Insiders Charged with Tesla Battery Tech Theft

A Canadian national was arrested in New York, for conspiring to send to undercover law enforcement officers trade secrets that belonged to his previous employer, Tesla Motors Canada subsidiary Hibar Systems Ltd.

Klaus Pflugbeil and Yilong Shao allegedly used stolen confidential information – developed by Hibar – to establish their own Chinese-based competitor.  

According to court documents, Pflugbeil and Shao are operators of a Hife Systems, Ltd., a PRC-based business that sold technology used for the manufacture of batteries, including batteries used in electric vehicles. The defendants built their business using Hibar’s sensitive and proprietary information, and marketed their business as a replacement for Hibar’s products.

Pflugbeil was arrested after he sent multiple trade secrets to an undercover agent and traveled to Nassau County for a meeting with who he believed to be Long Island-based businesspeople, but who in reality were undercover law enforcement agents

In 2019, Tesla acquired Hibar Systems, a Canada-based manufacturer of automated, precision dispensing pumps and battery assembly lines. Prior to its purchase, the Canadian Manufacturer sold battery assembly lines to customers who manufactured alkaline and lithium-ion batteries for consumer use.

Both Pflugbeil and Shao are former employees of Hibar.  According to his online profile, Pflugbeil spent 14 years with Hibar managing technology transfer and manufacturing in China, 

The complaint alleges that, by no later than 2019, Pflugbeil and Shao planned to make use of Hibar trade secrets for their own business activities. For example, between October and November 2019, Pflugbeil and Shao discussed “set[ting] up” a company in Canada and China that would rely on the sensitive and confidential information needed to make and sell their own battery technology. Pflugbeil told Shao that he had “a lot of original documents” related to the technology and sought out more “original drawings” from Hibar that they could copy for their planned business. Shao subsequently confirmed that “we have all of original assembly drawings by PDF.”

In or about July 2020, Pflugbeil and Shao opened Hife Systems, Ltd., which has since expanded to locations in China, Canada, Germany, and Brazil. Hife makes the same precision dispensing pumps and battery assembly lines that Hibar manufactured using its proprietary technology. Hife  is marketed by Pflugbeil as an alternative source for the sale of products that rely upon Hibar trade secrets, publishing online advertisements that state, for example, “Are you looking for Hibar Metering pumps and spare parts? Look no further.” 

In December 2021, Tesla Totonto Automation entered into a license agreement with Japan's Unicontrols Co for "exclusive manufacturing and exclusive sales of the Hibar precision pump business."

In operating Hife, Pflugbeil and Shao relied upon the Battery Assembly Trade Secret. For example, in September 2020, Pflugbeil emailed a series of drawings to a gears manufacturer in order to produce several parts and wrote “please keep the attached information confidential.” The attachment contained drawings belonging to Hibar related to the Battery Assembly Trade Secret. The drawings that Pflugbeil sent were identical to Hibar drawings, except the name of the company was changed, the date of the drawing was changed, and the drawing identifying number was written in reverse of Hibar’s drawing identifying number.

Undercover agents attended a trade show for the packaging and processing industries in Las Vegas, Nevada. The undercover agents posed as businesspeople who were interested in purchasing a battery assembly line to manufacture batteries at a facility on Long Island, New York. The undercover agents were introduced to Shao at the trade show and later to Pflugbeil via email.

Subsequently, on or about Nov. 17, 2023, Pflugbeil sent, via email, a detailed 66-page technical documentation proposal to an undercover agent. The proposal notes, “this technical documentation package contains proprietary information which must be kept confidential.” In reality, the proposal contained Battery Assembly Trade Secret information belonging to Hibar:  at least half a dozen drawings Pflugbeil used in the proposal and sent to UC-1 were, in fact, Hibar’s information related to the Battery Assembly Trade Secret.

If convicted, Pfugbeil faces a maximum penalty of 10 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.