1 00:00:04,440 --> 00:00:12,520 Speaker 1: Welcome to Tech Stuff, a production from iHeartRadio. Hey thereon 2 00:00:12,640 --> 00:00:16,160 Speaker 1: Welcome to Tech Stuff. I'm your host, Jonathan Strickland. I'm 3 00:00:16,160 --> 00:00:19,680 Speaker 1: an executive producer with iHeart Podcasts and how the tech 4 00:00:19,720 --> 00:00:23,560 Speaker 1: are you? So? In past Tech Stuff episodes, I've talked 5 00:00:23,640 --> 00:00:27,920 Speaker 1: a lot about stuff like intellectual property and patents and 6 00:00:28,040 --> 00:00:30,440 Speaker 1: that kind of thing, and a lot of those episodes 7 00:00:30,440 --> 00:00:34,080 Speaker 1: dip into how companies can end up causing frustration among 8 00:00:34,560 --> 00:00:39,160 Speaker 1: customers and others by being a little too enthusiastic about 9 00:00:39,200 --> 00:00:42,120 Speaker 1: protecting their IP. But how about we look at things 10 00:00:42,320 --> 00:00:46,120 Speaker 1: from a different angle. Why don't we consider some of 11 00:00:46,159 --> 00:00:50,120 Speaker 1: the cases in which a company experienced a hefty loss 12 00:00:50,200 --> 00:00:54,040 Speaker 1: due to someone yoinking IP that wasn't their own. Today, 13 00:00:54,640 --> 00:00:59,640 Speaker 1: I want to talk about industrial espionage, or corporate espionage, 14 00:00:59,720 --> 00:01:03,840 Speaker 1: or economic espionage. So here in the United States you'll 15 00:01:03,840 --> 00:01:07,560 Speaker 1: often hear about the threats of industrial espionage to the 16 00:01:07,600 --> 00:01:11,120 Speaker 1: tech sector as well as to national security, usually with 17 00:01:11,160 --> 00:01:14,120 Speaker 1: the implication that China is behind it all. At least 18 00:01:14,200 --> 00:01:17,040 Speaker 1: in recent years, that's been the narrative. That is a 19 00:01:17,160 --> 00:01:21,680 Speaker 1: driving concern for a lot of legislation and executive orders 20 00:01:21,680 --> 00:01:24,559 Speaker 1: that the US government has issued over the last few years, 21 00:01:24,840 --> 00:01:29,160 Speaker 1: there's this desire to protect US innovations from China, which 22 00:01:29,200 --> 00:01:32,920 Speaker 1: we see manifest in some hefty trade restrictions and that 23 00:01:33,040 --> 00:01:37,360 Speaker 1: kind of thing. But first let's define some terms. So, 24 00:01:37,920 --> 00:01:43,200 Speaker 1: industrial espionage generally covers the situation in which one party 25 00:01:43,400 --> 00:01:46,720 Speaker 1: is spying on the operations of another party, typically a 26 00:01:46,840 --> 00:01:51,240 Speaker 1: company of some sort, in an effort to discover trade secrets. 27 00:01:51,560 --> 00:01:56,080 Speaker 1: The end goal usually is to give some competitor and advantage, 28 00:01:56,200 --> 00:02:01,120 Speaker 1: or to potentially copy the company's work elsewhere, or maybe 29 00:02:01,480 --> 00:02:04,720 Speaker 1: even just to hurt the target company. We're gonna look 30 00:02:04,720 --> 00:02:10,160 Speaker 1: at a whole array of different motivations for corporate espionage 31 00:02:10,200 --> 00:02:14,480 Speaker 1: in this episode. And you know, industrial espionage itself may 32 00:02:14,639 --> 00:02:18,040 Speaker 1: or may not be illegal, depending upon the jurisdiction and 33 00:02:18,080 --> 00:02:21,400 Speaker 1: the nature of the espionage. It could just be considered 34 00:02:21,520 --> 00:02:25,240 Speaker 1: very bad ethics, depending again on the situation. In addition, 35 00:02:25,320 --> 00:02:29,120 Speaker 1: if other factors are involved, matters can clearly escalate. So 36 00:02:29,240 --> 00:02:32,200 Speaker 1: here in the United States we have the Economic Espionage 37 00:02:32,280 --> 00:02:36,519 Speaker 1: Act of nineteen ninety six. This act actually has two provisions. 38 00:02:36,919 --> 00:02:39,800 Speaker 1: The second of the two provisions is your plain old, 39 00:02:39,840 --> 00:02:44,040 Speaker 1: everyday industrial espionage. So essentially, a case where something like 40 00:02:44,120 --> 00:02:48,280 Speaker 1: Company A wants to know how Company B makes its widgets, 41 00:02:48,600 --> 00:02:52,639 Speaker 1: and so Company A sends in a spy to work 42 00:02:53,080 --> 00:02:56,840 Speaker 1: at Company B and then ferret out the secrets and 43 00:02:56,880 --> 00:02:59,720 Speaker 1: then bring it back to Company A so that they 44 00:02:59,720 --> 00:03:02,400 Speaker 1: can capitalize on it and then just claim like, oh, no, 45 00:03:02,560 --> 00:03:05,960 Speaker 1: we reverse engineered the technology, or we came up with 46 00:03:06,040 --> 00:03:09,200 Speaker 1: our own way of doing this. We didn't violate IP 47 00:03:09,400 --> 00:03:14,120 Speaker 1: in any way. The first provision of the Economic Espionage 48 00:03:14,160 --> 00:03:16,200 Speaker 1: Act deals with cases in which the aim of the 49 00:03:16,320 --> 00:03:21,880 Speaker 1: espionage is to benefit a foreign government, instrumentality, or agent. 50 00:03:22,320 --> 00:03:26,480 Speaker 1: So this is international economic espionage baby, and as such 51 00:03:26,600 --> 00:03:29,480 Speaker 1: it is viewed as being a very serious matter. Indeed, 52 00:03:29,720 --> 00:03:34,079 Speaker 1: that'd be fair. Really, all industrial espionage can be serious stuff. 53 00:03:34,320 --> 00:03:36,640 Speaker 1: So we're going to talk about some specific cases of 54 00:03:36,880 --> 00:03:40,800 Speaker 1: espionage in the tech sector and what happened. Now. I'm 55 00:03:40,840 --> 00:03:43,120 Speaker 1: not going to be talking about a few of the 56 00:03:43,200 --> 00:03:47,040 Speaker 1: really big espionage cases because they didn't really happen in tech, 57 00:03:47,560 --> 00:03:51,760 Speaker 1: Like there was one industrial espionage case that involved a 58 00:03:51,800 --> 00:03:56,160 Speaker 1: company that makes adhesives, which admittedly was a sticky situation, 59 00:03:56,560 --> 00:03:58,880 Speaker 1: but it wasn't a tech company. I am going to 60 00:03:58,880 --> 00:04:02,960 Speaker 1: talk about these stories in chronological order, and we'll start 61 00:04:03,000 --> 00:04:06,440 Speaker 1: in the nineteen eighties. So first up, let's talk about 62 00:04:06,520 --> 00:04:11,560 Speaker 1: IBM and the company Hitachi. So our story begins with 63 00:04:11,920 --> 00:04:16,200 Speaker 1: a guy named Raymond Cadet, and Cadet had worked as 64 00:04:16,240 --> 00:04:19,480 Speaker 1: a computer scientist for IBM, but he had left the 65 00:04:19,480 --> 00:04:22,159 Speaker 1: company in nineteen eighty in order to go work for 66 00:04:22,240 --> 00:04:28,760 Speaker 1: another business called National Advanced Systems or NAS. Now, Allegedly, 67 00:04:29,279 --> 00:04:32,760 Speaker 1: upon his departure from IBM, Cadet had a case of 68 00:04:32,760 --> 00:04:38,160 Speaker 1: sticky fingers and he took with him ten three ring 69 00:04:38,279 --> 00:04:43,279 Speaker 1: binder workbooks about the IBM's upcoming THREEH eight X series 70 00:04:43,320 --> 00:04:47,920 Speaker 1: of computers. Now, there were twenty seven of these types 71 00:04:47,960 --> 00:04:52,039 Speaker 1: of workbooks total for these systems, twenty seven totals, so 72 00:04:52,080 --> 00:04:56,120 Speaker 1: he only came away with ten volumes of the twenty seven, 73 00:04:56,400 --> 00:04:59,680 Speaker 1: so he had fewer than half of all the workbooks. 74 00:05:00,200 --> 00:05:04,520 Speaker 1: His boss at NAS, a man named Barry Safe, allegedly 75 00:05:04,560 --> 00:05:08,320 Speaker 1: made photo copies of those ten binders, and in nineteen 76 00:05:08,360 --> 00:05:12,279 Speaker 1: eighty one, Sefei traveled to Japan, and according to the 77 00:05:12,400 --> 00:05:16,400 Speaker 1: US Department of Justice, he then handed those copies of 78 00:05:16,440 --> 00:05:21,560 Speaker 1: these ten workbooks to executives at Hatachi because NAS was 79 00:05:21,720 --> 00:05:25,800 Speaker 1: marketing Hatachi computers back in the United States, so it 80 00:05:25,880 --> 00:05:29,760 Speaker 1: was kind of like saying, hey, here's IBM's information on 81 00:05:29,839 --> 00:05:33,560 Speaker 1: this upcoming system of computers so that you can get 82 00:05:33,640 --> 00:05:37,280 Speaker 1: the jump on creating your own compatible components and thus 83 00:05:37,640 --> 00:05:41,320 Speaker 1: undercut IBM's sales. So word got back to IBM that 84 00:05:41,440 --> 00:05:45,480 Speaker 1: something hinky was going on when a Hatachi computer engineer 85 00:05:45,520 --> 00:05:50,600 Speaker 1: named Kinji Hayashi revealed to a computer consultant named Maxwell 86 00:05:50,640 --> 00:05:54,240 Speaker 1: Paley that Hitachi had ten of these twenty seven volumes 87 00:05:54,279 --> 00:05:58,960 Speaker 1: from IBM and that he, that is, Hayashi, would be 88 00:05:59,160 --> 00:06:03,280 Speaker 1: really interesting did in acquiring any of the other volumes 89 00:06:03,480 --> 00:06:06,000 Speaker 1: that happened to be out there, you know, if Pailey 90 00:06:06,240 --> 00:06:10,960 Speaker 1: happened to have access to the other seventeen volumes. So 91 00:06:11,920 --> 00:06:15,360 Speaker 1: Pale immediately smelled something fishy. He was also a former 92 00:06:15,440 --> 00:06:19,800 Speaker 1: IBM employee before he became an independent consultant, so he 93 00:06:20,000 --> 00:06:23,520 Speaker 1: sussed out that Hitachi must have gained possession of those 94 00:06:23,600 --> 00:06:27,479 Speaker 1: workbooks without IBM's consent, because it wasn't the sort of 95 00:06:27,520 --> 00:06:30,960 Speaker 1: thing that Big Blue would be sharing just in general. 