Corporate Espionage in the Tech Sector

protecting their IP. But how about we look at things from a different angle. Why don't we consider some of the cases in which a company experienced a hefty loss due to someone yoinking IP that wasn't their own. Today, I want to talk about industrial espionage, or corporate espionage, or economic espionage. So here in the United States you'll often hear about the threats of industrial espionage to the tech sector as well as to national security, usually with

the implication that China is behind it all. At least in recent years, that's been the narrative. That is a driving concern for a lot of legislation and executive orders that the US government has issued over the last few years, there's this desire to protect US innovations from China, which we see manifest in some hefty trade restrictions and that

kind of thing. But first let's define some terms. So, industrial espionage generally covers the situation in which one party is spying on the operations of another party, typically a company of some sort, in an effort to discover trade secrets. The end goal usually is to give some competitor and advantage, or to potentially copy the company's work elsewhere, or maybe even just to hurt the target company. We're gonna look at a whole array of different motivations for corporate espionage

in this episode. And you know, industrial espionage itself may or may not be illegal, depending upon the jurisdiction and the nature of the espionage. It could just be considered very bad ethics, depending again on the situation. In addition, if other factors are involved, matters can clearly escalate. So here in the United States we have the Economic Espionage Act of nineteen ninety six. This act actually has two provisions. The second of the two provisions is your plain old,

everyday industrial espionage. So essentially, a case where something like Company A wants to know how Company B makes its widgets, and so Company A sends in a spy to work at Company B and then ferret out the secrets and then bring it back to Company A so that they can capitalize on it and then just claim like, oh, no, we reverse engineered the technology, or we came up with our own way of doing this. We didn't violate IP

in any way. The first provision of the Economic Espionage Act deals with cases in which the aim of the espionage is to benefit a foreign government, instrumentality, or agent. So this is international economic espionage baby, and as such it is viewed as being a very serious matter. Indeed, that'd be fair. Really, all industrial espionage can be serious stuff. So we're going to talk about some specific cases of

espionage in the tech sector and what happened. Now. I'm not going to be talking about a few of the really big espionage cases because they didn't really happen in tech, Like there was one industrial espionage case that involved a company that makes adhesives, which admittedly was a sticky situation, but it wasn't a tech company. I am going to talk about these stories in chronological order, and we'll start in the nineteen eighties. So first up, let's talk about

IBM and the company Hitachi. So our story begins with a guy named Raymond Cadet, and Cadet had worked as a computer scientist for IBM, but he had left the company in nineteen eighty in order to go work for another business called National Advanced Systems or NAS. Now, Allegedly, upon his departure from IBM, Cadet had a case of sticky fingers and he took with him ten three ring binder workbooks about the IBM's upcoming THREEH eight X series

of computers. Now, there were twenty seven of these types of workbooks total for these systems, twenty seven totals, so he only came away with ten volumes of the twenty seven, so he had fewer than half of all the workbooks.

His boss at NAS, a man named Barry Safe, allegedly made photo copies of those ten binders, and in nineteen eighty one, Sefei traveled to Japan, and according to the US Department of Justice, he then handed those copies of these ten workbooks to executives at Hatachi because NAS was marketing Hatachi computers back in the United States, so it was kind of like saying, hey, here's IBM's information on this upcoming system of computers so that you can get

the jump on creating your own compatible components and thus undercut IBM's sales. So word got back to IBM that something hinky was going on when a Hatachi computer engineer named Kinji Hayashi revealed to a computer consultant named Maxwell Paley that Hitachi had ten of these twenty seven volumes from IBM and that he, that is, Hayashi, would be really interesting did in acquiring any of the other volumes that happened to be out there, you know, if Pailey

happened to have access to the other seventeen volumes. So Pale immediately smelled something fishy. He was also a former IBM employee before he became an independent consultant, so he sussed out that Hitachi must have gained possession of those workbooks without IBM's consent, because it wasn't the sort of thing that Big Blue would be sharing just in general.

