The 4 Most Infamous Corporate Espionage Cases of All Times
18 January, 2016by omrisigelman
This past year, the FBI has observed a stark increase (53%!) in the amount of corporate espionage cases within the United States. In specific, corporate espionage – or also, economic or industrial espionage – is the theft or illicit trade of company secrets, often resulting in the loss of hundreds of millions of dollars. In analyzing their past investigations, the FBI has pointed out that a major concern in corporate espionage today are “insider threats” – essentially, employees who are knowledgeable of confidential matters are being recruited by competitor companies, and foreign governments in exchange for large amounts of money at much higher rates than ever before. Of course, at NURO, we take corporate security very seriously; accordingly, we decided to delve in and explore four infamous, notorious, and thrilling corporate espionage cases. In doing so, we aim to help today’s corporations and managers understand that with secure and encrypted messaging services, it is in fact possible to prevent such costly threats in the future.
Walter Liew vs. DuPont – “titanium dioxide”
In July 2014, Walter Liew, a chemical engineer from California, pleaded guilty to selling DuPont’s super secret pigment formula that makes cars, paper, and a long list of other everyday items whiter to China. In the 1990s, Liew and his wife Christina learned that China was interested in constructing a DuPont-like factory to manufacture the white pigment, also known as titanium dioxide. In recognizing that they could profit big from disclosing this confidential technology to China, the Liews hired three retired DuPont engineers and paid them thousands of dollars in exchange for sensitive company documents explicitly outlining the process to make the white pigment. Throughout the following decade, the Pangang Group, a company controlled by the Chinese government, fed the Liews about $28 million build factories dedicated to manufacturing the pigment. Today, Walter Liew is sitting in prison, and will be there for another 14 years. He was also fined $28 million dollars.
Starwood vs. Hilton
In 2009, Starwood Hotels accused Hilton Hotels of recruiting executives out from under them and stealing confidential materials to construct a luxury hotel chain called “Denizen” – essentially, copying Starwood’s successful “W” chain. In their lawsuit, Starwood noted that suddenly, Hilton hired both Ross Klein and Amar Lalvani, two executives who headed everything regarding Starwood’s “W” chain. Then, Starwood alleged that the ex-employees had stolen more than 10,000 documents and delivered them to Hilton – the worst part being that Starwood didn’t even notice that the documents were missing until after the indictment. What’s more, Hilton’s CEO Christopher Nassetta was more than aware of the espionage. Starwood argued that it was with these documents that Nassetta began developing “Denizen,” a replica of the influential achievement that was Starwood’s “W” chain. In the end, the courts ruled in favor of Starwood, ordering Hilton to cease developing “Denizen,” and prohibiting them from creating any boutique-type hotel chain for another two years. Hilton was also forbidden from hiring Starwood employees for its luxury brands group and forced to pay $75 million to Starwood as part of a settlement agreement.
Microsoft vs. Oracle
In June 1999, Oracle hired a detective agency called Investigative Group International (IGI) to spy on Microsoft – it was headed by a former Watergate investigator, if that says anything. Oracle suspected that Microsoft, while fighting an antitrust lawsuit, had something to do with a slew of uncannily pro-Microsoft newspaper advertisements taken out by the Independent Institute. In their advertisements, the Independent Institute cited 240 academics openly criticizing the government lawsuit. To Oracle, it seemed too good to be true. IGI, following Oracle’s orders, sifted through Microsoft’s trash (a practice also known as Dumpster Diving) in order to collect the Independent Institute’s funding figures. In the end, IGI found that Microsoft had paid the Independent Institute $153,000. In September, the New York Times published an article about IGI’s discoveries – a bit embarrassing to both Microsoft and the Independent Institute.In seeing that their suspicions were in fact correct, Oracle figured that the National Taxpayers Union, which was similarly publicly criticizing the government lawsuit, might also secretly be backed by Microsoft. Again, the IGI discovered that Microsoft had paid the National Taxpayer Union more than $200,000, and this time the Wall Street Journal and the Washington Post reported Microsoft’s transgression. The following May, the same happened. This time, IGI focused its investigations on the Association for Competitive Technology, a trade group; IGI arranged for a random woman to bribe ACT’s cleaning crew with $1,200 in exchange for bringing any office trash to an office nearby – of course, the office was a front for IGI. In June, Oracle Chairman Larry Ellison admitted to hiring IGI to spy on allies of Microsoft – but, he wasn’t sorry. In fact, he was proud, confessing, “I feel very good about what we did,” saying his company was only doing its civic duty.”
Steven Louis Davis vs. Gillette
In 1997, Steven Louis Davis, an engineer helping Gillette develop its new shaving system, was caught faxing and emailing technical drawings to four of Gillette’s competitors: American Safety Razor, which makes store-brand shaving systems; Bic, a maker of disposable razors; and Warner-Lambert, a manufacturer of Schick and Wilkinson products. The new shaving system project was extremely confidential and Gillette said it included “significant advances in technology.” Officially, Davis was employed by Wright Industries, a company hired to design manufacturing equipment for Gillette – meaning, as Wright Industries’ lead engineer for the Gillette project, Davis had intimate access to confidential information. The FBI discovered that he had contacted each company multiple times and loaded 600 megabytes (at the time a lot!) of drawings onto his computer. He even used fake names like Melinda Ivy and Carl Brown to keep the faxes and emails from being traced back to him! Naturally, Davis was arrested and indicted for wire fraud and theft of trade secrets. He was sentenced to two years and three months in federal prison. Sadly, these economic espionage cases aren’t shocking to most corporate executives; it’s not uncommon for rivalry companies to dumpster dive, hack, bribe, and hire away key employees. In a rush to push out new products, major corporations will do just about anything to defame their competitors. And, although a few of these cases stem from the 1990s, their spirit still holds today – as the FBI has noted that corporate espionage is no where near slowing down. It’s for this reason that corporations today must equip themselves with the highest form of corporate security. In back-and-forth messages between employees especially, whether they’re simple conversations or explicit sensitive information, the utmost security and encryption is required – this includes any exchange of corporate documents as well. Moreover, with a secure messaging application that includes a cognitive security layer that identifies potential breaches, there is little to no chance that competitors will be able to steal corporate secrets, as businesses will be able to react quickly and shut down the breach before it becomes a concern.