96 00:06:31,360 --> 00:06:34,960 Speaker 1: So Pilee then calls up one of his former colleagues 97 00:06:34,960 --> 00:06:39,760 Speaker 1: who was still at IBM, and Pailey says, hey, I 98 00:06:40,000 --> 00:06:44,760 Speaker 1: was chatting with this computer engineer over at Hitachi, and 99 00:06:45,080 --> 00:06:49,159 Speaker 1: he had access to ten of your twenty seven workbooks 100 00:06:49,600 --> 00:06:53,200 Speaker 1: about the upcoming three H eight X series of computers. 101 00:06:53,560 --> 00:06:59,719 Speaker 1: Is that cool or is something shady happening? So immediately 102 00:07:00,400 --> 00:07:03,600 Speaker 1: IBM recruited Pailey to come on and act as kind 103 00:07:03,600 --> 00:07:07,800 Speaker 1: of a spy for themselves. So they partnered Paley with 104 00:07:07,880 --> 00:07:12,560 Speaker 1: another fellow named Richard Callahan. And before Richard Callahan had 105 00:07:12,640 --> 00:07:15,080 Speaker 1: joined IBM to be like kind of like a head 106 00:07:15,120 --> 00:07:18,200 Speaker 1: of security, he had been a captain in the Marines. 107 00:07:18,240 --> 00:07:22,960 Speaker 1: He also had been an FBI agent, so he meant business. 108 00:07:23,280 --> 00:07:26,400 Speaker 1: So Pialee was able to go back to Hayashi you 109 00:07:26,440 --> 00:07:30,240 Speaker 1: know who again. Hayashi worked for Haitachi, and Paley told 110 00:07:30,280 --> 00:07:34,520 Speaker 1: Hayashi that, you know, I need to see these workbooks 111 00:07:34,560 --> 00:07:36,720 Speaker 1: to know what I'm looking for. Can you bring them 112 00:07:36,880 --> 00:07:40,000 Speaker 1: to a meeting? And Hayashi said, oh, yes, sure, and 113 00:07:40,040 --> 00:07:43,960 Speaker 1: he brought three of the workbooks with him and showed 114 00:07:43,960 --> 00:07:47,480 Speaker 1: them to Paley and to Callahan, and this gave enough 115 00:07:47,520 --> 00:07:50,600 Speaker 1: proof to IBM to take the next steps. They then 116 00:07:51,120 --> 00:07:55,880 Speaker 1: prosecuted Hitachi by actually first going to the Justice Department 117 00:07:56,000 --> 00:07:58,320 Speaker 1: with their problem and saying we have evidence that this 118 00:07:58,560 --> 00:08:01,960 Speaker 1: is happening. This would bring the FBI into the situation, 119 00:08:02,080 --> 00:08:05,000 Speaker 1: so the FBI would have their own investigation. So at 120 00:08:05,040 --> 00:08:07,480 Speaker 1: this point we're up to nineteen eighty one. No legal 121 00:08:07,520 --> 00:08:12,160 Speaker 1: action has happened yet, but obviously you have the case 122 00:08:12,240 --> 00:08:16,920 Speaker 1: of this former IBM manager leaves the company, hands information 123 00:08:17,160 --> 00:08:20,440 Speaker 1: that's proprietary to IBM to his boss. His boss then 124 00:08:20,520 --> 00:08:24,000 Speaker 1: goes and offers the information up to Hitachi Haitachi is 125 00:08:24,040 --> 00:08:27,840 Speaker 1: now seeking the rest of that information. IBM does its 126 00:08:27,880 --> 00:08:30,360 Speaker 1: little sting operation and discovers that this is the case. 127 00:08:30,400 --> 00:08:32,880 Speaker 1: They now go to the FBI, and the FBI then 128 00:08:32,960 --> 00:08:38,079 Speaker 1: launches their honeypot operation. So some FBI agents pose as 129 00:08:38,160 --> 00:08:41,600 Speaker 1: computer consultants who supposedly had high level access to the 130 00:08:41,640 --> 00:08:46,479 Speaker 1: inner workings of IBM, including these other workbooks that Hitachi 131 00:08:46,520 --> 00:08:51,640 Speaker 1: executives wanted. So the FBI agents approach executives from both 132 00:08:51,679 --> 00:08:55,959 Speaker 1: Hitachi and Mitsubishi Electric and they offer to sell trade 133 00:08:56,120 --> 00:09:01,160 Speaker 1: secrets to these Japanese companies. And if they were to 134 00:09:01,559 --> 00:09:03,959 Speaker 1: get hold of these secrets, then they could make computer 135 00:09:04,000 --> 00:09:09,480 Speaker 1: components compatible with upcoming IBM machines. So big big business 136 00:09:09,520 --> 00:09:14,120 Speaker 1: deal here, and Hitachi took the bait. Executives authorized a 137 00:09:14,200 --> 00:09:17,720 Speaker 1: payment of more than half a million dollars for those 138 00:09:17,760 --> 00:09:20,880 Speaker 1: trade secrets, and over the course of seven months, the 139 00:09:20,920 --> 00:09:24,199 Speaker 1: FBI operated this ruse until the US Department of Justice 140 00:09:24,240 --> 00:09:27,280 Speaker 1: was ready to move on the issue. So originally FBI 141 00:09:27,400 --> 00:09:30,120 Speaker 1: agents figured that this operation would take a couple of 142 00:09:30,160 --> 00:09:34,559 Speaker 1: weeks tops, but as they conducted it, they became more 143 00:09:34,600 --> 00:09:38,360 Speaker 1: and more convinced that the issues going on in Tatachi 144 00:09:38,880 --> 00:09:42,920 Speaker 1: weren't just related to a computer engineer right like, they 145 00:09:42,960 --> 00:09:46,000 Speaker 1: went much further up the chain of command. So they 146 00:09:46,080 --> 00:09:48,760 Speaker 1: kept the operation going to try and find out how 147 00:09:48,840 --> 00:09:51,920 Speaker 1: high up does this go. So the FBI alleged that 148 00:09:51,960 --> 00:09:55,839 Speaker 1: more than a dozen Hitachi employees, including high rank executives, 149 00:09:56,400 --> 00:09:59,840 Speaker 1: were responsible for engaging in what was at that point 150 00:10:00,080 --> 00:10:04,400 Speaker 1: the largest industrial espionage case ever in the United States. 151 00:10:04,760 --> 00:10:08,720 Speaker 1: Now in at least one of these situations, Haitachi the 152 00:10:08,720 --> 00:10:13,720 Speaker 1: Company did plead guilty, as did two Hitachi employees. Now. 153 00:10:14,200 --> 00:10:18,400 Speaker 1: Hitachi the Company maintained that the executive leadership was not 154 00:10:18,520 --> 00:10:22,240 Speaker 1: aware that the information was coming in from an illegal source, 155 00:10:22,640 --> 00:10:25,280 Speaker 1: though I don't really know where else it could have 156 00:10:25,440 --> 00:10:29,280 Speaker 1: come from, But the defense was, hey, they thought that 157 00:10:29,360 --> 00:10:33,119 Speaker 1: this was just legitimate information, that nothing was obtained illegally. 158 00:10:33,360 --> 00:10:37,000 Speaker 1: The Hitachi staff who pled guilty received fines of ten 159 00:10:37,040 --> 00:10:40,760 Speaker 1: thousand dollars or less. Hatachi the company settled out of 160 00:10:40,800 --> 00:10:45,079 Speaker 1: court with IBM and submitted to inspections for five years 161 00:10:45,480 --> 00:10:49,839 Speaker 1: so that IBM could actually determine if Hitachi was infringing 162 00:10:49,880 --> 00:10:53,000 Speaker 1: on IBMIP like if they were actually acting on some 163 00:10:53,040 --> 00:10:56,160 Speaker 1: of this information. So while this could have been a 164 00:10:56,160 --> 00:10:58,280 Speaker 1: big case really and you could argue, yeah, it was 165 00:10:58,320 --> 00:11:01,520 Speaker 1: a huge case, the fines were not what you would expect, right, 166 00:11:01,520 --> 00:11:05,559 Speaker 1: We're talking like ten thousand dollars here, five thousand dollars there. 167 00:11:05,800 --> 00:11:08,600 Speaker 1: That's not that much money when you think about the 168 00:11:08,600 --> 00:11:10,880 Speaker 1: things that are going on at the corporate level. But 169 00:11:10,960 --> 00:11:12,760 Speaker 1: we also have to remember this was happening in the 170 00:11:12,800 --> 00:11:16,679 Speaker 1: nineteen eighties. This is before the nineteen ninety six Espionage 171 00:11:16,720 --> 00:11:19,480 Speaker 1: Act was signed into law. IBM, on top of a 172 00:11:19,520 --> 00:11:24,040 Speaker 1: criminal case, pursued a civil case and Hatachi eventually settled 173 00:11:24,040 --> 00:11:26,440 Speaker 1: that one out of court as well for a reported 174 00:11:26,640 --> 00:11:30,400 Speaker 1: three hundred million dollars, which is a big old yaoza. 175 00:11:30,520 --> 00:11:34,760 Speaker 1: Now we are talking as for the National Advanced Systems 176 00:11:35,160 --> 00:11:37,600 Speaker 1: and its parent company of National Semi Conductor. That's the 177 00:11:37,600 --> 00:11:40,360 Speaker 1: company that the former IBM manager had gone to work 178 00:11:40,400 --> 00:11:44,960 Speaker 1: for Well. IBM went after Cadet and Cefe and another 179 00:11:45,120 --> 00:11:49,679 Speaker 1: NAS employee named Tibasuma Yazi, and the case went back 180 00:11:49,720 --> 00:11:52,559 Speaker 1: and forth in the courts. Sometimes a court would find 181 00:11:53,000 --> 00:11:55,800 Speaker 1: for the plaintiffs, sometimes for the defendants, as it would 182 00:11:55,840 --> 00:12:00,440 Speaker 1: get through appeals, and eventually National Semi Conductor ultimately would 183 00:12:00,440 --> 00:12:03,240 Speaker 1: settle out of court in nineteen eighty four for three 184 00:12:03,320 --> 00:12:08,080 Speaker 1: million dollars. So that was the big IBM Haitachi battle. 185 00:12:08,120 --> 00:12:10,600 Speaker 1: Obviously there are a lot more details there, but it 186 00:12:10,640 --> 00:12:13,440 Speaker 1: was already getting pretty complicated just to give the summation. 187 00:12:13,760 --> 00:12:17,560 Speaker 1: So let's move forward a decade to nineteen ninety three. 