BOSTON — Federal prosecutors on Thursday dropped the government’s charges against Gang Chen, a professor of mechanical engineering at the Massachusetts Institute of Technology, in an embarrassing setback to the government’s drive to crack down on economic and scientific espionage by China.
The case against Dr. Chen was among the most visible of the China Initiative, an effort started in 2018 under the Trump administration. China has made aggressive efforts to steal American technology, through methods including the recruiting of overseas scientists as “non-traditional collectors.”
But many of the prosecutions of researchers that resulted, like the case against Dr. Chen, did not allege espionage or theft of intellectual property, but something narrower and highly technical: failing to disclose Chinese affiliations in grant proposals to U.S. funding agencies.
The prosecutions have come under criticism for singling out scientists based on their ethnicity, and for overreach, blurring the line between disclosure violations and more serious crimes like espionage. Critics in academia say it has instilled a pervasive atmosphere of fear among scientists of Chinese descent.
Dr. Chen was arrested on Jan. 14, 2021, during President Donald J. Trump’s last full week in office, and charged with omitting affiliations with Chinese government institutions in grant applications to the U.S. Department of Energy in 2017. He pleaded not guilty to all the charges.
In recent weeks, however, officials at the Department of Energy have told prosecutors that Dr. Chen had no obligation to declare the seven affiliations, calling into question the basis of the charges, according to people familiar with the matter.
The move for dismissal comes as the Justice Department is reviewing the China Initiative, considering steps such as retiring the name and reclassifying the pending cases.
Government officials under the Obama, Trump and Biden administrations have warned that China’s push for global power poses significant national security and economic threats to the U.S.
The officials who started the China Initiative were concerned that Beijing could steal research and other intellectual property using nontraditional collectors of intelligence, like professors groomed to voluntarily share sensitive information in the name of academic cooperation.
The program has resulted in numerous pleas and convictions, such as those of a Monsanto employee who was intercepted leaving the country with a proprietary algorithm and a Coca-Cola chemist convicted of stealing a valuable formula. Last month, after less than three hours of deliberation, a jury in Boston found a Harvard chemist, Charles Leiber, guilty of six felonies, including making false statements and failing to declare income earned in China.
But other cases against academics have unraveled. The first case to reach the trial stage, against Anming Hu, a professor of engineering at the University of Tennessee, ended in acquittal last September after a judge ruled that the government had not provided sufficient evidence of intentional fraud. The Justice Department has also dismissed seven cases against researchers in recent months.
The case against Dr. Chen, a naturalized U.S. citizen since 2000, is the most prominent of the cases to be dismissed to date, involving an elite scientist who had robust support from his university.
Dr. Chen, who has been on paid leave from M.I.T. since his arrest, thanked friends and colleagues on Thursday for supporting him through “this terrible year” and offered sharp criticism of the China Initiative.
“While I am relieved that my ordeal is over, I am mindful that this terribly misguided China Initiative continues to bring unwarranted fear to the academic community and other scientists still face charges,” he said in a brief statement released by his lawyer.
Rachael S. Rollins, who was sworn in this month as the new U.S. attorney in Boston, said the decision to withdraw the case had been made after prosecutors obtained new information indicating that the Chinese affiliations at the center of the case were not of material importance to the funding agency.
“We understand that our charging decisions deeply impact people’s lives,” Ms. Rollins said. “As United States attorney, I will always encourage the prosecutors in our office to engage in this type of rigorous and continued review at every stage of a proceeding. Today’s dismissal is a result of that process and is in the interests of justice.”
When Dr. Chen was arrested just over a year ago, the tone from the prosecutor’s office was strikingly different.
At a news conference that morning, the U.S. attorney at the time, Andrew E. Lelling, said that “the allegations of the complaint imply that this was not just about greed, but about loyalty to China.” Joseph R. Bonavolanta, the F.B.I. special agent in charge in Boston, said that Dr. Chen had “knowingly and willingly defrauded at least $19 million in federal grants.”
The charges that were filed several days later were more limited in scope. They included two counts of wire fraud, for failing to disclose seven affiliations to the Department of Energy while applying for a $2.7 million grant to study heat conduction in polymer structures and in a subsequent progress report.
The affiliations included serving as a “fourth overseas expert consultant” to the Chinese government, a “review expert” for the National Natural Science Foundation of China and an adviser to the Chinese Scholarship Council, among others. He was also charged with failing to declare a Chinese bank account containing more than $10,000 and with making false statements to government officials in his grant disclosures.
In recent conversations, officials at the Department of Energy told prosecutors that the affiliations Dr. Chen had failed to declare would not have prevented the agency from extending the grant money, according to two people familiar with the matter.
Understand the Case Against Gang Chen
Who is Gang Chen? He is a professor of mechanical engineering at the Massachusetts Institute of Technology who was arrested on Jan. 14, 2021, and charged with grant fraud. Born in China, he has been a naturalized U.S. citizen since 2000.
In a statement Thursday morning, Dr. Chen’s lawyer, Robert Fisher, credited witnesses who “came forward and told the government how badly they misunderstood the details surrounding scientific and academic collaboration,” saying that “without them this case would likely still be ongoing.”
Mr. Fisher, a partner at Nixon Peabody, said the scientist had “never lied to the government or anyone else.”
“Today is a great day,” he said. “The government finally acknowledged what we have said all along: Professor Gang Chen is an innocent man. Our defense was never based on any legal technicalities. Our defense was this: Gang did not commit any of the offenses he was charged with. Full stop.”
Biden administration officials are expected to announce changes to the China Initiative in the coming weeks.
“Consistent with the attorney general’s direction, the department is reviewing our approach to countering threats posed by the P.R.C. government,” Wyn Hornbuckle, a spokesman for the Justice Department, said, referring to the People’s Republic of China.
The name China Initiative may be dropped, and the cases may no longer be packaged as a distinct group but reabsorbed into the caseload of the department’s National Security Division, according to current and former Justice Department officials. After initial discussion of offering amnesty in the pending grant fraud cases, officials are leaning toward resolving the cases individually, the officials said.
Among those urging the Justice Department to back away from prosecutions based on grant disclosures is Mr. Lelling himself, one of the architects of the initiative, who is now in private practice in Boston.
In a post on LinkedIn last month, he wrote that he believed the China Initiative had been intended to combat espionage but had “drifted and, in some significant ways, lost its focus.”
“You don’t want people to be scared of collaboration,” he said in an interview. “There’s no question, on the academic side, the China Initiative has created a climate of fear among researchers. That is one reason why D.O.J. should step back a bit.”
He added, however, that prosecutions of academics had done some good, prompting research scientists to be far more transparent about their Chinese funding.
“If you were looking for general deterrence, it has been achieved in spades — we have terrified the entire research community,” he said. “What is deterrence? You don’t speed because you’re afraid of getting a ticket. Deterrence is about fear.”
M.I.T.’s president, Rafael Reif, said that he was eager for Dr. Chen to return to his duties at the university and that the burden the case had put on him and his family had been “beyond imagining.”
“It is difficult to reconcile and accept the pain and anguish that such good people, people we are proud and fortunate to know, have endured over the last two years,” Mr. Reif said in a statement. “This case has also caused ongoing distress throughout our community, particularly for Gang’s friends, students and colleagues, and for those across M.I.T. and elsewhere who are of Chinese descent.”
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