Feb 26 (Reuters) – In an unusual rebuke to the U.S. Justice Department, a federal judge said prosecutors may not yet pursue their high-profile criminal case accusing Kolon Industries Inc of stealing trade secrets from Kevlar maker DuPont Co.
While refusing to dismiss the indictment, U.S. District Judge Robert Payne in Richmond, Virginia, in a Feb. 22 decision decided to put the case on hold because prosecutors had failed to properly notify the South Korean company of the charges.
The same judge had presided over a civil trial in which a jury in September 2011 ordered Kolon to pay DuPont $919.9 million for stealing 149 trade secrets related to Kevlar, a high-strength para-aramid fiber used in body armor, military helmets, tires and fiber-optic cables. Kolon is appealing.
In delaying the criminal case, which was unveiled in October, Payne said prosecutors failed to comply with laws designed to ensure that defendants are “served” with papers describing the charges and giving them a chance to answer.
The judge rejected what he called at least eight U.S. government efforts to serve Kolon, including under a bilateral treaty on legal proceedings.
For example, he said that in one instance the government waited too long to serve, while in another it did not suffice to serve a New Jersey-based unit rather than the parent.
Payne canceled a March 6 arraignment but said a new proceeding could take place as soon as June 7 if Kolon is properly served.
“The court cannot conclude to any degree of certainty that the United States will not be able to serve Kolon in this case,” the judge wrote in a 59-page decision.
He said Congress could not have intended the “absurd” result that foreign companies be able to escape U.S. prosecution by keeping their principal places of business outside the country.
Peter Carr, a spokesman for U.S. Attorney Neil MacBride in Alexandria, Virginia, said: “The court clearly ruled that Kolon is amenable to service in this case, and we intend to serve Kolon pursuant to the court’s order.”
Jeff Randall, a partner at Paul Hastings representing Kolon, said in a statement that his client plans to defend against the charges at the appropriate time.
He also said it may be difficult to serve Kolon in light of a recent letter from a Justice Department lawyer questioning the ability to serve “a foreign organization that has no agent or principal place of business within the United States.”
Kolon and five executives were charged with stealing trade secrets from DuPont, which had begun selling Kevlar in 1965, and from Japan’s Teijin Ltd, which makes a rival fabric, Twaron.
Prosecutors said they want to take at least $226 million of assets from Kolon, representing gross proceeds from the company’s sale of its own fabric, Heracron.
The indictment was dated Aug. 21 but kept secret for two months. Also in August, Kolon was barred from making its fabric for 20 years, but a federal appeals court later set aside this order while Kolon pursues appeals.
The case is U.S. v. Kolon Industries Inc, U.S. District Court, Eastern District of Virginia, No. 12-cr-00137.
For Kolon: Jeff Randall, at Paul Hastings.
For the United States: Michael Dry, U.S. Attorney’s office, Richmond, Virginia.