188 00:12:17,760 --> 00:12:21,680 Speaker 1: That's when the auto manufacturer Volkswagen got into some really 189 00:12:21,720 --> 00:12:25,920 Speaker 1: hot water, which, you know, not that surprising because Volkswagen 190 00:12:25,960 --> 00:12:28,520 Speaker 1: is also the car company that became the center of 191 00:12:28,600 --> 00:12:31,760 Speaker 1: diesel gate. That was when it was discovered that Volkswagen 192 00:12:31,800 --> 00:12:35,520 Speaker 1: had built in a way to fool emissions testing facilities 193 00:12:35,800 --> 00:12:38,679 Speaker 1: with its diesel powered vehicles, so that there was a 194 00:12:38,720 --> 00:12:42,480 Speaker 1: test mode where it wouldn't put out as many emissions, 195 00:12:42,559 --> 00:12:44,440 Speaker 1: but then as soon as it was out of test mode, 196 00:12:44,520 --> 00:12:47,320 Speaker 1: it would go into performance mode and emissions would be 197 00:12:47,679 --> 00:12:51,319 Speaker 1: much worse, they would have failed emissions tests. But as 198 00:12:51,320 --> 00:12:53,800 Speaker 1: it turns out, that's not the only time Volkswagen was 199 00:12:53,840 --> 00:12:58,280 Speaker 1: caught doing something a little bit underhanded. So in nineteen 200 00:12:58,400 --> 00:13:01,800 Speaker 1: ninety three, the company higher to a man named Jose Lopez, 201 00:13:02,120 --> 00:13:07,240 Speaker 1: who previously had worked as a purchasing executive for General Motors, 202 00:13:07,679 --> 00:13:10,040 Speaker 1: and in fact Lopez was in line to become the 203 00:13:10,080 --> 00:13:13,720 Speaker 1: head of North American operations for GM. He was known 204 00:13:13,840 --> 00:13:20,400 Speaker 1: as an incredibly effective purchasing executive, like could just create 205 00:13:20,440 --> 00:13:24,880 Speaker 1: the most killer deals for a company and was absolutely 206 00:13:24,920 --> 00:13:29,120 Speaker 1: cutthroat in his negotiations. Well before he could become North 207 00:13:29,120 --> 00:13:34,280 Speaker 1: American operations lead for GM, Volkswagen swooped in and made 208 00:13:34,360 --> 00:13:38,880 Speaker 1: him an offer he couldn't refuse. Specifically, Volkswagen executives promised 209 00:13:38,880 --> 00:13:42,160 Speaker 1: Lopez that the company would build a manufacturing facility in 210 00:13:42,200 --> 00:13:46,120 Speaker 1: the Basque region of Spain. That was something Lopez had 211 00:13:46,120 --> 00:13:48,720 Speaker 1: wanted for a very long time. He wanted to bring 212 00:13:48,840 --> 00:13:54,400 Speaker 1: manufacturing to his homeland, and so Lopez decided he'd take 213 00:13:54,440 --> 00:13:56,960 Speaker 1: the job. And Volkswagen had been in a bit of 214 00:13:57,000 --> 00:13:59,880 Speaker 1: a struggle before Lopez came on board, but quickly they 215 00:14:00,200 --> 00:14:02,680 Speaker 1: started to turn around for the company and the folks 216 00:14:02,679 --> 00:14:06,160 Speaker 1: back at GM were suspicious, and they accused Volkswagen and 217 00:14:06,280 --> 00:14:11,520 Speaker 1: Lopez of capitalizing on GM trade secrets such as the 218 00:14:11,520 --> 00:14:15,679 Speaker 1: company systems for purchasing parts and also their plans for 219 00:14:15,800 --> 00:14:20,880 Speaker 1: their own manufacturing facility. So these accusations ended up becoming 220 00:14:20,960 --> 00:14:23,760 Speaker 1: a big legal battle that stretched through most of the 221 00:14:23,840 --> 00:14:27,760 Speaker 1: nineteen nineties. It all started in ninety three, and GM 222 00:14:27,760 --> 00:14:31,040 Speaker 1: would subsequently file a civil lawsuit against Volkswagen, and the 223 00:14:31,040 --> 00:14:33,240 Speaker 1: two parties would not come to an out of court 224 00:14:33,320 --> 00:14:37,280 Speaker 1: settlement until nineteen ninety seven. At that point, Volkswagen agreed 225 00:14:37,280 --> 00:14:40,480 Speaker 1: to pay GM a cool one hundred million dollars and 226 00:14:40,600 --> 00:14:44,080 Speaker 1: agreed to purchase one billion dollars worth of GM parts 227 00:14:44,160 --> 00:14:48,800 Speaker 1: over the following seven years. Back in Germany, authorities continued 228 00:14:48,800 --> 00:14:52,440 Speaker 1: to pursue a criminal case against Lopez and three associates 229 00:14:52,480 --> 00:14:56,280 Speaker 1: who followed him over from GM to Volkswagen. Now Eventually, 230 00:14:56,280 --> 00:14:59,120 Speaker 1: in nineteen ninety eight, the police agreed to drop charges 231 00:14:59,200 --> 00:15:03,840 Speaker 1: provided that the four former GM executives donate a substantial 232 00:15:03,920 --> 00:15:07,200 Speaker 1: sum of money to charity. Lopez himself had resigned from 233 00:15:07,240 --> 00:15:10,200 Speaker 1: Volkswagen back in nineteen ninety seven. Then he was in 234 00:15:10,240 --> 00:15:12,560 Speaker 1: a terrible car accident and left him in a coma 235 00:15:12,600 --> 00:15:15,640 Speaker 1: for months in nineteen ninety eight. He did recover, however, 236 00:15:16,000 --> 00:15:19,160 Speaker 1: and is still alive today at the age of eighty three. 237 00:15:20,000 --> 00:15:22,960 Speaker 1: All right, we've got several more cases of espionage to 238 00:15:22,960 --> 00:15:24,840 Speaker 1: talk about, but we need to take a quick break 239 00:15:24,840 --> 00:15:38,800 Speaker 1: to thank our sponsors. Okay, Our next case of industrial 240 00:15:38,960 --> 00:15:43,160 Speaker 1: espionage is arguably on the razor's edge of being a 241 00:15:43,200 --> 00:15:45,880 Speaker 1: text story in the first place. But I think despite 242 00:15:45,880 --> 00:15:48,960 Speaker 1: the fact that it's a close shave, it still counts. 243 00:15:49,200 --> 00:15:53,120 Speaker 1: And this tale isn't about trying to cash in on secrets, 244 00:15:53,120 --> 00:15:56,800 Speaker 1: but rather to make a perceived enemy bleed from one 245 00:15:56,840 --> 00:16:00,680 Speaker 1: thousand cuts. It's the story of Gillette and a guy 246 00:16:00,800 --> 00:16:04,040 Speaker 1: named Stephen Louis Davis. You see what I did there 247 00:16:04,040 --> 00:16:07,120 Speaker 1: with other the razor punds wasn't clear until I got 248 00:16:07,120 --> 00:16:09,840 Speaker 1: to the end of that. Anyway, Steven L. Davis worked 249 00:16:09,880 --> 00:16:15,200 Speaker 1: for a company called Right Industries Incorporated. That's Right Wright, 250 00:16:15,480 --> 00:16:19,440 Speaker 1: like the Wright brothers. That company is an industrial fabrication company. 251 00:16:19,840 --> 00:16:22,960 Speaker 1: This means that Right Industries is a company that other 252 00:16:23,080 --> 00:16:27,320 Speaker 1: companies go to when it comes time to produce specific 253 00:16:27,360 --> 00:16:31,520 Speaker 1: stuff that these other, you know, originating companies aren't equipped 254 00:16:31,560 --> 00:16:35,480 Speaker 1: to make. So Gellette was a customer of Right Industries, 255 00:16:35,520 --> 00:16:39,560 Speaker 1: and Stephen Davis worked for Right. At the time, Gellette 256 00:16:39,600 --> 00:16:43,720 Speaker 1: was working on something that was top secret. Now, it 257 00:16:43,840 --> 00:16:47,400 Speaker 1: turned out this top secret project would be their Mock 258 00:16:47,560 --> 00:16:51,400 Speaker 1: three triple blade razor. I remember when those came out, 259 00:16:51,720 --> 00:16:55,120 Speaker 1: and it obviously would spawn a bunch of imitators among 260 00:16:55,400 --> 00:16:58,760 Speaker 1: the various competitors in the space. You started seeing razors 261 00:16:58,760 --> 00:17:01,920 Speaker 1: with lots more blaze, sometimes a ludicrous amount, to the 262 00:17:01,960 --> 00:17:04,679 Speaker 1: point where I think there were like parody commercials like 263 00:17:04,720 --> 00:17:07,760 Speaker 1: the seventeen bladed raiser. But this was back when the 264 00:17:07,840 --> 00:17:10,480 Speaker 1: double bladed eraser was kind of the standard. No one 265 00:17:10,480 --> 00:17:13,119 Speaker 1: had cracked the code on answering the question why not 266 00:17:13,280 --> 00:17:18,480 Speaker 1: three blades? So Gellette obviously would need to share information 267 00:17:18,560 --> 00:17:22,199 Speaker 1: about this top secret project with their fabrication partners in 268 00:17:22,280 --> 00:17:26,440 Speaker 1: order to manufacture the things. That information was incredibly valuable, 269 00:17:26,680 --> 00:17:29,959 Speaker 1: so reportedly, Gellette had sunk around seven hundred and fifty 270 00:17:30,160 --> 00:17:34,000 Speaker 1: million dollars in research and development to get to a 271 00:17:34,040 --> 00:17:38,160 Speaker 1: design where the Mock III would work. Now, obviously that 272 00:17:38,280 --> 00:17:41,560 Speaker 1: kind of commitment to a project is enormous, and if 273 00:17:41,640 --> 00:17:44,359 Speaker 1: Gellette couldn't realize a profit off of that work, it 274 00:17:44,359 --> 00:17:48,000 Speaker 1: would be in a huge corporate jam. Kind of like 275 00:17:48,040 --> 00:17:50,800 Speaker 1: when you shave a bit too much before you rense 276 00:17:50,800 --> 00:17:53,120 Speaker 1: out your razor and it gets all jammed up. That's 277 00:17:53,240 --> 00:17:57,960 Speaker 1: kind of what Gellette would be in. So enter Steven L. Davis, 278 00:17:58,080 --> 00:18:01,880 Speaker 1: who again worked for Wright. He was mightily cheesed off 279 00:18:01,960 --> 00:18:05,600 Speaker 1: both at his own direct employer and at Gillette itself. 