So Pilee then calls up one of his former colleagues who was still at IBM, and Pailey says, hey, I was chatting with this computer engineer over at Hitachi, and he had access to ten of your twenty seven workbooks about the upcoming three H eight X series of computers. Is that cool or is something shady happening? So immediately IBM recruited Pailey to come on and act as kind of a spy for themselves. So they partnered Paley with

another fellow named Richard Callahan. And before Richard Callahan had joined IBM to be like kind of like a head of security, he had been a captain in the Marines. He also had been an FBI agent, so he meant business. So Pialee was able to go back to Hayashi you know who again. Hayashi worked for Haitachi, and Paley told Hayashi that, you know, I need to see these workbooks to know what I'm looking for. Can you bring them

to a meeting? And Hayashi said, oh, yes, sure, and he brought three of the workbooks with him and showed them to Paley and to Callahan, and this gave enough proof to IBM to take the next steps. They then prosecuted Hitachi by actually first going to the Justice Department with their problem and saying we have evidence that this is happening. This would bring the FBI into the situation, so the FBI would have their own investigation. So at

this point we're up to nineteen eighty one. No legal action has happened yet, but obviously you have the case of this former IBM manager leaves the company, hands information that's proprietary to IBM to his boss. His boss then goes and offers the information up to Hitachi Haitachi is now seeking the rest of that information. IBM does its little sting operation and discovers that this is the case. They now go to the FBI, and the FBI then

launches their honeypot operation. So some FBI agents pose as computer consultants who supposedly had high level access to the inner workings of IBM, including these other workbooks that Hitachi executives wanted. So the FBI agents approach executives from both Hitachi and Mitsubishi Electric and they offer to sell trade secrets to these Japanese companies. And if they were to get hold of these secrets, then they could make computer

components compatible with upcoming IBM machines. So big big business deal here, and Hitachi took the bait. Executives authorized a payment of more than half a million dollars for those trade secrets, and over the course of seven months, the FBI operated this ruse until the US Department of Justice

was ready to move on the issue. So originally FBI agents figured that this operation would take a couple of weeks tops, but as they conducted it, they became more and more convinced that the issues going on in Tatachi weren't just related to a computer engineer right like, they went much further up the chain of command. So they kept the operation going to try and find out how

high up does this go. So the FBI alleged that more than a dozen Hitachi employees, including high rank executives, were responsible for engaging in what was at that point the largest industrial espionage case ever in the United States. Now in at least one of these situations, Haitachi the Company did plead guilty, as did two Hitachi employees. Now.

Hitachi the Company maintained that the executive leadership was not aware that the information was coming in from an illegal source, though I don't really know where else it could have come from, But the defense was, hey, they thought that this was just legitimate information, that nothing was obtained illegally. The Hitachi staff who pled guilty received fines of ten

thousand dollars or less. Hatachi the company settled out of court with IBM and submitted to inspections for five years so that IBM could actually determine if Hitachi was infringing on IBMIP like if they were actually acting on some of this information. So while this could have been a big case really and you could argue, yeah, it was a huge case, the fines were not what you would expect, right, We're talking like ten thousand dollars here, five thousand dollars there.

That's not that much money when you think about the things that are going on at the corporate level. But we also have to remember this was happening in the nineteen eighties. This is before the nineteen ninety six Espionage Act was signed into law. IBM, on top of a criminal case, pursued a civil case and Hatachi eventually settled that one out of court as well for a reported three hundred million dollars, which is a big old yaoza. Now we are talking as for the National Advanced Systems

and its parent company of National Semi Conductor. That's the company that the former IBM manager had gone to work for Well. IBM went after Cadet and Cefe and another NAS employee named Tibasuma Yazi, and the case went back and forth in the courts. Sometimes a court would find for the plaintiffs, sometimes for the defendants, as it would get through appeals, and eventually National Semi Conductor ultimately would settle out of court in nineteen eighty four for three

million dollars. So that was the big IBM Haitachi battle. Obviously there are a lot more details there, but it was already getting pretty complicated just to give the summation. So let's move forward a decade to nineteen ninety three. That's when the auto manufacturer Volkswagen got into some really hot water, which, you know, not that surprising because Volkswagen is also the car company that became the center of

