WSJ News Exclusive | Leaders of Self-Driving-Truck Company Face Espionage Concerns Over China Ties

That review is being conducted by the Committee on Foreign Investment in the United States, known as Cfius. The panel is led by the Treasury Department and includes the Justice and Defense departments as well as other federal agencies. Cfius reviews foreign investments for national-security concerns and has the authority to impose safeguards or recommend that the president block investments.

The Biden administration has ordered a range of steps to try to prevent U.S. technology from advancing China’s military power, and is considering others. The Pentagon has specifically pushed to increase the U.S. military’s use of autonomous vehicles and to counter American adversaries’ technological advances in the field.

The recommendation to the Justice Department didn’t come from the full Cfius panel. Representatives who are part of the Cfius review process can make their own recommendations to law enforcement, according to lawyers familiar with the panel’s workings. It couldn’t be determined how the recommendation was received by the Justice Department, which declined to comment.

TuSimple spokeswoman

Megan Strader

said Cfius hasn’t raised with the company any allegations of economic espionage. “We have been and intend to continue communicating and cooperating with Cfius,” Ms. Strader said.

An official at the Treasury Department said the panel is “committed to taking all necessary actions within its authority to safeguard U.S. national security.”

The Wall Street Journal reported in October that Cfius, the FBI and the Securities and Exchange Commission have been investigating whether TuSimple improperly financed and transferred technology to a Chinese startup, citing people with knowledge of the matter. The startup, Hydron Inc., was founded and is run by TuSimple’s controlling shareholder and co-founder,

Mo Chen.

Hydron operates in China and has said it is building hydrogen-powered semi trucks. Mr. Chen and his TuSimple co-founder,

Xiaodi Hou,

along with Chief Executive

Cheng Lu,

are the individuals recommended by the Cfius representatives for possible economic-espionage charges, according to the people familiar with the matter.

Representatives of Hydron didn’t respond to a request for comment for this article.

Whether the probes are likely to result in any charges couldn’t be determined. TuSimple has said it is unaware of any FBI or SEC investigations. Such investigations can take years.

While the Cfius panel must seek a consensus when deciding whether to scuttle a deal, there is no such requirement for representatives who want to recommend that prosecutors pursue charges, said

Rick Sofield,

a partner at Vinson & Elkins LLP who used to lead the Justice Department’s Cfius team. “It doesn’t matter to the criminal guys whether it’s a single agency or the whole committee sending it,” he said, adding: “I’ve never known it to be something from the whole committee.”

Cfius began its scrutiny of TuSimple in 2021 because it became concerned about a Chinese shareholder’s large investment and control of two board seats. Last year, Cfius undertook another review focused on Hydron.

The Hydron review led the Cfius representatives to conclude that TuSimple’s leaders’ dealings with Hydron potentially violated U.S. laws prohibiting economic espionage and trade-secrets theft, among other possible offenses, according to the people familiar with the matter.

TuSimple’s board of directors in October fired then-Chief Executive Mr. Hou in connection with the board’s discovery that TuSimple had transferred confidential company information to Hydron and its partners, according to a filing TuSimple submitted to the SEC.

The board’s investigation found significant evidence of improper technology transfer to Hydron, according to the people familiar with the matter. The transfer included technical data, blueprints and schematics that would enable Hydron to replicate TuSimple’s technology as well as specific information about TuSimple personnel who would be valuable to Hydron, according to one of the people.

TuSimple employees who also worked for Hydron included top staff in marketing, product development, business development and government relations, according to people familiar with the matter.

TuSimple has said it has considered an agreement to buy freight trucks from Hydron but hasn’t bought any and has no other financial relationship with the startup. Hydron has said TuSimple is a customer.

Mr. Hou, a co-founder of TuSimple, has in prior comments criticized the board’s decision to fire him as CEO and said he would be vindicated. “I want to be clear that I fundamentally deny any suggestions of wrongdoing,” he said in an October statement. Through his spokeswoman, he declined to comment for this article.

Days after his dismissal, Mr. Hou teamed up with his co-founder and major shareholder, Mr. Chen, to fire the board, including one member who had been appointed as part of an agreement with Cfius. Messrs. Hou and Chen also reinstalled Mr. Lu, a previous chief executive, to run the company.

Messrs. Chen and Lu didn’t respond to requests for comment.

After Messrs. Hou and Chen fired the TuSimple board in November, they brought on three independent directors, including a new government-security director to liaise with Cfius. TuSimple’s Ms. Strader said the new independent board members are continuing to investigate the company’s interactions with Hydron, and that it isn’t accurate to draw any conclusions until that investigation is complete.

A conviction on a charge of economic espionage requires prosecutors to prove a foreign government benefited from the activity and carries a 15-year maximum prison sentence.

The Justice Department has brought only a handful of such cases in recent years. Last year, for example, a former

Coca-Cola Co.

employee was sentenced to 14 years in prison after being convicted of stealing the formulation for the coating inside BPA-free cans on behalf of a company that had received millions of dollars in Chinese government grants.

Write to Kate O’Keeffe at [email protected], Aruna Viswanatha at [email protected] and Heather Somerville at [email protected]