280 00:18:05,840 --> 00:18:09,600 Speaker 1: So Davis had been working in a rather prominent role 281 00:18:09,760 --> 00:18:13,239 Speaker 1: on the project, but then found himself demoted to a 282 00:18:13,359 --> 00:18:17,080 Speaker 1: lesser role, and he was bitter about that. So he 283 00:18:17,119 --> 00:18:20,920 Speaker 1: thought perhaps one way to vent his spleen would be 284 00:18:21,280 --> 00:18:25,240 Speaker 1: he could take this top secret design of this triple 285 00:18:25,280 --> 00:18:29,840 Speaker 1: bladed razor. He could go to Gellette's competitors in the industry, 286 00:18:30,000 --> 00:18:32,480 Speaker 1: and then he could stick it to Gellette as well 287 00:18:32,480 --> 00:18:35,800 Speaker 1: as his own direct employer. And reportedly, he wasn't even 288 00:18:35,800 --> 00:18:39,040 Speaker 1: looking to profit all this. He wasn't looking to sell 289 00:18:39,080 --> 00:18:41,840 Speaker 1: this information off and then make a huge amount of 290 00:18:41,880 --> 00:18:45,159 Speaker 1: money and then you know, retired to Patagonia or something. 291 00:18:45,200 --> 00:18:51,520 Speaker 1: He just wanted revenge. So off Davis goes with information 292 00:18:51,600 --> 00:18:55,720 Speaker 1: about Gellette's top secret innovation to a couple of different 293 00:18:55,720 --> 00:19:00,640 Speaker 1: companies that included Big the American Safety Razor cup and 294 00:19:00,920 --> 00:19:04,560 Speaker 1: Shick as in Shick Wilkinson's Sword, the makers of the 295 00:19:04,600 --> 00:19:09,120 Speaker 1: Shick razor. Now the folks at Shick immediately contacted their 296 00:19:09,160 --> 00:19:12,399 Speaker 1: peers over at Gillette to tattle on Davis because they 297 00:19:12,400 --> 00:19:16,399 Speaker 1: were like, Okay, this is non information we should have. 298 00:19:16,560 --> 00:19:19,280 Speaker 1: It is really illegal for us to have it. This 299 00:19:19,359 --> 00:19:22,760 Speaker 1: isn't cool. Let's get in front of this and let 300 00:19:22,800 --> 00:19:26,840 Speaker 1: Gellette know what's going on. So Gillette, the executive's there. 301 00:19:26,880 --> 00:19:30,080 Speaker 1: When they find out that Davis had leaked their information 302 00:19:30,200 --> 00:19:33,879 Speaker 1: to their competitors, they contacted the FBI, So the FBI 303 00:19:34,040 --> 00:19:37,560 Speaker 1: launched an investigation. The FBI was able to verify that 304 00:19:37,680 --> 00:19:41,040 Speaker 1: Davis had in fact absconded with these trade secrets and 305 00:19:41,080 --> 00:19:46,159 Speaker 1: attempted corporate espionage, and they apprehended Davis. He was tried 306 00:19:46,200 --> 00:19:49,320 Speaker 1: and found guilty of five counts of corporate espionage under 307 00:19:49,359 --> 00:19:53,520 Speaker 1: the then new Espionage Act of nineteen ninety six. Now, 308 00:19:53,560 --> 00:19:56,880 Speaker 1: he could have received a sentence of up to ten 309 00:19:57,080 --> 00:20:01,080 Speaker 1: years for his crimes, but the judge was far less 310 00:20:01,160 --> 00:20:05,480 Speaker 1: vindictive and gave him a twenty seven month sentence instead. 311 00:20:05,760 --> 00:20:09,440 Speaker 1: Still some you know, serious time, but not ten years. Now, 312 00:20:10,160 --> 00:20:13,160 Speaker 1: around the same time that this whole Stephen Davis Gillette 313 00:20:13,240 --> 00:20:18,399 Speaker 1: case was unfolding. There was another industrial espionage trial that 314 00:20:18,640 --> 00:20:22,680 Speaker 1: was coming to prominence, but this one would actually happen 315 00:20:22,800 --> 00:20:26,680 Speaker 1: before the Espionage Act was signed into law, so there 316 00:20:26,720 --> 00:20:31,520 Speaker 1: is like overlap here. Technically, the Gillette case concluded first, 317 00:20:31,920 --> 00:20:34,440 Speaker 1: but when it came time to decide which ones when 318 00:20:34,480 --> 00:20:36,880 Speaker 1: in the order of this particular episode, it was kind 319 00:20:36,880 --> 00:20:40,560 Speaker 1: of a toss up. This other case involved the Eastman 320 00:20:40,760 --> 00:20:46,159 Speaker 1: Kodak Company and a former manager named Harold Warden. So 321 00:20:46,680 --> 00:20:50,760 Speaker 1: remember we're talking about the mid nineteen nineties at this point. 322 00:20:51,040 --> 00:20:54,440 Speaker 1: This is back when film cameras were far more common 323 00:20:54,800 --> 00:20:59,080 Speaker 1: than digital cameras. This is an era before everyone carried 324 00:20:59,080 --> 00:21:01,720 Speaker 1: around a smartphone that had a digital camera in it. 325 00:21:02,000 --> 00:21:04,520 Speaker 1: So if you were taking pictures back in the nineties, 326 00:21:04,720 --> 00:21:09,280 Speaker 1: chances are you were doing so on film, and Kodak 327 00:21:09,840 --> 00:21:13,280 Speaker 1: was the name in film. The company had a long 328 00:21:13,480 --> 00:21:16,600 Speaker 1: history of research and development in the world of film. 329 00:21:16,880 --> 00:21:21,000 Speaker 1: They were responsible for creating all new processes and they 330 00:21:21,040 --> 00:21:25,200 Speaker 1: tested new materials on an effort to gain market dominance. 331 00:21:25,800 --> 00:21:30,520 Speaker 1: So Warden had worked for Kodak for nearly thirty years 332 00:21:30,960 --> 00:21:34,440 Speaker 1: and then he retired from Kodak in nineteen ninety two, 333 00:21:35,119 --> 00:21:37,520 Speaker 1: and one thing that Kodak had worked on during that 334 00:21:37,640 --> 00:21:42,200 Speaker 1: time was a secret method for making film. Their process 335 00:21:42,880 --> 00:21:46,359 Speaker 1: gave the company a real advantage because they could make 336 00:21:46,680 --> 00:21:50,000 Speaker 1: film at a faster pace than their competitors and at 337 00:21:50,040 --> 00:21:53,359 Speaker 1: a higher level of quality than their competitors could do. 338 00:21:54,040 --> 00:21:56,880 Speaker 1: And most folks at Kodak only had a tiny glimpse 339 00:21:56,960 --> 00:22:00,760 Speaker 1: into how it all worked. Because the philosophy Kodak was 340 00:22:01,080 --> 00:22:06,440 Speaker 1: to protect corporate information, they would compartmentalize everyone. You would 341 00:22:06,520 --> 00:22:09,800 Speaker 1: only need to know the stuff that directly pertained to 342 00:22:09,880 --> 00:22:13,480 Speaker 1: your job, and you were ignorant of everything else. But Warden, 343 00:22:13,880 --> 00:22:17,040 Speaker 1: because he was a manager, knew a bit more than 344 00:22:17,080 --> 00:22:20,160 Speaker 1: most people did. He had a larger view of how 345 00:22:20,200 --> 00:22:23,560 Speaker 1: the process worked. So he goes off to retire, and 346 00:22:23,600 --> 00:22:27,359 Speaker 1: when he does, he creates his own independent consulting firms. 347 00:22:27,359 --> 00:22:30,040 Speaker 1: So he retires from Kodak, but he's not done working. 348 00:22:30,080 --> 00:22:33,600 Speaker 1: He's now working for himself. As well as that, he 349 00:22:33,760 --> 00:22:36,359 Speaker 1: ends up keeping up this line of communication open with 350 00:22:36,440 --> 00:22:39,520 Speaker 1: some of his former colleagues who were still at Kodak 351 00:22:39,640 --> 00:22:43,280 Speaker 1: or who had recently left the company, and would occasionally 352 00:22:43,280 --> 00:22:45,439 Speaker 1: be able to convince them to hand over or to 353 00:22:45,600 --> 00:22:50,280 Speaker 1: sell proprietary information from Kodak. Now, using this method, he 354 00:22:50,440 --> 00:22:55,440 Speaker 1: essentially assembled the book on Kodak's processes that was not 355 00:22:55,640 --> 00:22:58,439 Speaker 1: within the company itself, and then he would kind of 356 00:22:58,520 --> 00:23:01,600 Speaker 1: use this information to see if any Kodak's competitors would 357 00:23:01,640 --> 00:23:05,679 Speaker 1: be interested and you know, taking advantage of his wealth 358 00:23:05,720 --> 00:23:08,479 Speaker 1: of information. So he would kind of coach clients on 359 00:23:08,480 --> 00:23:11,280 Speaker 1: how to work the way that Kodak worked. This was 360 00:23:11,359 --> 00:23:14,399 Speaker 1: kind of a clever workaround, like he was trying not 361 00:23:14,600 --> 00:23:19,800 Speaker 1: to sell outright patented information to others. He was trying 362 00:23:19,840 --> 00:23:25,080 Speaker 1: to avoid a crystal clear violation of the law, but 363 00:23:25,520 --> 00:23:29,720 Speaker 1: he was playing in a very gray area himself. So 364 00:23:29,840 --> 00:23:34,040 Speaker 1: Kodak gets wind of something going on when one of 365 00:23:34,080 --> 00:23:37,720 Speaker 1: its competitors said, hey, a former manager who used to 366 00:23:37,760 --> 00:23:41,679 Speaker 1: work for y'all offered to tell us how you do everything. 367 00:23:42,240 --> 00:23:45,520 Speaker 1: So then Kodak conducts a little sting operation of their own. 368 00:23:45,960 --> 00:23:48,840 Speaker 1: A Kodak executive pretended to be a representative of a 369 00:23:48,960 --> 00:23:52,679 Speaker 1: Chinese company that was just getting into film manufacturing. So, 370 00:23:53,640 --> 00:23:58,879 Speaker 1: posing as this supposed Chinese executive, he offered Warden a 371 00:23:58,920 --> 00:24:03,040 Speaker 1: buttload of cash in return for some trade secrets from Kodak, 372 00:24:03,400 --> 00:24:06,840 Speaker 1: and Warden said he would not sell any patented technology, 373 00:24:06,880 --> 00:24:09,480 Speaker 1: but he did offer to bend the rules so that 374 00:24:09,520 --> 00:24:12,040 Speaker 1: pretty much everything else would still be on the table. 