BYD can pursue Foxconn conspiracy claims, Hong Kong judge says

BYD Co., the Chinese car and battery maker in which Warren Buffett has a stake, won court approval to pursue claims that Foxconn International Holdings Ltd. gathered false evidence and conspired to injure BYD’s business.

“I think this plea should be allowed to develop and be decided by the trial judge who would be able to hear all the evidence,” Hong Kong Judge Louis Chan said yesterday. Foxconn, the world’s largest contract maker of mobile phones, had argued that BYD’s claims were scandalous and frivolous.

BYD made the allegations after two Foxconn units sued three years ago claiming BYD recruited former employees and stole the companies’ trade secrets including operation manuals. In its countersuit, BYD accused its rival of unlawful interference with its business and conspiracy to injure. Shenzhen, China-based Foxconn planted documents and coerced a former employee to confess he had stolen secrets, according to BYD’s claims.

BYD’s claims include that a security manager of one of Foxconn’s units illegally intimidated a former employee to make a false statement by accompanying her on a 20-hour train journey with four public security officers, according to yesterday’s 24- page ruling.

Foxconn declined to comment on the ruling, said Vincent Tong, a spokesman for the handset maker. Foxconn will “follow through with the proceedings as we move along with the legal process,” Tong said in a telephone interview.

Court Proceedings Continue

BYD will assert its claims and defend the claims brought by the Foxconn units as the court proceedings continue, according to Sandra Mak, a spokeswoman for BYD.

“However we hope that the matter can be concluded so that we can dedicate our entire effort to our business,” she said in a statement on behalf of the company.

Hong Kong-listed Foxconn faces competition from BYD for orders of handset components from customers including Nokia Oyj. The company, which is the worst performer on the benchmark Hang Seng Index this year, said BYD, China’s largest maker of rechargeable batteries, doubled its revenue from its handset business in 2005, 2006 and 2007 after obtaining Foxconn data.

Foxconn shares are down 37 percent year-to-date, versus a 5.5 percent slide in the benchmark index. BYD shares were unchanged at HK$44.65 yesterday. Shenzhen-based BYD is down 35 percent in Hong Kong this year.

Three former Foxconn employees, including a former chief operating officer of one of the contract manufacturer’s units, had been previously convicted of infringing Foxconn’s business secrets in a separate proceeding in Shenzhen.

The case is HCA2114/2007, BYD Co. et al and Shenzhen Futaihong Precision Industry Co. et al in the Hong Kong Court of First Instance.