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Optical/IP

Village Stung by Employee Arrest

Things had been going well at Village Networks Inc.. Its optical packet node product, the iOPN, is trialing at Global Crossing Ltd. (NYSE: GX), with general delivery expected this summer. The company's launched new partnerships (see OMM, Village Networks Team Up), and its charismatic CEO, Kai Eng, formerly from Lucent, is slated to speak at Supercomm (see Supercomm to Host Investor Forum).

Imagine the shock, then, when FBI agents entered the company's Eatontown, N.J., headquarters yesterday and arrested a longtime employee for allegedly acting as a go-between for engineers stealing trade secrets from Lucent Technologies Inc. (NYSE: LU).

According to the New Jersey Public Affairs Office, Yong-Qing Cheng, 37, a naturalized Chinese-American and manager of product marketing at Village Networks for the past three years, faces charges that he helped two Chinese nationals, Hai Lin and Kai Xu, try to sell trade secrets they'd stolen while working on Lucent's PathStar Access Server product, which handles voice and data over IP on existing PSTN nets.

The release says Cheng traveled to Beijing in July 2000 in order to sell shares of a company called ComTriad Technologies Inc. The trio had allegedly formed the company to peddle a product designed from Lucent's code. Cheng allegedly tried to sell the shares to Datang Telecom Technology Co., a large affiliate of the Datang Technology and Industry Group, which represents China at the International Telecommunication Union (ITU), has 7,000 employees, and includes eight companies and 12 research centers.

There's no indication that Datang was involved in the alleged plot. And for its part, Village says it's cooperating in a government investigation, but has been assured it's not involved.

"The government's focusing on the situation, not on the company," a Village spokesperson says.

Still, it's a blow for a firm just starting out. "It's an unusual situation, and it will be an additional hurdle for them to overcome," says Seth Spalding of Epoch Partners.

Village says it's confident of coming through unscathed. "Our momentum is really strong; we've been meeting with potential customers and have a lot of interest," a spokesperson says. "We feel we're strong enough to get through this without missing a beat."

- Mary Jander, Senior Editor, Light Reading http://www.lightreading.com
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