375 00:24:12,480 --> 00:24:16,720 Speaker 1: Kodak then contacted the FBI. The FBI investigated Warden and 376 00:24:16,760 --> 00:24:19,840 Speaker 1: they found that he had pretty much all the documentation 377 00:24:19,960 --> 00:24:24,160 Speaker 1: you needed to copy some of Kodak's most important processes 378 00:24:24,200 --> 00:24:28,800 Speaker 1: in manufacturing. So the FBI arrested Warden, and at this point, 379 00:24:28,840 --> 00:24:31,160 Speaker 1: like I said, the Espionage Act of nineteen ninety six 380 00:24:31,280 --> 00:24:34,480 Speaker 1: hadn't been signed into law, so they couldn't charge him 381 00:24:34,840 --> 00:24:38,000 Speaker 1: on that act because it was not yet law. Instead, 382 00:24:38,520 --> 00:24:41,720 Speaker 1: they held him on a charge of transporting stolen property 383 00:24:41,760 --> 00:24:46,119 Speaker 1: across state lines. Now, he ultimately would plead guilty to 384 00:24:46,200 --> 00:24:48,560 Speaker 1: this charge, and he received a sentence of one year 385 00:24:48,600 --> 00:24:52,080 Speaker 1: in prison, three months of house arrest, three years of probation, 386 00:24:52,320 --> 00:24:56,480 Speaker 1: and a fine of thirty thousand dollars. Again, that's a lot, 387 00:24:56,560 --> 00:24:58,960 Speaker 1: I mean thirty grand. That's a lot of money to 388 00:24:59,000 --> 00:25:01,520 Speaker 1: get hit with as a fine. But when you're looking 389 00:25:01,560 --> 00:25:05,560 Speaker 1: at the possible damage that this would do to a 390 00:25:05,560 --> 00:25:09,240 Speaker 1: company like Kodak, where you're talking about countless millions of 391 00:25:09,280 --> 00:25:13,240 Speaker 1: dollars that had been spent on creating the system in 392 00:25:13,280 --> 00:25:18,480 Speaker 1: the first place, and then the weight of that secrecy. 393 00:25:19,119 --> 00:25:21,639 Speaker 1: It was obviously an important thing at Kodak, where they 394 00:25:21,640 --> 00:25:24,960 Speaker 1: were trying to keep it compartmentalized as much as possible. 395 00:25:25,240 --> 00:25:27,919 Speaker 1: Thirty grand is nothing compared to the damage that you 396 00:25:27,920 --> 00:25:31,600 Speaker 1: could do. Now let's talk about a case that was 397 00:25:31,680 --> 00:25:35,520 Speaker 1: total garbage, and by that I mean it involves total garbage. 398 00:25:35,560 --> 00:25:39,119 Speaker 1: I'm talking about Oracle's fight with Microsoft. Now, some of 399 00:25:39,160 --> 00:25:41,399 Speaker 1: y'all might already know where this story is going. You 400 00:25:41,480 --> 00:25:45,280 Speaker 1: might have memories of this, but let's set the stage 401 00:25:45,280 --> 00:25:49,080 Speaker 1: for everybody in case you either are young, maybe you 402 00:25:49,119 --> 00:25:52,200 Speaker 1: weren't all round when this happened, or maybe you've just forgotten. 403 00:25:52,600 --> 00:25:56,080 Speaker 1: But first we have to understand the parties involved. Right, 404 00:25:56,119 --> 00:25:59,159 Speaker 1: you've got Oracle, which is a computer technology company, and 405 00:25:59,240 --> 00:26:02,199 Speaker 1: back in two thousand, when this story was unfolding, it 406 00:26:02,240 --> 00:26:06,600 Speaker 1: was primarily known as a database software company. These days, 407 00:26:06,640 --> 00:26:09,320 Speaker 1: Oracle does tons of stuff. To call it a database 408 00:26:09,359 --> 00:26:12,280 Speaker 1: software company would be reductive. They are a big player 409 00:26:12,280 --> 00:26:15,200 Speaker 1: in things like cloud computing. Oracle is also the company 410 00:26:15,200 --> 00:26:20,560 Speaker 1: that actually houses TikTok's servers, the servers that hold information 411 00:26:20,600 --> 00:26:23,320 Speaker 1: about American citizens. You might remember that was like a 412 00:26:23,359 --> 00:26:29,240 Speaker 1: big deal during President Trump's administration was that TikTok would 413 00:26:29,240 --> 00:26:34,920 Speaker 1: make certain that it would sequester its servers from its 414 00:26:35,000 --> 00:26:38,159 Speaker 1: parent company byte Dance, which is a Chinese company, and 415 00:26:38,200 --> 00:26:41,920 Speaker 1: that Oracle would end up housing the servers that TikTok 416 00:26:42,400 --> 00:26:46,640 Speaker 1: would use for American citizen data. Well, anyway, before all 417 00:26:46,680 --> 00:26:51,879 Speaker 1: that would happen, Oracle was really a software database company, 418 00:26:52,160 --> 00:26:58,040 Speaker 1: and one of their big corporate competitors was obviously Microsoft. Now, 419 00:26:58,359 --> 00:27:02,080 Speaker 1: since the early nineteen nine Microsoft had really been on 420 00:27:02,240 --> 00:27:05,240 Speaker 1: the defensive with the US Department of Justice because the 421 00:27:05,280 --> 00:27:09,960 Speaker 1: government was concerned that Microsoft was essentially operating monopoly because 422 00:27:10,119 --> 00:27:14,000 Speaker 1: spoiler alert, they were kind of operating a monopoly specifically 423 00:27:14,040 --> 00:27:17,959 Speaker 1: in the consumer computer space. You know, things like Windows 424 00:27:18,560 --> 00:27:22,760 Speaker 1: was practically the default operating system for most computers at 425 00:27:22,760 --> 00:27:25,600 Speaker 1: that time. Like Apple did have a presence, but it 426 00:27:25,640 --> 00:27:30,000 Speaker 1: was a sliver of the pie. It was essentially Microsoft's world. 427 00:27:30,160 --> 00:27:34,199 Speaker 1: They could operate like a monopoly since they made the 428 00:27:34,320 --> 00:27:38,520 Speaker 1: operating system and they also made other types of software 429 00:27:38,640 --> 00:27:42,400 Speaker 1: like productivity software think about the Office Suite of programs. 430 00:27:42,800 --> 00:27:46,280 Speaker 1: There was this concern that Microsoft was using the leverage 431 00:27:46,320 --> 00:27:51,360 Speaker 1: of having operating system dominance to also dominate in those 432 00:27:51,400 --> 00:27:55,280 Speaker 1: other areas. And to suppress competition from other software companies 433 00:27:55,359 --> 00:28:00,159 Speaker 1: like Oracle. And Microsoft had essentially agreed to in the 434 00:28:00,200 --> 00:28:03,400 Speaker 1: early nineties that it would keep Windows and its other 435 00:28:03,480 --> 00:28:08,800 Speaker 1: products separate. That yes, you could buy Microsoft Office, but 436 00:28:08,880 --> 00:28:13,800 Speaker 1: that it wouldn't be deeply integrated into Windows, so that customers, 437 00:28:13,800 --> 00:28:17,440 Speaker 1: whether they were you know, end consumers or PC manufacturers 438 00:28:17,520 --> 00:28:20,400 Speaker 1: or whatever, would have the freedom to choose which software 439 00:28:20,400 --> 00:28:23,040 Speaker 1: products they actually wanted to run on their Windows machines 440 00:28:23,440 --> 00:28:25,760 Speaker 1: and not force them to go all in with Microsoft 441 00:28:25,840 --> 00:28:28,880 Speaker 1: branded products. So that way, if you wanted to use 442 00:28:28,920 --> 00:28:31,800 Speaker 1: Word Perfect instead of Microsoft Word, or you want to 443 00:28:31,840 --> 00:28:34,840 Speaker 1: LOADUE one, two three instead of Excel, that would be fine. 444 00:28:35,040 --> 00:28:39,680 Speaker 1: Except Microsoft did package Internet Explorer with Windows, and the 445 00:28:39,760 --> 00:28:44,200 Speaker 1: two were heavily integrated together, and the Department of Justice 446 00:28:44,320 --> 00:28:49,120 Speaker 1: was concerned about that, as were companies like Netscape. Now 447 00:28:49,200 --> 00:28:52,680 Speaker 1: Microsoft was essentially saying, hey, yeah, no, no, no, no, no, 448 00:28:52,840 --> 00:28:56,320 Speaker 1: you don't get it. Internet Explorer isn't a product, It's 449 00:28:56,560 --> 00:29:01,080 Speaker 1: just a feature of Windows. But since the word competing 450 00:29:01,240 --> 00:29:05,360 Speaker 1: internet browsers on the market like Netscape, that argument didn't 451 00:29:05,400 --> 00:29:08,360 Speaker 1: really fly with the government, and so you had this 452 00:29:08,680 --> 00:29:15,920 Speaker 1: massive antitrust lawsuit brought against Microsoft by the United States government. 453 00:29:16,600 --> 00:29:20,680 Speaker 1: But justice does not move swiftly here in the US 454 00:29:21,000 --> 00:29:24,080 Speaker 1: most of the time, and this issue dragged on for 455 00:29:24,160 --> 00:29:28,640 Speaker 1: the full decade. So as two thousand came around, we 456 00:29:28,640 --> 00:29:30,840 Speaker 1: were finally getting to a point where the judge in 457 00:29:30,880 --> 00:29:34,000 Speaker 1: the case was nearing a decision as to whether Microsoft 458 00:29:34,080 --> 00:29:37,000 Speaker 1: had been acting as a monopoly or not. From a 459 00:29:37,120 --> 00:29:41,040 Speaker 1: legal perspective, Oracle clearly had something to gain here with 460 00:29:41,080 --> 00:29:44,920 Speaker 1: that decision, But Oracle also wanted to see Microsoft's hold 461 00:29:45,280 --> 00:29:48,520 Speaker 1: slip a bit so that Microsoft couldn't just throw its 462 00:29:48,560 --> 00:29:52,680 Speaker 1: weight around and dictate terms to everybody else. And then 463 00:29:52,760 --> 00:29:56,760 Speaker 1: an organization called the Independent Institute took out a full 464 00:29:56,880 --> 00:30:00,440 Speaker 1: page of ads and newspapers across the United States, and 465 00:30:00,520 --> 00:30:05,400 Speaker 1: this ad quoted different academics who said that the government 466 00:30:05,480 --> 00:30:09,360 Speaker 1: was unfairly targeting Microsoft and didn't have any justification to 467 00:30:09,400 --> 00:30:12,440 Speaker 1: say that the company was behaving as a monopoly. And 468 00:30:12,480 --> 00:30:17,800 Speaker 1: the folks at Oracle began to wonder just how independent 469 00:30:18,160 --> 00:30:22,120 Speaker 1: that Independent Institute was, and they suspected that, in fact, 470 00:30:22,640 --> 00:30:25,720 Speaker 1: it might be a group that perhaps received some funding 471 00:30:25,920 --> 00:30:30,040 Speaker 1: and direction from Microsoft itself in an effort to shape 472 00:30:30,120 --> 00:30:33,479 Speaker 1: public opinion about the case and to coerce the judge 473 00:30:33,600 --> 00:30:37,520 Speaker 1: into dismissing the whole thing, and then they decided they 474 00:30:37,520 --> 00:30:40,520 Speaker 1: were going to find out. I'll talk about how they 475 00:30:40,560 --> 00:30:43,360 Speaker 1: did that after we come back from this quick break 476 00:30:43,360 --> 00:30:57,840 Speaker 1: from our sponsors. Okay, so Microsoft is under the microscope 477 00:30:57,840 --> 00:31:00,720 Speaker 1: by the US government. It is on the defensive. It's 478 00:31:00,760 --> 00:31:04,800 Speaker 1: trying to claim it's not acting as a monopoly. And 479 00:31:05,240 --> 00:31:11,160 Speaker 1: this supposed independent Institute of Academics publishes these ads, buys ads, 480 00:31:11,160 --> 00:31:13,520 Speaker 1: but all the goodness of their hearts, they purchase ads 481 00:31:13,520 --> 00:31:17,120 Speaker 1: and newspapers across the United States to say, hey, government, 482 00:31:17,560 --> 00:31:22,160 Speaker 1: they're overstepping yourself. This is not a case of monopoly. 