WASHINGTON _ Two Massachusetts men were arrested anddetained on Wednesday for allegedly conspiring to sell anerythropoietin (EPO) cell line to an undercover FBI agent posing asa Russian KGB agent.
The cell line, allegedly stolen from the labs of Integrated GeneticsInc. (IG) was offered for sale at $300,000.
The arrests mark one of the first bona fide industrial espionageincidents involving biotechnology, and court documents tell a talecomplete with brown attache cases, Swiss bank accounts and an FBIstakeout in a Dunkin' Donuts parking lot.
Subrahmanyam M. Kota, of Westboro, Mass., and Vermuri BhaskarReddy, of Northboro, Mass., were charged with one count ofconspiring to transfer and transport stolen property with a value of$5,000 or more in foreign commerce. Kota and Reddy are bothnatives of India.
A criminal complaint unsealed in a district of Massachusetts federalcourt on Wednesday, along with a sworn affidavit from an FBIspecial agent in the bureau's Boston division, outlined the scheme.
"The complaint alleges an attempted illegal sale to what was thoughtto be a foreign government," said District of Massachusetts U.S.Attorney Donald Stern in a statement released on Thursday. "Thetransfer of such know-how places at risk jobs in this country,particularly in Massachusetts. Indeed, one of Massachusetts' greatestresources is its high-tech and biotech industries."
Kota and Reddy were scheduled for a detention hearing lateThursday. Both men will continue to be held until a Bostonmagistrate rules on whether bail will be set or whether they willcontinue to be held without bail.
If convicted of the conspiracy charge, Kota and Reddy each face amaximum penalty of five years in prison and $250,000 fines.
According to the FBI complaint, in October 1992, an FBI agentusing an assumed name and posing as a KGB agent met with Kotaand asked him if he was interested in "renewing" his relationshipwith what had been the Soviet KGB. At that meeting, Kota allegedlytold the FBI agent that he could provide "information on varioustypes of technology, including biotechnology."
During a subsequent meeting two weeks later, Kota told the FBIagent that he had a friend who had developed a drug "which sells for$2,000 a dose and produces revenues in this country of $900 millionper year." Kota then gave the FBI agent a written proposal whichquoted a price of $300,000 to provide the agent with a cell linegenetically engineered to produce EPO and the "instructions"necessary to manufacture the drug.
Kota's "friend" turned out to be Reddy, who had worked for IG(which was bought by Cambridge, Mass.-based Genzyme Corp. in1989), when the company was developing EPO. Reddy left the firmin 1988. Although IG holds a patent for EPO, the firm halted itswork on the drug in 1988 after Amgen Inc., of Thousand Oaks,Calif., was awarded a broader patent and thus gained exclusive U.S.marketing rights. "Everything was put into the freezer at that time,"explained Genzyme general counsel Mark Hofer. Amgen's U.S.sales of EPO in 1993 totaled about $587 million.
On May 3, 1993, the FBI agent and Kota had a telephoneconversation in which Kota said the EPO cell line was "in hand."Electronic surveillance of Kota's phone lines in the following weeksrevealed that he called Reddy and told him that the "biotechnologyproduct," which the two were supplying to India, was wanted byanother country.
On Nov. 10, 1993, Kota gave the FBI agent a preliminary sample ofwhat he said was EPO and told him that he preferred to be paid forthe stolen biotechnology through a Swiss bank account. The nextday, the FBI delivered the sample to Amgen for testing. In July1994, Amgen confirmed that the sample contained EPO consistentwith IG's EPO and not consistent with either Amgen's commercialor experimental product.
On Dec. 9, 1994, Kota and the FBI agent had one last meeting todiscuss final arrangements for the transfer of the stolen EPO. At thattime, Kota allegedly told the agent that Reddy would be willing tofly to Moscow, if necessary. The next day, FBI agents staking out aDunkin' Donuts parking lot in Marlboro, Mass., reported that theysaw Kota leave the fast food store with a large brown attache case.Minutes later, Reddy left the building. Four days later, the two werearrested.
FBI spokesman William McMullin told BioWorld that theMassachusetts EPO investigation is still "active" and he declined toreveal how the FBI became interested in investigating Kota.
Amgen's manager of product communications, David Kaye, toldBioWorld that this is not the first case of international espionagerelating to biotechnology products. A year and a half ago, Amgenfired an employee who attempted to sell cell lines to contacts in aforeign country (Kaye refused to identify the country). The FBIaided Amgen in investigating that case but no charges were filed.
"With biotech products, you don't have to steal a tank load ofproduct, you just need the intellectual property," Kaye said. "That'swhy we are very diligent and aggressive in monitoring this kind ofactivity."
Most employees at biotechnology firms must sign legal documentswhen they are hired that bar them from taking proprietaryinformation outside of the company. However, as Kaye notes,"people are people." As a result, many firms have corporate securitydepartments that monitor employees. Kathleen Rinehart,spokeswoman for Genzyme, declined to detail her firm's securitymeasures "for security reasons."
"We have a corporate security department because compliance withour security policies is essential to protect the physical andintellectual property of this organization," she said. n
-- Lisa Piercey Washington Editor
(c) 1997 American Health Consultants. All rights reserved.