diesel gate. That was when it was discovered that Volkswagen had built in a way to fool emissions testing facilities with its diesel powered vehicles, so that there was a test mode where it wouldn't put out as many emissions, but then as soon as it was out of test mode, it would go into performance mode and emissions would be much worse, they would have failed emissions tests. But as it turns out, that's not the only time Volkswagen was

caught doing something a little bit underhanded. So in nineteen ninety three, the company higher to a man named Jose Lopez, who previously had worked as a purchasing executive for General Motors, and in fact Lopez was in line to become the head of North American operations for GM. He was known as an incredibly effective purchasing executive, like could just create the most killer deals for a company and was absolutely

cutthroat in his negotiations. Well before he could become North American operations lead for GM, Volkswagen swooped in and made him an offer he couldn't refuse. Specifically, Volkswagen executives promised Lopez that the company would build a manufacturing facility in the Basque region of Spain. That was something Lopez had wanted for a very long time. He wanted to bring manufacturing to his homeland, and so Lopez decided he'd take

the job. And Volkswagen had been in a bit of a struggle before Lopez came on board, but quickly they started to turn around for the company and the folks back at GM were suspicious, and they accused Volkswagen and Lopez of capitalizing on GM trade secrets such as the company systems for purchasing parts and also their plans for their own manufacturing facility. So these accusations ended up becoming a big legal battle that stretched through most of the

nineteen nineties. It all started in ninety three, and GM would subsequently file a civil lawsuit against Volkswagen, and the two parties would not come to an out of court settlement until nineteen ninety seven. At that point, Volkswagen agreed to pay GM a cool one hundred million dollars and agreed to purchase one billion dollars worth of GM parts over the following seven years. Back in Germany, authorities continued to pursue a criminal case against Lopez and three associates

who followed him over from GM to Volkswagen. Now Eventually, in nineteen ninety eight, the police agreed to drop charges provided that the four former GM executives donate a substantial sum of money to charity. Lopez himself had resigned from Volkswagen back in nineteen ninety seven. Then he was in a terrible car accident and left him in a coma for months in nineteen ninety eight. He did recover, however, and is still alive today at the age of eighty three.

All right, we've got several more cases of espionage to talk about, but we need to take a quick break to thank our sponsors. Okay, Our next case of industrial espionage is arguably on the razor's edge of being a text story in the first place. But I think despite the fact that it's a close shave, it still counts. And this tale isn't about trying to cash in on secrets, but rather to make a perceived enemy bleed from one thousand cuts. It's the story of Gillette and a guy

named Stephen Louis Davis. You see what I did there with other the razor punds wasn't clear until I got to the end of that. Anyway, Steven L. Davis worked for a company called Right Industries Incorporated. That's Right Wright, like the Wright brothers. That company is an industrial fabrication company. This means that Right Industries is a company that other companies go to when it comes time to produce specific stuff that these other, you know, originating companies aren't equipped

to make. So Gellette was a customer of Right Industries, and Stephen Davis worked for Right. At the time, Gellette was working on something that was top secret. Now, it turned out this top secret project would be their Mock three triple blade razor. I remember when those came out, and it obviously would spawn a bunch of imitators among

the various competitors in the space. You started seeing razors with lots more blaze, sometimes a ludicrous amount, to the point where I think there were like parody commercials like the seventeen bladed raiser. But this was back when the double bladed eraser was kind of the standard. No one had cracked the code on answering the question why not three blades? So Gellette obviously would need to share information about this top secret project with their fabrication partners in

order to manufacture the things. That information was incredibly valuable, so reportedly, Gellette had sunk around seven hundred and fifty million dollars in research and development to get to a design where the Mock III would work. Now, obviously that kind of commitment to a project is enormous, and if Gellette couldn't realize a profit off of that work, it would be in a huge corporate jam. Kind of like when you shave a bit too much before you rense

out your razor and it gets all jammed up. That's kind of what Gellette would be in. So enter Steven L. Davis, who again worked for Wright. He was mightily cheesed off both at his own direct employer and at Gillette itself. So Davis had been working in a rather prominent role on the project, but then found himself demoted to a lesser role, and he was bitter about that. So he thought perhaps one way to vent his spleen would be he could take this top secret design of this triple

bladed razor. He could go to Gellette's competitors in the industry, and then he could stick it to Gellette as well as his own direct employer. And reportedly, he wasn't even looking to profit all this. He wasn't looking to sell this information off and then make a huge amount of money and then you know, retired to Patagonia or something.

