Racho Jordanov, the co-founder and former chief executive officer of JHL Biotech, and Rose Lin, another of the company’s co-founders and former chief operating officer, were sentenced March 15 in federal court to prison terms for their respective roles in conspiring to commit trade secret theft and wire fraud.
The sentencing by Senior U.S. District Judge William Alsup was announced in a joint press release from U.S.Attorney Stephanie M. Hinds, Internal Revenue Service Special Agent-in-Charge Mark H. Pearson and FBI Special Agent-in-Charge Craig D. Fair.
Jordanov was sentenced to 12 months and one day, to be followed by a 36-month supervised release including nine months of home confinement. Lin also was sentenced to serve 12 months and one day in federal prison, to be followed by 36 months of supervised release.
Both defendants pleaded guilty to the charges last August.
According to the plea agreements, in 2012, Jordanov, also known as “Racho” Jordanov, 74, of Rancho Santa Fe, Calif., and Lin, also known as Rose Sweihorn Tong, 73, of South San Francisco, Calif., co-founded JHL Biotech, Inc., a biopharmaceutical startup in Taiwan.
Between 2011 and 2019, Jordanov, as President and CEO of JHL Biotech, obtained and possessed confidential, proprietary, and trade secret information from Genentech, based in South San Francisco, and used it to accelerate the timeline for and to reduce the costs of JHL Biotech’s development and production of Genentech biosimilars and to enhance JHL Biotech’s ability to meet various regulatory requirements.
Jordanov admitted he obtained for JHL Biotech’s use many confidential and proprietary documents from Genentech without authorization, some of which contained trade secret information, according to prosecutors. They said he admitted to working with multiple people within JHL Biotech to possess and use confidential, proprietary, and trade secret information he knew JHL Biotech was not authorized to have.
According to the plea agreement, Jordanov hired former Genentech employees to work at JHL Biotech, several of whom he learned surreptitiously brought, without authorization, confidential and proprietary documents with them from Genentech to JHL Biotech.
The company used only some of the stolen documents, but Jordanov tolerated this practice by the employees of JHL Biotech and made no effort to discourage its employees from using the documents or information they brought with them, according to their pleas.
The employees Jordanov hired provided the Genentech documents and information to JHL Biotech, which, at times, allowed the company to cheat, cut corners, solve problems, provide examples, avoid further experimentation, eliminate costs, lend scientific assurance, and otherwise help JHL Biotech start-up, develop, and operate its business secretly using the intellectual property and scientific know-how taken from Genentech. Jordanov admitted that he suspected that some or all the stolen information was brought to JHL Biotech in violation of relevant Genentech non-disclosure agreements and employment contracts, but he made no effort to verify whether that was true.
In January 2014, Lin arranged for Xanthe Lam, a scientist working full-time at Genentech, to secretly work as the head of formulation for JHL Biotech, according to the plea documents.
Lin encouraged JHL Biotech scientists to ask Xanthe Lam for assistance or information when they ran into problems. Throughout this time, Lin knew that Xanthe Lam continued to work for Genentech and was not authorized to work for JHL Biotech. Lin also knew that Xanthe Lam did not want Genentech to learn of her work for JHL Biotech. Lin agreed to pay Xanthe Lam’s consultancy fee through her husband, Allen Lam.
To further conceal Xanthe Lam’s work for the company, JHL Biotech did not enter a direct contract with Xanthe Lam, according to prosecutors.
Instead, JHL always paid her through Allen Lam. Lin agreed to conceal Xanthe Lam’s work for JHL Biotech because Lin knew Genentech would not permit Xanthe Lam to work for another biotech company. Lin also directed JHL Biotech employees to use Allen Lam’s JHL email address to email questions to Xanthe Lam. Lin also instructed JHL Biotech employees to refer to Xanthe Lam as “Allen” in these email communications.
In early 2014, Lin learned that JHL Biotech employees were using confidential and proprietary documents, taken without authorization from Genentech, to create a set of JHL Biotech standard operating procedures.
Lin admitted she knew the JHL Biotech employees did not have the right to use Genentech’s documents and that their actions constituted theft from Genentech.
Between 2014 and 2018, Jordanov sometimes personally used and instructed others to use confidential, proprietary, trade secret Genentech documents and information relating to Genentech’s complex technology transfer procedures and processes, prosecutors said.
He used Genentech’s confidential and tech transfer documents in the development, construction, and operation of new facilities for JHL Biotech including its manufacturing facility in Wuhan, China. Jordanov instructed the employees to whom he sent the documents not to share them with others inside the company. Later, in September 2018, after the criminal investigation had begun, the JHL employee Jordanov tasked with using the Genentech tech transfer documents was instructed by Jordanov to delete the email from Jordanov and its attachment and Jordanov instructed the employee to tell others at JHL Biotech to do the same.
In early December 2016, Jordanov and Lin met with representatives of Sanofi S.A., the multi-national French pharmaceutical company, for approximately one week, during which they reviewed the strategic partnership agreement to be entered into by Sanofi and JHL Biotech.
Jordanov and Lin did not disclose their possession and use of stolen Genentech documents to Sanofi, and instead, Jordanov signed the partnership agreements on behalf of JHL Biotech. By concealing these facts, prosecutors said that Jordanov and Lin made it appear, falsely, that JHL Biotech had developed its own, or had lawfully obtained, the intellectual property that the biotech company used when, in fact, JHL Biotech had relied upon intellectual property, including confidential, proprietary, and trade secret information that it stole or received without authorization to obtain regulatory approval for its clinical trials, and build out its manufacturing capability.
Jordanov and Lin knew that if they had not concealed these facts, Sanofi would not have agreed to the corporate transaction and invest approximately $80 million in JHL Biotech securities pursuant to the subscription agreement and approximately $21 million pursuant to Biologics Products Options Agreement (BPOA) for a total investment by Sanofi in JHL Biotech of approximately $101 million.
Last July, in a related case, Xanthe Lam and Allen Lam pleaded guilty to, among other offenses, conspiracy to commit theft of trade secrets by stealing confidential, proprietary, and trade secret information from Genentech and giving it to JHL Biotech.