updated 8/2/2007 9:07:04 PM ET 2007-08-03T01:07:04

An engineer pleaded guilty to stealing military training software and trying to sell it to the Chinese Navy, becoming only the third person to be convicted on the rare charge of economic espionage, prosecutors said Thursday.

Xiaodong Sheldon Meng, 42, pleaded guilty in San Jose federal court Wednesday to one count of economic espionage for trying to sell stolen software to China's Navy Research Center, and one count of violating U.S. arms control regulations for illegally exporting software used to train military fighter pilots, the U.S. attorney's office said.

Meng is a Chinese national with Canadian citizenship who lives in Cupertino, about 45 miles south of San Francisco.

Under the terms of the plea agreement, he faces a reduced sentence of up to two years in prison and a $1.5 million fine.

Sentencing was set for Jan. 23. Meng is currently free on $500,000 bond.

Meng was indicted in December on 36 felony counts alleging he stole code for software made by his former employer, San Jose-based Quantum3D Inc., and attempted to sell it to the Royal Thai Air Force, the Royal Malaysian Air Force and the Navy Research Center in China.

Authorities have declined to say whether any of the secrets were successfully sold, or if any foreign officials knew about the scheme.

Jay Rorty, Meng's federal public defender, said the plea agreement resolves potential charges in Alabama, Florida and Minnesota.

"Mr. Meng remains free of custody and is glad to put these charges behind him," Rorty said in a statement.

The indictment was only the third time prosecutors charged someone with economic espionage, the most serious crime under the Economic Espionage Act of 1996. It alleges the theft of trade secrets with the intent to benefit a foreign government.

Authorities say Silicon Valley is a hotbed for trade-secret thefts motivated by the desire to fuel technological and military development in countries like China and Iran. However, the charge of economic espionage is hard to prove, and many defendants are charged with the lesser offense of theft of trade secrets.

In December, two other engineers in an unrelated but similar case pleaded guilty in San Jose federal court to two counts each of economic espionage.

Fei Ye, a U.S. citizen from China, and Ming Zhong, a permanent resident of the U.S. from China, were charged with stealing confidential microchip blueprints from their employers and attempting to smuggle them to China to start a microprocessor company.

Sentencing in their case is set for Sept. 10.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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