By Francisco Mateo, CPP, CFE
I previously posted about the Lloyd’s 360 Risk Insight findings on the increased risk of “piracy, kidnapping and government expropriations, which have been exacerbated by the global financial crisis.” Likewise, economic espionage is another threat to business value. There has been an increase lately leading to notable cases.
Such is the case of Sergey Aleynikov, a former Goldman Sachs Group Inc computer programmer accused of stealing secret trading codes from the financial firm which cost nearly $50 million to produce.
In a recent disclosure financial industry giant Deutsche Bank recently fired two executives, Wolfram Schmitt, head of investor relations, and Rafael Schenz, German security chief for their involvement in retaining an investigations firm to gather information on activist shareholder Michael Bohndorf and media tycoon Leo Kirch. The improper acts took place over the last 4 years. The case highlights how commercial espionage cases transcend companies from diverse industries.
A recent Stuff Magazine in New Zealand noted on Business spies on the rise, as they try to gain an edge over each other’s business in a tough business environment. What is remarkable about these cases is that even small businesses are joining the act.
The current trend indicates that economic espionage would continue to grow in significance for both businesses and governments. Most recently Chinese authorities arrested 4 Australian mining firm, Rio Tinto, employees accused of “bribing Chinese steel company employees to obtain confidential information on China’s negotiating position in the talks.” The arrest of Stern Hu, an Australian national who up until his arrest was Rio Tinto’s GM in China, has been received with stern condemnation from the Australia’s foreign minister. Ironically there have been notable espionage cases involving Chinese nationals in the US. David Yen Lee is a Taiwan native facing a five-count indictment alleging theft of trade secrets from Valspar Corp., a publicly traded maker of household paint and other coating products. Other cases include Hanjuan Jin a former software engineer at Motorola Inc. accused of stealing commercial and military secrets. The most notable case is that of Chinese citizen Dongfan “Greg” Chung former aerospace engineer at the Boeing plant in Huntington Beach, California; convicted in the first-ever trial under the Economic Espionage Act, for taking 300,000 pages of sensitive documents that included information about the U.S. space shuttle and booster rockets.
The growing economic espionage problem highlights the difficulties of protecting intellectual property from competitors worldwide. The trend calls for increase vigilance and counterintelligence efforts at all levels. I recently posted on the successful strategy at Apple, which has nourished a culture of honesty and awareness. Some of the strategies include:
- Hardening R&D areas with elaborate access control schemes.
- Some companies employ Technical Surveillance Countermeasures (TSCM) like office debugging sweeps periodically.
- Keeping a tight lid on information access and dissemination, through, security awareness, non-disclosure agreement, etc.
- Security cameras in areas where employees are working on important projects.
- Cloaking and disinformation are also part of a counterintelligence/counter-surveillance strategy.
Regardless of the strategies companies use, prudence should prevail since lack of transparency regarding a company’s products or services can be counterproductive from a shareholder point of view. Regardless of your company’s size, all strategies should be evaluated with the right internal stakeholders (Legal, marketing, corporate security, etc.) before execution.