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Eye-Spy

A case study on corporate espionage

In an attempt to understand & assimilate the an


aspect of ‘Corporate Behavior’ we study this real-
life example of corporate misdoing & unethical
practice.

The Pentagon
6/4/2008
PART 1
WHAT IS ‘CORPORATE ESPIONAGE’?
In an attempt to understand the deep rooted meaning of the term ‘Corporate
Espionage’, coined over the years with the steady or rather unsteady devel-
opment of the corporate structure in our working environment, we would
trace the etymological way; just as the purists do. To begin with, ‘Corporate’
initially meant ‘united in one body’ (1398, from L. corporatus or corpus which
means body1). However, in due course of time the term & the connotations
attached with it finally paved way for the new age definition which is ‘per-
taining to a corporation or a group come together for a common goal’. Mov-
ing onto ‘Espionage’, it means ‘the systematic use of spies to get military,
political or industrial secrets’ (1793, from Fr. espionnage2). Now going back to
where we started, ‘Corporate Espionage’ basically suggests impregnating a
corporate system or structure with spies or systems so as to facilitate leak-
age of information which could in all probability mar the growth, financial
stability & the prospects of the victim organization to have sustained devel-
opment in future.

Now that we have defined what the purists have to say about ‘Corporate Es-
pionage’ let’s look at it from an objective point of view so as to understand
the magnitude of malpractices that comes under the umbrella of this termin-
ology. Now at this juncture, it’s essential to make a clear demarcation
between the terms ‘Corporate or Industrial Espionage’ & ‘corporate intelli-
gence gathering’. ‘Industrial or Corporate Espionage’ is distinct from legal &
ethical activities such as examining corporate publications, websites, patent
filings and the like to determine the operations of a corporation. All these
come under the gamut of ‘Corporate Competitive Intelligence’. ‘Corporate
1
http://dictionary.reference.com/browse/corporate
2
http://dictionary.reference.com/browse/espionage
Espionage’ would cover illicit activities like theft of trade secrets, bribery,
blackmail & technological surveillance. And with developments that followed
in the recent years, even attempts to sabotage a corporation may be con-
sidered corporate espionage. Although from the looks of the definition the
distinction is crystal clear, in practice it is quite difficult to sometimes tell the
difference between legal & illegal methods.

REAL LIFE INSTANCES OF ‘CORPORATE ESPIONAGE’


The increasing number of real life instances of corporate treachery em-
boldens the importance of the issue at hand. Here are just a few of the more
prominent instances of real-life corporate espionage:

• In 1999, one of the most famous cases of corporate treachery, a


Taiwanese company head was arrested as he was convicted to have paid
an Avery Dennison (U.S. Label manufacturer) employee $160,000 for
the secret formulas for the company’s pressure-sensitive adhesive.

• In 1996, General Motors sued Volkswagen, charging that GM’s former


head of production had stolen trade secrets & turned them over to Volk-
swagen.

• In 2000, Oracle Corporation head Larry Ellison had hired an investigation


firm to dig out embarrassing secrets about Bill Gates headed Microsoft.

• In 2001, FBI arrested two employees from Lucent Technologies for con-
spiring to steal lucent trade secrets & sell them to the Chinese govern-
ment.

• In 2003, Italian auto manufacturer Ferrari charged Toyota with stealing


the design for its Formula One racing car.

In order to have a detailed understanding of issue at hand, we would be


studying the Procter & Gamble vs. Unilever case.
PROCTER & GAMBLE VS. UNILEVER LTD.
“Everyone does competitive intelligence work, but we are shocked at the levels to
which they (P&G) went”

-Unilever Spokesperson, September 20013

“None of the information that was gathered during this (spying) operation was ever
used by P&G or will ever be used. It was an unfortunate situation. We certainly re-
gret that it occurred. We have acted responsibly & promptly to protect Unilever’s in-
terests”

-P&G Spokesperson, September 20014

“Yes, P&G took the right position in approaching Unilever about this (espionage)
activity. But to say the P&G-Unilever event should never happened is overly
simplistic”

-Leonard Fuld, President, Fuld & Co. (Investigation firm), September 20015

These quotes give a fair idea of where are we getting at in the due course of
this case. In September of 2001 the Chairman of P&G Group, Mr. John Pepper,
found himself in a soup when he was alleged to have deployed spies into the
offices of its FMCG competitor, Unilever ltd. P&G was accused to have their
competitive intelligence operatives misrepresent themselves as market ana-
lysts, journos & students to Unilever employees so as to gather some import-
ant information. However, these accusations were outright denied by Mr.
Pepper & P&G top notches.

3
"Shampoo Giants Tell Spies to Wash and Go," www.commondreams.org, September 01,
2001.
4
"P&G Comes Clean on Spying Operation," Fortune, August 30, 2001.
5
"Competitive Intelligence Guru Fuld: Media Confuses Dumpster Diving With Competitive In-
telligence," Business Wire, September, 06, 2001.
This was an easy rub-off for the P&G group; however the matter didn’t end
there. Once this matter was dead & buried another issue cropped up when
Mr. Pepper discovered that Mr. Jerry Vaughan (name changed) & Ms. Rita
Skeeter (name changed), top managers in P&G’s competitive analysis de-
partment engaged in corporate spying practices at its rival corporation, Uni-
lever Ltd. The internal spying operation gathered about eighty documents
detailing Unilever’s plans for the U.S. hair care business over the next three
years, including critical information such as launch-plans, prices & margins.
The entire event came as a rude shock to Mr. Pepper, who had not commis-
sioned (rather claimed not to) such an operation.

The modus-operandi of this entire fiasco was conceptualized by Mr. Vaughan


& Ms. Skeeter in close alliance with Mr. Thomas Ellison (name changed),
head of a Cincinnati based organization ‘The Ranch’. The spies deployed en-
gaged in an activity called ‘Dumpster Diving’ or ‘Rubbish archeology’ which
in common parlance means to ‘scanning through someone’s rubbish or
dump’. This included rummaging through dumpsters on Unilever’s property
in search of any unshredded document containing key strategic plans. Al-
though, during those times it was ridiculed as a spying technique amongst
the peer group, the method held rich dividence in this case.

The top bosses at P&G were perfectly aware of the fact that their snooping
did not put them to the wrong side of the law; however, Mr. Pepper main-
tained that these activities did not comply with the company’s internal
guidelines for business practices. Following which the chairman found him-
self in a situation where his subordinates hadn’t violated the law but did get
involved in an illicit practice according to his company policies. Also, in highly
competitive industry, he was exposed to trade secrets of his closest compet-
itors which could go a long way in helping him outshine Unilever. What would
Pepper do?
Mr. John Pepper announced it in public about the illicit activity that his subor-
dinates were involved in, & assured Unilever about his stand on the whole is-
sue. What followed was the dismissal of the managers from the organization.