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Internal Investigation Turned Foreign Espionage: 360° Due Diligence Case 2020

A Texas oilfield supply company engaged Orchid Law for an internal investigation of employees suspected of stealing confidential, proprietary business information and data for the benefit of a foreign competitor. Orchid Law are experts in energy M&A transactions and advisers to Asian and American companies.

Why Orchid Law?

The owners of the Texas company have worked and conducted business in the international and USA upstream oil and gas industry for many decades, including China. They knew we would know how to quietly and legally find proof of their suspicions that the employees stole information and data for Chinese companies offering promises of more money and ‘what else.’ Orchid Law’s focus: Conduct 360° Due Diligence, confirm the relationships/connections of the individuals to the Chinese companies and government, and find evidence of violations of substantive US federal and state laws. Also, the big question of Why our company, a small-medium size independent? To do so, we would figure out the motivations of the key people orchestrating the illegal activities. 

Were our client’s suspicions confirmed? Yes. Their former employees were hired away by companies set up under the laws of various states (such as Texas and California) with sources of funding and decision makers originating in China. Were the foreign owned companies playing fair and abiding by the federal and state antitrust and other substantive laws? No. Are other similarly situated companies in the oil and gas industry harmed by the illegal activities? Yes, economic espionage by foreign actors in the USA is systemic, happens often, and has been going on for years. 

We stop here as we are sworn to secrecy and now is not the time. Do take a few minutes, read the following public news releases, and fact check. 

Lessons Learned and Our Advice:

  • Protect your information, data, assets and business. Do it now, without delay. Fact: economic espionage, whether in form of security breaches, hacking, stealing computers, mimicking log-in and passwords, and old-fashion theft/breaking and entering, increases during periods of uncertainty and business down cycles. 
  • There are many (too many) cyber security and data privacy consultants offering services. Be sure to check on the consultants’ expertise, track record, and credentials, as claimed, before you open the door to your company’s database and systems.
  • Don’t ignore the auto password reminders. What good is the best encryption or sophisticated algorithm if the log-in is the administrator’s name and the password is ‘password’ or something so elementary that a novice can break in with no sweat?
  • Humans direct and conduct the illegal activity and breaches. Back to Trust. Can you trust unconditionally the people working for you? Don’t overthink, it is Yes or No.
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Sample Assignments: Connections and Networks

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Sample Assignments: 360º Due Diligence

Background: Orchid’s investigation on business partners, active diligence on claims of development status and projects assets led clients to evaluate realistic outcomes of investment and entering into purchase agreements.

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Sample Assignment: Critical Industries

Background: A private PRC brand name company in the Chinese electronics industry hired Orchid to assist on securing USPTO patents and advise on international market entry in USA, Europe, Japan, and Korea. Prior to hiring Orchid, the client interviewed major law firms in China and USA for IP work, however, was unable to progress for several reasons.

Orchid's Role:

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Sample Assignments: Renewable Energy

Background: Orchid represented major Asian wind turbine manufacturers and development companies on multiple assignments in Asia, USA, and Europe. Check out Orchid Group Services. Our roles range from legal and regulatory adviser to helping clients find the right partner or investor, projects, and site locations.

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Sample Assignments: Power (LNG)

Background: Our experience in LNG covers decades working with companies in USA, Korea, China, Japan, and Taiwan in multiple roles. Orchid Group are experts on work such as market studies and LNG analysis. In addition, we represented multinational corporations on investment in LNG liquefaction projects and securing access to the China LNG market.

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Sample Assignment: Power (SK E&C)

Background: SK E&C hired Orchid to lead commercial and legal due diligence on the potential acquisition of 100% membership interests in two greenfield combined cycle power plants in ERCOT.

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Sample Assignment: Power (KOSEP)

kosep

Background: Korea South-East Power Co. (“KOSEP”) was considering the acquisition of a greenfield CCGT project in Pennsylvania within the PJM market and hired Korea Ratings (“KR”) to assess the feasibility of the project. On behalf of KOSEP, KR hired Orchid to lead due diligence from on the ground.

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Case Study: #2 Commercial Advisory

xemc

Background: Chinese wind turbine manufacturer, XEMC, approached Orchid to advise it on a brownfield wind power project in California that the firm was considering purchasing and re-powering with its own turbines.

Orchid's Role:

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Case Study: #1 Commercial Advisory

kosep

Background: Korea South-East Power Co. (“KOSEP”) was considering the acquisition of a greenfield CCGT project in Pennsylvania within the PJM market and hired Korea Ratings (“KR”) to assess the feasibility of the project. On behalf of KOSEP, KR hired Orchid to lead due diligence from on the ground.

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Case Study: #2 Market Research

Background: The Electricity Generating Public Company Limited wished to bid on the sale of a 49% stake in an 1800 MW CCGT in South Korea and needed an adviser to forecast power market prices and advise on issues related to LNG supply agreements and a terminal use agreement.

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Case Study: #1 Market Research

Background: A confidential client was required by the lenders to two of its gas-fired power projects to demonstrate the competitiveness of its LNG supply agreements. Orchid Group was engaged to conduct the study.

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Case Study: Deal Origination

Background: Energy Initiative Japan (EIJ), a Japanese developer of solar projects hired Orchid to lead the sale of a portfolio of greenfield solar projects developed under the Feed-in-Tariff (FIT) established under the “Act on Special Measures Concerning the Procurement of Renewable Electrical Energy by Operators of Electric Utilities” in Japan.

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Case Study: Strategy Consulting

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Background: Doosan Heavy Industries (DHI) was eyeing the United States as their key market for selling wind turbines, but wanted to understand whether they could compete there, what models were most competitive the logistical network required for them to compete in the USA. They hired Orchid to help them work through developing market entry strategy.

Orchid's Role:

Orchid provided DHI with a comprehensive package complete with strategic options for entering the USA.

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