483 00:31:23,360 --> 00:31:27,280 Speaker 1: And moreover, you don't really have the jurisdiction or authority 484 00:31:27,320 --> 00:31:31,440 Speaker 1: to do this. This is anti American, it's bad for business, 485 00:31:31,480 --> 00:31:34,440 Speaker 1: et cetera, et cetera. So the folks in the Oracle 486 00:31:34,480 --> 00:31:37,160 Speaker 1: are saying, I think something's up, don't. I don't think 487 00:31:37,200 --> 00:31:40,000 Speaker 1: this is really an independent group at all. So the 488 00:31:40,080 --> 00:31:43,080 Speaker 1: executives at Oracle then hire on a firm, a couple 489 00:31:43,120 --> 00:31:44,880 Speaker 1: of firms actually, but the one we really want to 490 00:31:44,920 --> 00:31:47,800 Speaker 1: talk about. The investigators were from a firm that was 491 00:31:47,840 --> 00:31:51,600 Speaker 1: called IGI to look into the whole thing, and the 492 00:31:51,640 --> 00:31:55,600 Speaker 1: executives told IGI do whatever it takes as long as 493 00:31:55,600 --> 00:31:59,400 Speaker 1: it's within the boundaries of the law, and find out 494 00:31:59,440 --> 00:32:03,920 Speaker 1: if micro Soft is actually funding this supposed independent institute. 495 00:32:04,200 --> 00:32:09,000 Speaker 1: So IGI came back to Oracle with receipts. Like literally, 496 00:32:09,240 --> 00:32:12,480 Speaker 1: IGI found documentation linking a one hundred and fifty three 497 00:32:12,600 --> 00:32:17,440 Speaker 1: thousand dollars payment from Microsoft to the institute, and a 498 00:32:17,480 --> 00:32:20,360 Speaker 1: New York Times journalist was then given access to this 499 00:32:20,480 --> 00:32:23,840 Speaker 1: little nugget of information and published an article about it. 500 00:32:24,080 --> 00:32:27,280 Speaker 1: And when that article showed up and it showed this 501 00:32:27,440 --> 00:32:32,640 Speaker 1: link between Microsoft and the supposed independent institute, well there 502 00:32:32,720 --> 00:32:35,120 Speaker 1: was a lot of egg on Microsoft's face, and there 503 00:32:35,160 --> 00:32:40,480 Speaker 1: was some suspicion that IGI had stolen that information. The 504 00:32:40,520 --> 00:32:45,080 Speaker 1: president of the Independent Institute said as much. But the 505 00:32:45,280 --> 00:32:49,920 Speaker 1: truth appeared to be that IGI didn't steal anything because 506 00:32:49,960 --> 00:32:54,240 Speaker 1: stealing is obviously illegal and they were told to operate 507 00:32:54,280 --> 00:32:57,920 Speaker 1: within the bounds of the law. So what IGI had 508 00:32:58,000 --> 00:33:02,600 Speaker 1: done was they went on a little dive. They literally 509 00:33:03,000 --> 00:33:08,040 Speaker 1: sifted through the trash from the Independent Institute until they 510 00:33:08,040 --> 00:33:11,400 Speaker 1: were able to find a copy of financial statements that 511 00:33:11,520 --> 00:33:15,000 Speaker 1: included the Microsoft payment information. That was not the end 512 00:33:15,040 --> 00:33:19,280 Speaker 1: of it, however, Oracle also directed IGI to investigate another 513 00:33:19,440 --> 00:33:25,120 Speaker 1: organization called the National Taxpayers Union, which, like the Independent Institute, 514 00:33:25,480 --> 00:33:28,880 Speaker 1: had been shaming the US government for having the audacity 515 00:33:29,080 --> 00:33:33,280 Speaker 1: to go after Microsoft, that little scrappy mom and pop 516 00:33:33,440 --> 00:33:36,560 Speaker 1: store that just happened to be run by a massive billionaire. 517 00:33:36,920 --> 00:33:39,760 Speaker 1: Keep in mind that Oracle was also being run by 518 00:33:39,800 --> 00:33:43,080 Speaker 1: a billionaire. But this is two billionaires kind of hating 519 00:33:43,120 --> 00:33:46,240 Speaker 1: on each other. So I'm all for it. If billionaires 520 00:33:46,280 --> 00:33:50,200 Speaker 1: want to rock'em sockem robots for my entertainment, have ad it? 521 00:33:50,360 --> 00:33:54,440 Speaker 1: I say. Anyway, IGI once again took to the garbage 522 00:33:54,520 --> 00:33:58,400 Speaker 1: cans and found evidence that Microsoft had paid this so 523 00:33:58,520 --> 00:34:03,960 Speaker 1: called National tax Payers Union around two hundred thousand dollars. 524 00:34:04,600 --> 00:34:09,359 Speaker 1: So IGI made sure through a different organization that the 525 00:34:09,520 --> 00:34:12,880 Speaker 1: Washington Post got access to this little bit of info, 526 00:34:12,960 --> 00:34:16,200 Speaker 1: and the Washington Post posted an article that once again 527 00:34:16,239 --> 00:34:21,439 Speaker 1: showed Microsoft was kind of astroturfing by paying all these 528 00:34:21,480 --> 00:34:26,600 Speaker 1: different supposed independent organizations to say that Microsoft had done 529 00:34:26,640 --> 00:34:29,319 Speaker 1: nothing wrong and that in fact, the US government was 530 00:34:29,400 --> 00:34:34,239 Speaker 1: harming American commerce through this this whole court case in 531 00:34:34,280 --> 00:34:37,879 Speaker 1: the first case. Now, around the same time, some other 532 00:34:38,000 --> 00:34:42,360 Speaker 1: organizations that were on Microsoft side reported that on occasion 533 00:34:42,800 --> 00:34:47,320 Speaker 1: people were showing up to their various corporate headquarters claiming 534 00:34:47,320 --> 00:34:50,360 Speaker 1: to be someone they were not. That strangers were showing 535 00:34:50,480 --> 00:34:55,080 Speaker 1: up and claiming to be representatives of various organizations or 536 00:34:55,360 --> 00:34:58,760 Speaker 1: you know, high level executives or something, and that sometimes 537 00:34:59,360 --> 00:35:03,600 Speaker 1: stuff would go so missing after these visits, like say 538 00:35:03,800 --> 00:35:08,400 Speaker 1: a laptop with company information on it. Now, nothing solid 539 00:35:08,800 --> 00:35:12,680 Speaker 1: would link these supposed incidents to Oracle or to the 540 00:35:12,719 --> 00:35:16,320 Speaker 1: firms that Oracle was using, like IGI, but the implication 541 00:35:16,600 --> 00:35:20,239 Speaker 1: was that Oracle was not just sifting through garbage or 542 00:35:20,280 --> 00:35:23,279 Speaker 1: not just using investigators to sift through garbage, but we're 543 00:35:23,320 --> 00:35:27,920 Speaker 1: outright stealing stuff in order to show that Microsoft was 544 00:35:28,000 --> 00:35:32,480 Speaker 1: kind of behind all these supposed independent groups and that 545 00:35:32,640 --> 00:35:36,120 Speaker 1: therefore there was you know, law breaking going on. But 546 00:35:36,200 --> 00:35:39,759 Speaker 1: again there was no firm evidence to actually show that 547 00:35:39,840 --> 00:35:43,319 Speaker 1: this was the case. Now, eventually, while this is all 548 00:35:43,360 --> 00:35:46,759 Speaker 1: going on, at least initially, no one knows that Oracle's 549 00:35:46,800 --> 00:35:50,719 Speaker 1: doing this. Right, these these articles are coming out, but 550 00:35:50,800 --> 00:35:55,200 Speaker 1: it's not clear where the information came from that ends 551 00:35:55,280 --> 00:35:58,280 Speaker 1: up being you know, the central point of the article. 552 00:35:58,600 --> 00:36:01,200 Speaker 1: So New York Times and the Washington Post they start 553 00:36:01,239 --> 00:36:04,920 Speaker 1: publishing these articles linking Microsoft to these different groups but 554 00:36:05,000 --> 00:36:07,799 Speaker 1: there was no clear link to where this was all 555 00:36:07,840 --> 00:36:13,279 Speaker 1: coming from. Eventually, Oracle's role became public knowledge, and at 556 00:36:13,280 --> 00:36:19,600 Speaker 1: that point, Lawrence Ellison, the billionaire behind Oracle, was completely unrepentant. 557 00:36:20,000 --> 00:36:23,840 Speaker 1: He did not apologize. He said the stuff that was 558 00:36:23,920 --> 00:36:27,440 Speaker 1: directly linked to his company wasn't technically illegal, like some 559 00:36:27,480 --> 00:36:30,920 Speaker 1: of it might be considered, you know, unsavory that you're 560 00:36:31,000 --> 00:36:34,480 Speaker 1: sifting through garbage or whatever, but it wasn't against the law. 561 00:36:35,280 --> 00:36:39,560 Speaker 1: And further, he was saying Microsoft is the real bad 562 00:36:39,600 --> 00:36:43,480 Speaker 1: guy here. The company is essentially trying to sell the 563 00:36:43,600 --> 00:36:46,919 Speaker 1: story that anything that would be bad for Microsoft would 564 00:36:46,920 --> 00:36:49,800 Speaker 1: also be bad for the United States of America, which 565 00:36:50,320 --> 00:36:54,280 Speaker 1: just isn't the case. And it was a completely disingenuous argument. 