Notable Corporate Espionage Cases in September

Korean Daewoo Engineers Defect to Russian Automaker With Subcompact confidential files

In a story filled with high-tech international intrigue, tragedy, financial loss and four cylinder engines, GM Daewoo alleges an upstart Russian automaker is selling a new car based on a stolen Daewoo design.  Shortly after resigning from Daewoo, two engineers known only as Mr. Hwang and Mr. Jeong began working at the Korean subsidiary of Russian automaker TagAZ. According to the Korea Times, Daewoo alleges that Jeong copied over 6,000 confidential files detailing the design and engineering of the new Lacetti – sold in the US as the Chevrolet Cruze – and brought them to his new employer where they were integral to the development of the TagAZ C-100.  Our Russian is rustier than a ‘73 Lada, but apparently TagAZ is best known for (re)building Hyundai automobiles from knockdown kits in Russian factories. The C-100 would have been their first original vehicle, had they actually designed it themselves.  Charges of industrial espionage are taken quite seriously in Korea, and with good reason: A GM Daewoo spokesperson said that developing a new model such as the Lacetti could cost over $245 million. “When prosecution authorities complete investigations into the case, we will consider filing a damages lawsuit against TagAZ Korea,” GM Daewoo spokesman Kim Sang-Won told Agence France Presse.  In early September, Hwang and Jeong were arrested and could face up to ten years in prison. And that’s not the worst of it: According to the China Post, a potential co-conspirator was found hanged in his office at TagAZ with a suicide note claiming innocence.  We took a look at photos of both the Lacetti and the C-100 and — given the choice — would definitely prefer the original. While most of the stolen technology is sitting under the hood, the C-100 bears a striking resemblance to the last generation Lacetti, still sold as the EX. The EX looks about ten years older than its Cruze-cousin counterpart, the Lacetti Premier. Still, if the Cruze catches on we wouldn’t be surprised if some Russian gearhead glues a bowtie on the grill of his TagAZ.   (Wired, 30 Sep 09)

Hilton executive Ross Klein in corporate ‘espionage’ case exits

Hilton Hotels Corporation, the American hotel behemoth, has replaced Ross Klein as global head of luxury and lifestyle brands after a lawsuit brought by Starwood Hotels, his former employer, accused him of looting confidential information.   Sources close to the company confirmed today that Mr. Klein, who had been placed on paid administrative leave in April after the launch of the legal action, has now left Hilton. He is being replaced by John Vanderslice, former chief executive of Miraval Spa in Tucson, Arizona.   The news that Mr. Klein has left will reignite speculation that Hilton, which is also being sued, is close to agreeing a settlement with its rival aimed at drawing a line under what the writ called “the clearest imaginable case of corporate espionage, theft of trade secrets, unfair competition and computer fraud”.   The lawsuit, filed in the US District Court for the Southern District of New York, alleges that Mr. Klein and Amar Lalvani, a former Starwood colleague who defected with him to Hilton, “stole massive amounts of proprietary and highly confidential Starwood information”.  It alleges that this information “was used to expedite Hilton’s entry into the lifestyle hotel market, reposition its luxury brands and substantially reduce its costs and risks of doing so”.  The suit claims that Mr. Klein and Mr. Lalvani “directly and through other Starwood luxury brands employees they recruited to Hilton, stole more than 100,000 electronic files before and after they joined Hilton”.  It adds that confidential information on Starwood’s successful W brand was used in the development of the Denizen brand, launched by Hilton in March in a blaze of publicity. (Times Online, 22 Sep 09)


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