He just wanted revenge. So off Davis goes with information about Gellette's top secret innovation to a couple of different companies that included Big the American Safety Razor cup and Shick as in Shick Wilkinson's Sword, the makers of the Shick razor. Now the folks at Shick immediately contacted their peers over at Gillette to tattle on Davis because they were like, Okay, this is non information we should have. It is really illegal for us to have it. This

isn't cool. Let's get in front of this and let Gellette know what's going on. So Gillette, the executive's there. When they find out that Davis had leaked their information to their competitors, they contacted the FBI, So the FBI launched an investigation. The FBI was able to verify that Davis had in fact absconded with these trade secrets and attempted corporate espionage, and they apprehended Davis. He was tried and found guilty of five counts of corporate espionage under

the then new Espionage Act of nineteen ninety six. Now, he could have received a sentence of up to ten years for his crimes, but the judge was far less vindictive and gave him a twenty seven month sentence instead. Still some you know, serious time, but not ten years. Now, around the same time that this whole Stephen Davis Gillette

case was unfolding. There was another industrial espionage trial that was coming to prominence, but this one would actually happen before the Espionage Act was signed into law, so there is like overlap here. Technically, the Gillette case concluded first, but when it came time to decide which ones when in the order of this particular episode, it was kind of a toss up. This other case involved the Eastman

Kodak Company and a former manager named Harold Warden. So remember we're talking about the mid nineteen nineties at this point. This is back when film cameras were far more common than digital cameras. This is an era before everyone carried around a smartphone that had a digital camera in it. So if you were taking pictures back in the nineties, chances are you were doing so on film, and Kodak was the name in film. The company had a long history of research and development in the world of film.

They were responsible for creating all new processes and they tested new materials on an effort to gain market dominance. So Warden had worked for Kodak for nearly thirty years and then he retired from Kodak in nineteen ninety two, and one thing that Kodak had worked on during that

time was a secret method for making film. Their process gave the company a real advantage because they could make film at a faster pace than their competitors and at a higher level of quality than their competitors could do. And most folks at Kodak only had a tiny glimpse into how it all worked. Because the philosophy Kodak was to protect corporate information, they would compartmentalize everyone. You would only need to know the stuff that directly pertained to

your job, and you were ignorant of everything else. But Warden, because he was a manager, knew a bit more than most people did. He had a larger view of how the process worked. So he goes off to retire, and when he does, he creates his own independent consulting firms. So he retires from Kodak, but he's not done working.

He's now working for himself. As well as that, he ends up keeping up this line of communication open with some of his former colleagues who were still at Kodak or who had recently left the company, and would occasionally be able to convince them to hand over or to

sell proprietary information from Kodak. Now, using this method, he essentially assembled the book on Kodak's processes that was not within the company itself, and then he would kind of use this information to see if any Kodak's competitors would be interested and you know, taking advantage of his wealth of information. So he would kind of coach clients on how to work the way that Kodak worked. This was kind of a clever workaround, like he was trying not

to sell outright patented information to others. He was trying to avoid a crystal clear violation of the law, but he was playing in a very gray area himself. So Kodak gets wind of something going on when one of its competitors said, hey, a former manager who used to work for y'all offered to tell us how you do everything. So then Kodak conducts a little sting operation of their own. A Kodak executive pretended to be a representative of a

Chinese company that was just getting into film manufacturing. So, posing as this supposed Chinese executive, he offered Warden a buttload of cash in return for some trade secrets from Kodak, and Warden said he would not sell any patented technology, but he did offer to bend the rules so that pretty much everything else would still be on the table.