566 00:36:54,320 --> 00:36:56,759 Speaker 1: So he's like, I don't feel sorry about this at all. 567 00:36:56,880 --> 00:37:01,799 Speaker 1: I absolutely feel I'm justified in investigating Microsoft's connection to 568 00:37:01,840 --> 00:37:05,279 Speaker 1: these groups that supposedly are saying they're coming forth on 569 00:37:05,400 --> 00:37:11,080 Speaker 1: their own to defend Microsoft. There are a ton more 570 00:37:11,280 --> 00:37:14,040 Speaker 1: examples of things that happen in that case as well. 571 00:37:14,080 --> 00:37:16,680 Speaker 1: You could do just a full episode that really dives 572 00:37:16,719 --> 00:37:19,520 Speaker 1: into that one. It was a juicy one, but we 573 00:37:19,600 --> 00:37:24,000 Speaker 1: should probably conclude this episode with just one more espionage 574 00:37:24,120 --> 00:37:25,960 Speaker 1: case to talk about. There are a lot of other 575 00:37:26,000 --> 00:37:28,800 Speaker 1: ones I could choose from. I mean, there's a Lewandowski 576 00:37:29,120 --> 00:37:32,720 Speaker 1: Waimo Uber story that I feel I need to follow 577 00:37:32,800 --> 00:37:36,080 Speaker 1: up on I've talked about in past episodes many years ago. 578 00:37:36,360 --> 00:37:40,960 Speaker 1: But instead, let's talk about a case of espionage in 579 00:37:41,000 --> 00:37:45,359 Speaker 1: which a company spied on its own boardroom and its 580 00:37:45,400 --> 00:37:50,120 Speaker 1: executives and employees. Shall we. So at this point, chronologically, 581 00:37:50,680 --> 00:37:53,720 Speaker 1: we're up to the mid two thousands, so it's after 582 00:37:53,800 --> 00:37:57,480 Speaker 1: the dot com crash, and the tech industry is kind 583 00:37:57,560 --> 00:38:02,040 Speaker 1: of on the road to recovery, really being shaken by 584 00:38:02,080 --> 00:38:05,200 Speaker 1: the whole dot com bubble bursting. The company we're talking 585 00:38:05,200 --> 00:38:08,480 Speaker 1: about is Hewitt Packard or HP, and it had been 586 00:38:08,520 --> 00:38:13,400 Speaker 1: through some chucha changes, as David Bowie would say. In 587 00:38:13,480 --> 00:38:18,399 Speaker 1: nineteen ninety nine, HP had brought on Carly Fiorina as 588 00:38:18,560 --> 00:38:22,440 Speaker 1: the new CEO for HP. She came in from outside 589 00:38:22,440 --> 00:38:25,920 Speaker 1: the company. She jumped the head of internal candidates who 590 00:38:25,960 --> 00:38:30,200 Speaker 1: were under consideration for CEO, and she took charge of it. Now, 591 00:38:30,719 --> 00:38:33,480 Speaker 1: that was something that some people on the board weren't 592 00:38:33,520 --> 00:38:35,799 Speaker 1: really crazy about. In fact, a lot of people at 593 00:38:35,920 --> 00:38:39,760 Speaker 1: HP weren't crazy about it, and she had never held 594 00:38:39,800 --> 00:38:44,560 Speaker 1: a CEO level position before, and according to some her 595 00:38:44,600 --> 00:38:47,240 Speaker 1: appointment was due to members of the Board of directors 596 00:38:47,320 --> 00:38:50,600 Speaker 1: kind of playing game of thrones against each other that 597 00:38:50,640 --> 00:38:54,000 Speaker 1: it was a really toxic environment at the board level, 598 00:38:54,280 --> 00:38:56,400 Speaker 1: and it sounds like things got really nasty. It sounds 599 00:38:56,400 --> 00:39:00,480 Speaker 1: like there was like this generational gap between two halves 600 00:39:00,480 --> 00:39:05,600 Speaker 1: of the board. Now, HP traditionally had this group of 601 00:39:05,680 --> 00:39:10,160 Speaker 1: principles that its founders had suggested were like the guiding 602 00:39:10,320 --> 00:39:14,799 Speaker 1: light for their managerial style at HP. So these were 603 00:39:14,880 --> 00:39:18,920 Speaker 1: kind of like the commandments from HP. They were considered 604 00:39:18,960 --> 00:39:22,759 Speaker 1: to be like the ethical core of the company. The 605 00:39:22,840 --> 00:39:28,080 Speaker 1: principles included we have trust and respect for individuals. We 606 00:39:28,120 --> 00:39:31,799 Speaker 1: focus on a high level of achievement and contribution. We 607 00:39:31,840 --> 00:39:36,800 Speaker 1: conduct our business with uncompromising integrity. We achieve our common 608 00:39:36,840 --> 00:39:42,399 Speaker 1: objectives through teamwork. We encourage flexibility and innovation in how 609 00:39:42,480 --> 00:39:47,920 Speaker 1: the company is managed. But by this point in HP's history, 610 00:39:48,040 --> 00:39:52,200 Speaker 1: those principles were starting to become what Barbosa in parts 611 00:39:52,200 --> 00:39:55,239 Speaker 1: of the Caribbean would say were more like guidelines than 612 00:39:55,239 --> 00:40:00,640 Speaker 1: actual rules, and Carly Fiorina viewed these princes as being 613 00:40:00,719 --> 00:40:05,040 Speaker 1: outdated and actually holding HP back from taking its place 614 00:40:05,800 --> 00:40:11,080 Speaker 1: in the next century. So she started making some really 615 00:40:11,200 --> 00:40:15,240 Speaker 1: drastic changes at HP that included stuff like asking employees 616 00:40:15,280 --> 00:40:18,239 Speaker 1: to take pay cuts so that they could avoid layoffs, 617 00:40:18,600 --> 00:40:22,759 Speaker 1: and then following that with massive layoffs. And to say 618 00:40:22,800 --> 00:40:26,520 Speaker 1: that she was unpopular among the HP staff is putting 619 00:40:26,600 --> 00:40:31,400 Speaker 1: it lightly. She also had some supporters in the boardroom, 620 00:40:31,640 --> 00:40:34,520 Speaker 1: and then she had some enemies in the boardroom. She 621 00:40:34,600 --> 00:40:37,920 Speaker 1: herself was chair of the board and CEO, so she 622 00:40:37,960 --> 00:40:41,360 Speaker 1: would have these brutal corporate fights with the rest of 623 00:40:41,400 --> 00:40:44,160 Speaker 1: the board in order to see her vision through, including 624 00:40:44,920 --> 00:40:47,960 Speaker 1: a massive merger with Compact, which at the time was 625 00:40:48,000 --> 00:40:51,959 Speaker 1: one of the largest mergers ever. So she fought these 626 00:40:52,080 --> 00:40:55,480 Speaker 1: battles in the boardroom, and some battles she won, but 627 00:40:55,560 --> 00:40:58,000 Speaker 1: she didn't win all of them. In fact, in two 628 00:40:58,040 --> 00:41:00,920 Speaker 1: thousand and four, the rest of the board succeeded in 629 00:41:01,080 --> 00:41:05,359 Speaker 1: forcing Carly Fiorina to resign from HP, and they said 630 00:41:05,360 --> 00:41:07,680 Speaker 1: that she had just done a massive amount of damage 631 00:41:07,680 --> 00:41:10,760 Speaker 1: to the company and that she had forced the company 632 00:41:10,800 --> 00:41:14,480 Speaker 1: to abandon its corporate culture. It was just a really 633 00:41:14,600 --> 00:41:18,400 Speaker 1: nasty situation. Her replacement as chair of the board was 634 00:41:18,440 --> 00:41:22,560 Speaker 1: a woman named Patricia Dunn. Patricia Dunn had been CEO 635 00:41:22,640 --> 00:41:25,439 Speaker 1: of Barclay's Global Investors in the past. She had also 636 00:41:25,480 --> 00:41:28,520 Speaker 1: been a member of HP's board of directors since two 637 00:41:28,560 --> 00:41:31,480 Speaker 1: thousand and one, so she was no stranger to that environment. 638 00:41:31,880 --> 00:41:36,680 Speaker 1: And starting in early two thousand and five, someone began 639 00:41:36,840 --> 00:41:41,520 Speaker 1: leaking information about boardroom activities and discussions and meetings to 640 00:41:41,600 --> 00:41:45,280 Speaker 1: the press. And this obviously was a huge no note. 641 00:41:45,400 --> 00:41:48,200 Speaker 1: It also meant that whoever was doing this was at 642 00:41:48,200 --> 00:41:51,319 Speaker 1: a very high level or who had access to very 643 00:41:51,400 --> 00:41:54,640 Speaker 1: high level information. Now, there was a lot of distrust 644 00:41:54,640 --> 00:41:59,080 Speaker 1: and animosity at the company at the leadership levels, including 645 00:41:59,120 --> 00:42:01,719 Speaker 1: amongst various members of the board who just did not 646 00:42:02,040 --> 00:42:05,440 Speaker 1: like each other. And then here's done as chair of 647 00:42:05,440 --> 00:42:07,839 Speaker 1: the board and she wants to clamp down on all 648 00:42:07,880 --> 00:42:11,440 Speaker 1: of these leaks. They're harming the company. They're hurting her 649 00:42:11,480 --> 00:42:15,400 Speaker 1: ability to help lead the company or at least to 650 00:42:15,520 --> 00:42:18,680 Speaker 1: guide the company as chair of the board. Now, how 651 00:42:18,760 --> 00:42:24,560 Speaker 1: much of what would follow was directly under her guidance 652 00:42:24,760 --> 00:42:28,799 Speaker 1: is a matter of dispute. She would maintain that she 653 00:42:28,960 --> 00:42:32,000 Speaker 1: was unaware of the particulars. She just had sort of 654 00:42:32,000 --> 00:42:34,880 Speaker 1: the big vision kind of view of what was going on. 655 00:42:35,239 --> 00:42:38,520 Speaker 1: Others would argue that she was much more responsible than 656 00:42:38,560 --> 00:42:41,560 Speaker 1: she led on. But what happened was she turned to 657 00:42:41,600 --> 00:42:45,879 Speaker 1: an independent security company to investigate the situation, to find 658 00:42:45,920 --> 00:42:48,319 Speaker 1: out where are these leaks coming from, who is the 659 00:42:48,400 --> 00:42:53,240 Speaker 1: person who's privy to these board proceedings, who has loose lips. 660 00:42:53,760 --> 00:42:58,080 Speaker 1: To do this, the security team would use a method 661 00:42:58,200 --> 00:43:02,759 Speaker 1: called pretexting, like this is what you do before you 662 00:43:02,800 --> 00:43:06,200 Speaker 1: send a text message. No, I'm talking about a pretext 663 00:43:06,440 --> 00:43:11,400 Speaker 1: like an invented situation that gives you the ability to 664 00:43:11,440 --> 00:43:14,680 Speaker 1: put leverage on someone to trick them. It's a kind 665 00:43:14,719 --> 00:43:17,440 Speaker 1: of social engineering. It's what hackers do all the time. 666 00:43:17,520 --> 00:43:20,080 Speaker 1: When a hacker shows up at a company claiming to 667 00:43:20,120 --> 00:43:24,279 Speaker 1: be a representative from it, they are pretexting. So that's 668 00:43:24,320 --> 00:43:27,840 Speaker 1: what the security team was doing to various folks at HP. 669 00:43:28,320 --> 00:43:31,879 Speaker 1: That included members of the board, that included some high 670 00:43:31,960 --> 00:43:35,640 Speaker 1: level executives, included some of their staff. And what the 671 00:43:36,239 --> 00:43:39,680 Speaker 1: security team was trying to do was to get access 672 00:43:39,760 --> 00:43:44,480 Speaker 1: to people's personal phone records. They would include ways of 673 00:43:44,920 --> 00:43:48,440 Speaker 1: contacting the phone companies directly and try to get records. 