGE DEFENDANTS SENTENCED
United States Attorney Paul E. Coggins announced that two individual defendants and three corporate defendants in a multi-million dollar international economic espionage case were sentenced today in federal court. The Honorable United States District Judge Sidney A. Fitzwater sentenced Jack Shearer, age 54, of Montgomery, Texas to 54 months imprisonment and ordered him to pay $7,655,155.00 in restitution. William Robert Humes, age 60, of Arlington, Texas was sentenced to 27 months imprisonment and ordered to pay $3.8 million in restitution. Corporate defendants Tejas Procurement Services, Inc., Tejas Compressor Systems, Inc., and Procurement Solutions International, L.L.C. were each sentenced to five years probation and ordered, jointly and severally, to pay $7,655.155.00 in restitution.
Jack Shearer pled guilty in December 1999 to two counts of an Information which charged him with conspiracy to steal trade secrets, in violation of Title 18, United States Code, Section 1832(a)(5). William Robert Humes also pled guilty to one count of conspiracy to steal trade secrets, in violation of Title 18, United States Code, Section 1832(a)(5).
United States Attorney Coggins stated, "This is the first Economic Espionage Act case in which the defendants pled guilty to taking trade secret information and actually converting the stolen information into manufactured products that were placed in the stream of commerce. The sentences handed down today are among the longest sentences ever imposed in an Economic Espionage case."Three corporations founded by Jack Shearer -- Tejas Procurement Services, Inc.; Tejas Compressor Systems, Inc.; and Procurement Solutions International, L.L.C. -- pled guilty, by their duly appointed representatives, in December 1999 to federal charges of conspiracy to steal trade secrets. Tejas' revenues from the stolen trade secrets were in excess of $7 million.
Shearer admitted that he stole intellectual property, or proprietary trade secrets, from his former employer, Solar Turbines Incorporated (Solar) headquartered in San Diego, California. Solar designs and manufactures industrial gas turbine engines and turbo machinery systems for the production and transmission of crude oil, petroleum products and natural gas; generating electricity and thermal energy for a wide variety of industrial applications; and for the fast ferry marine market. Solar's equipment, distributed worldwide, is used to provide electrical power for industrial operations such as oil drilling operations. Solar, with approximately 5100 employees worldwide, is a wholly owned subsidiary of Caterpillar Inc., the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines.
Shearer worked for Solar for twenty-six years until his employment was terminated in 1992. While he was employed at Solar, Shearer lived overseas and serviced a sales territory that included Libya, Jordan, Syria, Lebanon, Iraq, Iran and Saudi Arabia. When Shearer was terminated from Solar, he started Tejas Compressor Systems, Inc. and Tejas Procurement Services, Inc., headquartered in Conroe, Texas, in order to compete with his former employer.
Shearer obtained Solar's trade secret information and used that information to manufacture counterfeit Solar parts through Tejas. Shearer obtained this confidential trade secret information through at least three individuals, defendant William Robert Humes and defendant Jack Edward Nafus, as well as a third named individual, now all former employees of Solar. Defendant Jack Edward Nafus, age 51, of River Ridge, Louisiana, also pled guilty in December 1999 to conspiracy to sell trade secrets and is scheduled to be sentenced on June 23, 2000. Tejas, at Shearer's direction, paid each of these Solar employees to provide Solar drawings, plans, and schematics that included confidential specifications describing the dimensions and manufacturing details of Solar parts. Shearer was aware that these payments constituted unlawful transactions and he knew that stealing this proprietary trade secret information would injure Solar.
One of Shearer's and Tejas' main customers was an Iranian national businessman who operated an oil and gas parts broker business in Uppsala, Sweden. This businessman placed millions of dollars of orders per year with Tejas and orders he placed were designed for oil field applications and painted desert beige.
Tejas and a number of its employees became suspicious that the parts ordered by this Iranian national businessman were going to prohibited countries, such as Iran. One of Tejas' suppliers refused to manufacture parts for Tejas because it determined, based merely on the type of gear sought to be manufactured, that it was a proprietary Solar part of a Solar turbine engine located in Iran. Among other reasons, the manufacturer refused to manufacture the part for Tejas because it was in violation of the Presidential Order for selling such parts to prohibited countries such as Iran. In today's sentencing, the Court's enhancement to Jack Shearer's sentence was based on the stolen trade secrets benefit to a foreign government, instrumentality or agent.
United States Attorney Coggins noted the significance of this case and stated, "The conspirators in this case were responsible for stealing a massive amount of intellectual property worth millions of dollars. There have been only sixteen cases under the Economic Espionage Act since its passage in 1996, and this has been the most complex and far-reaching, and has involved the widest dissemination of trade secrets." Coggins also said, "The protection of intellectual property rights is essential to an effectively functioning economy. We will continue to aggressively prosecute individuals and companies who commit intellectual property crimes such as the Economic Espionage Act violations that were charged in this case."
United States Attorney Coggins praised Solar Turbines Incorporated for being an outstanding corporate citizen. He said, "Solar's courage in coming forward and reporting their suspicions to the Federal Bureau of Investigation is to be highly commended." United States Attorney Coggins also praised the extensive investigative efforts of the Federal Bureau of Investigation and the prosecutive support of Assistant United States Attorney Reid Wittliff.
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