Kodak then contacted the FBI. The FBI investigated Warden and they found that he had pretty much all the documentation you needed to copy some of Kodak's most important processes in manufacturing. So the FBI arrested Warden, and at this point, like I said, the Espionage Act of nineteen ninety six hadn't been signed into law, so they couldn't charge him on that act because it was not yet law. Instead, they held him on a charge of transporting stolen property

across state lines. Now, he ultimately would plead guilty to this charge, and he received a sentence of one year in prison, three months of house arrest, three years of probation, and a fine of thirty thousand dollars. Again, that's a lot, I mean thirty grand. That's a lot of money to

get hit with as a fine. But when you're looking at the possible damage that this would do to a company like Kodak, where you're talking about countless millions of dollars that had been spent on creating the system in the first place, and then the weight of that secrecy. It was obviously an important thing at Kodak, where they were trying to keep it compartmentalized as much as possible. Thirty grand is nothing compared to the damage that you

could do. Now let's talk about a case that was total garbage, and by that I mean it involves total garbage. I'm talking about Oracle's fight with Microsoft. Now, some of y'all might already know where this story is going. You might have memories of this, but let's set the stage for everybody in case you either are young, maybe you weren't all round when this happened, or maybe you've just forgotten.

But first we have to understand the parties involved. Right, you've got Oracle, which is a computer technology company, and back in two thousand, when this story was unfolding, it was primarily known as a database software company. These days, Oracle does tons of stuff. To call it a database software company would be reductive. They are a big player in things like cloud computing. Oracle is also the company that actually houses TikTok's servers, the servers that hold information

about American citizens. You might remember that was like a big deal during President Trump's administration was that TikTok would make certain that it would sequester its servers from its parent company byte Dance, which is a Chinese company, and that Oracle would end up housing the servers that TikTok would use for American citizen data. Well, anyway, before all that would happen, Oracle was really a software database company,

and one of their big corporate competitors was obviously Microsoft. Now, since the early nineteen nine Microsoft had really been on the defensive with the US Department of Justice because the government was concerned that Microsoft was essentially operating monopoly because spoiler alert, they were kind of operating a monopoly specifically in the consumer computer space. You know, things like Windows was practically the default operating system for most computers at

that time. Like Apple did have a presence, but it was a sliver of the pie. It was essentially Microsoft's world. They could operate like a monopoly since they made the operating system and they also made other types of software like productivity software think about the Office Suite of programs. There was this concern that Microsoft was using the leverage of having operating system dominance to also dominate in those other areas. And to suppress competition from other software companies

like Oracle. And Microsoft had essentially agreed to in the early nineties that it would keep Windows and its other products separate. That yes, you could buy Microsoft Office, but that it wouldn't be deeply integrated into Windows, so that customers, whether they were you know, end consumers or PC manufacturers or whatever, would have the freedom to choose which software products they actually wanted to run on their Windows machines and not force them to go all in with Microsoft

branded products. So that way, if you wanted to use Word Perfect instead of Microsoft Word, or you want to LOADUE one, two three instead of Excel, that would be fine. Except Microsoft did package Internet Explorer with Windows, and the two were heavily integrated together, and the Department of Justice was concerned about that, as were companies like Netscape. Now Microsoft was essentially saying, hey, yeah, no, no, no, no, no, you don't get it. Internet Explorer isn't a product, It's

just a feature of Windows. But since the word competing internet browsers on the market like Netscape, that argument didn't really fly with the government, and so you had this massive antitrust lawsuit brought against Microsoft by the United States government. But justice does not move swiftly here in the US most of the time, and this issue dragged on for

the full decade. So as two thousand came around, we were finally getting to a point where the judge in the case was nearing a decision as to whether Microsoft had been acting as a monopoly or not. From a legal perspective, Oracle clearly had something to gain here with that decision, But Oracle also wanted to see Microsoft's hold slip a bit so that Microsoft couldn't just throw its

