NISKAYUNA -- A General Electric engineer whose home was raided Wednesday morning has been charged with theft of trade secrets, according to court proceedings held late Wednesday afternoon.
Xiaoqing Zheng, 55, of 8 Cephalonia Drive, Niskayuna, was arraigned on the felony charge in Federal Court.
Zheng is accused of stealing trade secrets belonging to his employer, GE, federal prosecutors said in a prepared statement. He is specifically accused of using "an elaborate and sophisticated means to remove electronic files" involving GE turbine technology trade secrets.
He did so by using a system called steganography to hide the data inside an innocuous looking digital picture of a sunset and then emailing that picture and the stolen files to his personal email account, prosecutors said.
Thursday Updates: Bond set for GE engineer in trade secret theft case (Updated 4:25 p.m.)
Zheng admitted to the acts to investigators after the raid and said he used the picture method to take materials belonging to GE on five to 10 prior occasions, according to allegations in a federal affidavit filed in court.
He also admitted that companies he owns or works for in China work on the same technology that he worked on at GE; that his companies are not yet profitable but have received money or funding from the government of China, according to the affidavit.
The overall investigation relates to suspected thefts dating back to 2014 and Zheng's unlawful use of GE's secrets, including his "ownership interest in companies that may compete with GE and Zheng's contacts in China," the federal affidavit states.
In 2014, Zheng allegedly downloaded more than 19,000 files from the General Electric computer network onto a personal thumb drive.
General Electric early Wednesday afternoon confirmed Zheng worked for GE Power and issued the following statement about his arrest:
“We have been in close cooperation with the FBI for some time on this matter. At GE, we aggressively protect and defend our intellectual property and have strict processes in place for identifying these issues and partnering with law enforcement. We won’t have any additional comment at this time as this is an ongoing investigation."
Zheng was ordered held Wednesday until a detention hearing, which was set for Thursday afternoon.
Zheng indicated in court that he may need a translator at the proceedings and said he did not have an attorney. At one point, he asked the judge for legal advice.
Breaking: Xiaoqing Zheng was just charged with felony theft of trade secrets related to his time at @generalelectric. Bail hearing tomorrow at 1:30.— Jake Lahut (@JakeLahut) August 1, 2018
Zheng's wife and daughter were in court for Wednesday's appearance. If convicted, Zheng would face up to 10 years in prison and a fine of $250,000.
Agents with the FBI and Homeland Security arrested Zheng after raiding his home Wednesday morning.
The home at 8 Cephalonia Drive is owned by Zheng and Hui Jin, county property records show.
A half-dozen dark-colored, unmarked vehicles could be seen early Wednesday at the residence, as agents wearing jackets with "FBI" and "POLICE HSI" emblazoned on them could be seen at the home before and after Zheng was taken from the house in handcuffs.
Moments ago: a man taken from the Niskayuna house in handcuffs by the FBI pic.twitter.com/BwBXhEha2t
— Jake Lahut (@JakeLahut) August 1, 2018
Zheng's LinkedIn profile indicates he has worked for GE Power & Water since at least 2008. He initially served as a technical leader and then became a principal engineer in June 2015. The page shows his education at the Massachusetts Institute of Technology and Northwestern Polytechnical University.
The profile also lists 29 patents as accomplishments, most dealing with various kinds of turbine seals.
The data Zheng is accused of taking on July 5 was related to those seals, according to the federal affidavit.
Thursday Updates: Bond set for GE engineer in trade secret theft case (will be updated)
General Electric investigators first took notice of Zheng in 2014 when they believed he copied the 19,000 files. Investigators could not determine what was in the files, but interviewed Zheng and he allegedly said he had deleted them. The company had no additional information about the files and could not confirm that they had been deleted or whether they had been shared with others, according to the affidavit.
Then, GE discovered in late 2017 that about 400 encrypted files had been saved on Zheng's work desktop computer. The company then placed monitoring software on his computers to learn more. That led to the July 5 discovery of the photograph. Investigators were able to determine what files were encoded in the photo -- proprietary calculations related to sealing and optimizing turbine technology, the affidavit states.
Investigators believe Zheng used the sophisticated picture-email method to send the information because GE had banned thumb drives.
GE also investigated potential conflicts of interest related to Zheng, the affidavit states. Zheng owns a company in China that was launched in 2015 -- an aviation parts supplier. He disclosed to GE that he and "his brothers" owned the company, and GE investigated. They found cause to believe there might be a conflict of interest, but "GE did not instruct Zheng that his interest in the Chinese company was unacceptable, and Zheng was permitted to retain his GE employment," the affidavit states.
GE later told federal investigators that it appeared Zheng's company worked on the same types of technology that Zheng worked on for GE. Federal investigators also found advertising by the firm in China that marketed "its expertise in turbine sealing technology."
The affidavit also includes the results of the search of Zheng's home and statements he allegedly made to investigators.
Investigators found a handbook explaining Chinese government resources to those who can provide certain technology. His passport showed five trips to China over the past two years and various electronic items. The electronics were to be analyzed.
Feds seen raiding a home off of River Road in Niskayuna pic.twitter.com/Lxr7pdbzrV— Jake Lahut (@JakeLahut) August 1, 2018
A meeting of the minds from the FBI and HSI as we enter hour two pic.twitter.com/nOLXbUHnQC— Jake Lahut (@JakeLahut) August 1, 2018