674 00:43:48,640 --> 00:43:50,920 Speaker 1: Trying to get these phone records, they were posing as 675 00:43:50,920 --> 00:43:53,440 Speaker 1: different people in order to do that. So HP was 676 00:43:53,520 --> 00:43:57,400 Speaker 1: spying on their own, their board members, as well as 677 00:43:57,440 --> 00:44:01,440 Speaker 1: high level executives and other staff. This skullduggery did not 678 00:44:01,760 --> 00:44:05,720 Speaker 1: go unnoticed, however, so word got to the US House 679 00:44:05,760 --> 00:44:10,720 Speaker 1: Committee on Energy and Commerce, a very high level group, 680 00:44:11,280 --> 00:44:15,280 Speaker 1: and the committee launched its own investigation. Its subpoenad done 681 00:44:15,360 --> 00:44:18,440 Speaker 1: as well as some other executives over at HP to 682 00:44:18,760 --> 00:44:21,759 Speaker 1: appear before the committee and give testimony as to what 683 00:44:21,800 --> 00:44:24,960 Speaker 1: the heck was going on. And they were not super 684 00:44:25,040 --> 00:44:28,920 Speaker 1: keen on a company using security professionals with all sorts 685 00:44:28,960 --> 00:44:32,440 Speaker 1: of these underheaded methods used to spy on people, because 686 00:44:32,480 --> 00:44:34,400 Speaker 1: the government doesn't like it if they're not the ones 687 00:44:34,440 --> 00:44:38,720 Speaker 1: doing that kind of thing. Anyway, the use of pretexting 688 00:44:39,560 --> 00:44:42,799 Speaker 1: became really the center point of this whole investigation, as 689 00:44:42,800 --> 00:44:46,480 Speaker 1: well as how much insight Done had into what had 690 00:44:46,520 --> 00:44:49,440 Speaker 1: been going on, as well as the legality of everything, 691 00:44:50,040 --> 00:44:53,480 Speaker 1: because at least some of the actions were not illegal 692 00:44:53,640 --> 00:44:57,800 Speaker 1: as classified under California law at the time, for example, 693 00:44:58,640 --> 00:45:01,279 Speaker 1: but there are other things that were illegal that were 694 00:45:01,600 --> 00:45:05,120 Speaker 1: classified under stuff like wire fraud. The whole scandal got 695 00:45:05,120 --> 00:45:09,200 Speaker 1: really ugly. Board member George Keyworth was identified as the 696 00:45:09,200 --> 00:45:12,800 Speaker 1: source of the leaks, although he continued to deny his involvement. 697 00:45:12,840 --> 00:45:15,280 Speaker 1: He said that he was not the source of the leaks, 698 00:45:15,520 --> 00:45:17,480 Speaker 1: but that was who it got penned on, and he 699 00:45:17,640 --> 00:45:21,000 Speaker 1: was removed from the board. Another board member, a friend 700 00:45:21,120 --> 00:45:25,880 Speaker 1: to George Keyworth named Tom Perkins, quit the board in protest. 701 00:45:26,120 --> 00:45:28,760 Speaker 1: When Keyworth was removed. He said, I said I'm leaving 702 00:45:28,800 --> 00:45:34,640 Speaker 1: as well. And Perkins was a real staunch opponent to 703 00:45:34,719 --> 00:45:38,560 Speaker 1: Patricia Dunn. The two did not like each other at all. 704 00:45:39,000 --> 00:45:43,640 Speaker 1: Perkins then communicated with an attorney named Viet Din. Viet 705 00:45:43,680 --> 00:45:46,560 Speaker 1: Den figured out that there was no way HP could 706 00:45:46,600 --> 00:45:51,040 Speaker 1: have conducted this investigation legally. There just wasn't. Like the 707 00:45:51,080 --> 00:45:53,480 Speaker 1: way that they had to get this information meant that 708 00:45:53,560 --> 00:45:57,000 Speaker 1: they had to engage in illegal activities in order to 709 00:45:57,080 --> 00:45:59,720 Speaker 1: do so. So he was like, this is bad news, 710 00:46:00,440 --> 00:46:05,120 Speaker 1: and Perkins said that Done was responsible for the whole scandal. Done, however, 711 00:46:05,160 --> 00:46:07,799 Speaker 1: said that Perkins was the one who was responsible and 712 00:46:07,840 --> 00:46:10,880 Speaker 1: the whole spying scandal was really just a ploy to 713 00:46:10,880 --> 00:46:14,240 Speaker 1: get Patricia Done removed from HP board in the first place, 714 00:46:14,480 --> 00:46:16,760 Speaker 1: and if that's the case, well it kind of worked. 715 00:46:17,120 --> 00:46:19,840 Speaker 1: But Perkins himself was not on the board either. Both 716 00:46:20,000 --> 00:46:23,400 Speaker 1: Perkins and Don would resign from the board of directors. 717 00:46:23,840 --> 00:46:26,799 Speaker 1: Dunn left the board while she was also under investigation 718 00:46:26,880 --> 00:46:29,360 Speaker 1: for her role in the whole affair. A bunch of 719 00:46:29,400 --> 00:46:33,120 Speaker 1: people were brought up on charges, including Patricia Dunn, but 720 00:46:33,320 --> 00:46:36,120 Speaker 1: a judge would later drop the charges against her, and 721 00:46:36,239 --> 00:46:40,440 Speaker 1: all charges brought against other members of HP board and 722 00:46:40,520 --> 00:46:44,759 Speaker 1: executive staff were dropped as well. No one in HP 723 00:46:45,640 --> 00:46:50,120 Speaker 1: was found guilty of anything or had their charges saw through. 724 00:46:50,160 --> 00:46:53,120 Speaker 1: In fact, the only person who actually saw jail time 725 00:46:53,440 --> 00:46:55,480 Speaker 1: as a result of all of this was one of 726 00:46:55,560 --> 00:47:00,560 Speaker 1: the security investigators from that independent company, Brian Agner is 727 00:47:00,560 --> 00:47:03,080 Speaker 1: his name. He got a three month sentence for his 728 00:47:03,160 --> 00:47:05,560 Speaker 1: part in securing those private phone records, but no one 729 00:47:05,560 --> 00:47:08,600 Speaker 1: at HP served any time at all. Now that doesn't 730 00:47:08,600 --> 00:47:10,840 Speaker 1: mean the company got off lightly. For one thing, the 731 00:47:10,880 --> 00:47:13,719 Speaker 1: board level leadership was in a right state of disarray. 732 00:47:13,800 --> 00:47:16,879 Speaker 1: I mean, it was just undeniable that it was this 733 00:47:17,280 --> 00:47:21,160 Speaker 1: toxic environment of people who did not see eye to eye. 734 00:47:21,400 --> 00:47:24,520 Speaker 1: That situation also prompted the state of California to update 735 00:47:24,560 --> 00:47:26,600 Speaker 1: its laws to make it much more clear that the 736 00:47:26,640 --> 00:47:31,360 Speaker 1: practice of pretexting is absolutely illegal. And on top of 737 00:47:31,360 --> 00:47:34,080 Speaker 1: all that, HP's reputation took a huge hit. It was 738 00:47:34,560 --> 00:47:37,120 Speaker 1: obvious the company had moved far away from the old 739 00:47:38,000 --> 00:47:41,480 Speaker 1: HP way days, you know, back with those five principles. 740 00:47:41,719 --> 00:47:45,200 Speaker 1: So yeah, it was an ugly situation and it did 741 00:47:45,239 --> 00:47:47,759 Speaker 1: not help HP at all during a period that was 742 00:47:47,920 --> 00:47:51,680 Speaker 1: pretty tumultuous for the tech industry as a whole. So 743 00:47:51,760 --> 00:47:55,120 Speaker 1: there you go. There's some examples of industrial espionage. Like 744 00:47:55,160 --> 00:47:57,440 Speaker 1: I said, those are just a few. There were actually 745 00:47:57,560 --> 00:48:00,200 Speaker 1: quite a bunch that made my list that you know, 746 00:48:00,239 --> 00:48:02,200 Speaker 1: it just got too long for me to do all 747 00:48:02,280 --> 00:48:04,800 Speaker 1: of them. But maybe I'll revisit this topic in the future, 748 00:48:04,840 --> 00:48:07,160 Speaker 1: maybe do some deep dives on a couple of other ones, 749 00:48:07,440 --> 00:48:11,120 Speaker 1: because it's fascinating to see the links that companies will 750 00:48:11,160 --> 00:48:15,120 Speaker 1: go to in order to find out information that they 751 00:48:15,160 --> 00:48:19,400 Speaker 1: don't easily have access to. It gets a little James 752 00:48:19,400 --> 00:48:24,640 Speaker 1: BONDI or Mission Impossibly or something. Anyway, I hope all 753 00:48:24,640 --> 00:48:27,439 Speaker 1: of you out there are well and I will talk 754 00:48:27,480 --> 00:48:38,400 Speaker 1: to you again really soon. Tech Stuff is an iHeartRadio production. 755 00:48:38,680 --> 00:48:43,719 Speaker 1: For more podcasts from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, 756 00:48:43,840 --> 00:48:49,520 Speaker 1: or wherever you listen to your favorite shows.