weight around and dictate terms to everybody else. And then an organization called the Independent Institute took out a full page of ads and newspapers across the United States, and this ad quoted different academics who said that the government was unfairly targeting Microsoft and didn't have any justification to

say that the company was behaving as a monopoly. And the folks at Oracle began to wonder just how independent that Independent Institute was, and they suspected that, in fact, it might be a group that perhaps received some funding and direction from Microsoft itself in an effort to shape public opinion about the case and to coerce the judge into dismissing the whole thing, and then they decided they

were going to find out. I'll talk about how they did that after we come back from this quick break from our sponsors. Okay, so Microsoft is under the microscope by the US government. It is on the defensive. It's trying to claim it's not acting as a monopoly. And this supposed independent Institute of Academics publishes these ads, buys ads, but all the goodness of their hearts, they purchase ads and newspapers across the United States to say, hey, government,

they're overstepping yourself. This is not a case of monopoly. And moreover, you don't really have the jurisdiction or authority to do this. This is anti American, it's bad for business, et cetera, et cetera. So the folks in the Oracle are saying, I think something's up, don't. I don't think this is really an independent group at all. So the executives at Oracle then hire on a firm, a couple of firms actually, but the one we really want to

talk about. The investigators were from a firm that was called IGI to look into the whole thing, and the executives told IGI do whatever it takes as long as it's within the boundaries of the law, and find out if micro Soft is actually funding this supposed independent institute.

So IGI came back to Oracle with receipts. Like literally, IGI found documentation linking a one hundred and fifty three thousand dollars payment from Microsoft to the institute, and a New York Times journalist was then given access to this little nugget of information and published an article about it. And when that article showed up and it showed this link between Microsoft and the supposed independent institute, well there was a lot of egg on Microsoft's face, and there

was some suspicion that IGI had stolen that information. The president of the Independent Institute said as much. But the truth appeared to be that IGI didn't steal anything because stealing is obviously illegal and they were told to operate within the bounds of the law. So what IGI had done was they went on a little dive. They literally sifted through the trash from the Independent Institute until they were able to find a copy of financial statements that

included the Microsoft payment information. That was not the end of it, however, Oracle also directed IGI to investigate another organization called the National Taxpayers Union, which, like the Independent Institute, had been shaming the US government for having the audacity to go after Microsoft, that little scrappy mom and pop store that just happened to be run by a massive billionaire. Keep in mind that Oracle was also being run by a billionaire. But this is two billionaires kind of hating

on each other. So I'm all for it. If billionaires want to rock'em sockem robots for my entertainment, have ad it? I say. Anyway, IGI once again took to the garbage cans and found evidence that Microsoft had paid this so called National tax Payers Union around two hundred thousand dollars.

So IGI made sure through a different organization that the Washington Post got access to this little bit of info, and the Washington Post posted an article that once again showed Microsoft was kind of astroturfing by paying all these different supposed independent organizations to say that Microsoft had done nothing wrong and that in fact, the US government was harming American commerce through this this whole court case in

the first case. Now, around the same time, some other organizations that were on Microsoft side reported that on occasion people were showing up to their various corporate headquarters claiming to be someone they were not. That strangers were showing up and claiming to be representatives of various organizations or you know, high level executives or something, and that sometimes stuff would go so missing after these visits, like say

a laptop with company information on it. Now, nothing solid would link these supposed incidents to Oracle or to the firms that Oracle was using, like IGI, but the implication was that Oracle was not just sifting through garbage or not just using investigators to sift through garbage, but we're outright stealing stuff in order to show that Microsoft was kind of behind all these supposed independent groups and that

therefore there was you know, law breaking going on. But again there was no firm evidence to actually show that this was the case. Now, eventually, while this is all going on, at least initially, no one knows that Oracle's doing this. Right, these these articles are coming out, but it's not clear where the information came from that ends up being you know, the central point of the article.

So New York Times and the Washington Post they start publishing these articles linking Microsoft to these different groups but there was no clear link to where this was all coming from. Eventually, Oracle's role became public knowledge, and at that point, Lawrence Ellison, the billionaire behind Oracle, was completely unrepentant.

He did not apologize. He said the stuff that was directly linked to his company wasn't technically illegal, like some of it might be considered, you know, unsavory that you're sifting through garbage or whatever, but it wasn't against the law. And further, he was saying Microsoft is the real bad guy here. The company is essentially trying to sell the story that anything that would be bad for Microsoft would also be bad for the United States of America, which

just isn't the case. And it was a completely disingenuous argument. So he's like, I don't feel sorry about this at all. I absolutely feel I'm justified in investigating Microsoft's connection to these groups that supposedly are saying they're coming forth on their own to defend Microsoft. There are a ton more examples of things that happen in that case as well. You could do just a full episode that really dives

into that one. It was a juicy one, but we should probably conclude this episode with just one more espionage case to talk about. There are a lot of other ones I could choose from. I mean, there's a Lewandowski Waimo Uber story that I feel I need to follow up on I've talked about in past episodes many years ago. But instead, let's talk about a case of espionage in which a company spied on its own boardroom and its

executives and employees. Shall we. So at this point, chronologically, we're up to the mid two thousands, so it's after the dot com crash, and the tech industry is kind of on the road to recovery, really being shaken by the whole dot com bubble bursting. The company we're talking about is Hewitt Packard or HP, and it had been through some chucha changes, as David Bowie would say. In nineteen ninety nine, HP had brought on Carly Fiorina as the new CEO for HP. She came in from outside

the company. She jumped the head of internal candidates who were under consideration for CEO, and she took charge of it. Now, that was something that some people on the board weren't

really crazy about. In fact, a lot of people at HP weren't crazy about it, and she had never held a CEO level position before, and according to some her appointment was due to members of the Board of directors kind of playing game of thrones against each other that it was a really toxic environment at the board level, and it sounds like things got really nasty. It sounds like there was like this generational gap between two halves

of the board. Now, HP traditionally had this group of principles that its founders had suggested were like the guiding light for their managerial style at HP. So these were kind of like the commandments from HP. They were considered to be like the ethical core of the company. The principles included we have trust and respect for individuals. We focus on a high level of achievement and contribution. We conduct our business with uncompromising integrity. We achieve our common

objectives through teamwork. We encourage flexibility and innovation in how the company is managed. But by this point in HP's history, those principles were starting to become what Barbosa in parts of the Caribbean would say were more like guidelines than actual rules, and Carly Fiorina viewed these princes as being outdated and actually holding HP back from taking its place

in the next century. So she started making some really drastic changes at HP that included stuff like asking employees to take pay cuts so that they could avoid layoffs, and then following that with massive layoffs. And to say that she was unpopular among the HP staff is putting it lightly. She also had some supporters in the boardroom,

and then she had some enemies in the boardroom. She herself was chair of the board and CEO, so she would have these brutal corporate fights with the rest of the board in order to see her vision through, including a massive merger with Compact, which at the time was one of the largest mergers ever. So she fought these battles in the boardroom, and some battles she won, but

she didn't win all of them. In fact, in two thousand and four, the rest of the board succeeded in forcing Carly Fiorina to resign from HP, and they said that she had just done a massive amount of damage to the company and that she had forced the company to abandon its corporate culture. It was just a really nasty situation. Her replacement as chair of the board was a woman named Patricia Dunn. Patricia Dunn had been CEO

of Barclay's Global Investors in the past. She had also been a member of HP's board of directors since two thousand and one, so she was no stranger to that environment. And starting in early two thousand and five, someone began leaking information about boardroom activities and discussions and meetings to the press. And this obviously was a huge no note. It also meant that whoever was doing this was at a very high level or who had access to very

high level information. Now, there was a lot of distrust and animosity at the company at the leadership levels, including amongst various members of the board who just did not like each other. And then here's done as chair of the board and she wants to clamp down on all of these leaks. They're harming the company. They're hurting her ability to help lead the company or at least to guide the company as chair of the board. Now, how much of what would follow was directly under her guidance

is a matter of dispute. She would maintain that she was unaware of the particulars. She just had sort of the big vision kind of view of what was going on. Others would argue that she was much more responsible than she led on. But what happened was she turned to an independent security company to investigate the situation, to find out where are these leaks coming from, who is the person who's privy to these board proceedings, who has loose lips.

To do this, the security team would use a method called pretexting, like this is what you do before you send a text message. No, I'm talking about a pretext like an invented situation that gives you the ability to put leverage on someone to trick them. It's a kind of social engineering. It's what hackers do all the time. When a hacker shows up at a company claiming to be a representative from it, they are pretexting. So that's what the security team was doing to various folks at HP.

That included members of the board, that included some high level executives, included some of their staff. And what the security team was trying to do was to get access to people's personal phone records. They would include ways of contacting the phone companies directly and try to get records. Trying to get these phone records, they were posing as different people in order to do that. So HP was spying on their own, their board members, as well as

high level executives and other staff. This skullduggery did not go unnoticed, however, so word got to the US House Committee on Energy and Commerce, a very high level group, and the committee launched its own investigation. Its subpoenad done as well as some other executives over at HP to appear before the committee and give testimony as to what

the heck was going on. And they were not super keen on a company using security professionals with all sorts of these underheaded methods used to spy on people, because the government doesn't like it if they're not the ones

doing that kind of thing. Anyway, the use of pretexting became really the center point of this whole investigation, as well as how much insight Done had into what had been going on, as well as the legality of everything, because at least some of the actions were not illegal as classified under California law at the time, for example, but there are other things that were illegal that were classified under stuff like wire fraud. The whole scandal got

really ugly. Board member George Keyworth was identified as the source of the leaks, although he continued to deny his involvement. He said that he was not the source of the leaks, but that was who it got penned on, and he was removed from the board. Another board member, a friend to George Keyworth named Tom Perkins, quit the board in protest. When Keyworth was removed. He said, I said I'm leaving as well. And Perkins was a real staunch opponent to

Patricia Dunn. The two did not like each other at all. Perkins then communicated with an attorney named Viet Din. Viet Den figured out that there was no way HP could have conducted this investigation legally. There just wasn't. Like the way that they had to get this information meant that they had to engage in illegal activities in order to do so. So he was like, this is bad news,

and Perkins said that Done was responsible for the whole scandal. Done, however, said that Perkins was the one who was responsible and the whole spying scandal was really just a ploy to get Patricia Done removed from HP board in the first place, and if that's the case, well it kind of worked. But Perkins himself was not on the board either. Both Perkins and Don would resign from the board of directors. Dunn left the board while she was also under investigation

for her role in the whole affair. A bunch of people were brought up on charges, including Patricia Dunn, but a judge would later drop the charges against her, and all charges brought against other members of HP board and executive staff were dropped as well. No one in HP was found guilty of anything or had their charges saw through. In fact, the only person who actually saw jail time as a result of all of this was one of the security investigators from that independent company, Brian Agner is

his name. He got a three month sentence for his part in securing those private phone records, but no one at HP served any time at all. Now that doesn't mean the company got off lightly. For one thing, the board level leadership was in a right state of disarray. I mean, it was just undeniable that it was this toxic environment of people who did not see eye to eye. That situation also prompted the state of California to update its laws to make it much more clear that the

practice of pretexting is absolutely illegal. And on top of all that, HP's reputation took a huge hit. It was obvious the company had moved far away from the old HP way days, you know, back with those five principles. So yeah, it was an ugly situation and it did not help HP at all during a period that was pretty tumultuous for the tech industry as a whole. So there you go. There's some examples of industrial espionage. Like

I said, those are just a few. There were actually quite a bunch that made my list that you know, it just got too long for me to do all of them. But maybe I'll revisit this topic in the future, maybe do some deep dives on a couple of other ones, because it's fascinating to see the links that companies will go to in order to find out information that they don't easily have access to. It gets a little James

BONDI or Mission Impossibly or something. Anyway, I hope all of you out there are well and I will talk to you again really soon. Tech Stuff is an iHeartRadio production. For more podcasts from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, or wherever you listen to your favorite shows.