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Date: Fri, 26 Jan 2007 12:12:07 -0500
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From: "James M. Atkinson" <jm..._at_tscm.com>
Subject: HP accused of spying on Dell's printer plans
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http://www.nytimes.com/cnet/CNET_2100-1014_3-6153158.html?_r=2&oref=slogin&oref=slogin
January 25, 2007
HP accused of spying on Dell's printer plans
Greg Sandoval, for News.com;Declan McCullagh, for News.com
A correction was made to this story. Read below
for details. A former Hewlett-Packard executive
accused by the company of stealing trade secrets
is now saying that he was instructed by the
company's management to spy on rival Dell.
Karl Kamb Jr., previously HP's vice president of
business development and strategy, was named as a
defendant in a federal lawsuit filed by HP in
2005. It alleges that onetime HP employees
illegally started a rival flat-screen TV company
while still working at HP and it is claiming up to $100 million in damages.
Kamb, who has denied any wrongdoing, filed a
countersuit in U.S. District Court for the
Eastern District of Texas on Friday, according to
legal documents. Among Kamb's allegations:
That in 2002, HP hired Katsumi Iizuka, a
president of Dell Japan until 1995, to supply
information on Dell's plans to enter the printer business.
That "senior HP management" signed off on the payments to Iizuka.
That HP obtained Kamb's private phone records
through pretexting, the practice of seeking
information by masquerading as someone else.
Among the defendants in Kamb's suit are former HP
Chairman Patricia Dunn and former HP attorney Kevin Hunsaker.
In a statement on Wednesday, HP denied Kamb's accusations.
"This counterclaim is wholly without merit," HP
said. "It's a blatant attempt to delay the
prosecution of the original case...We intend to
vigorously pursue our original claim and to
defend ourselves against this action."
The countersuit, which seeks unspecified damages,
comes only a few months after an embarrassing
episode in HP's history, in which the company
engaged in illegal pretexting to obtain the
private phone records of journalists, employees
and company board members as part of an effort to
uncover a news leak on the board. Former HP
Chairman Patricia Dunn has been charged with four
felony counts related to the scandal and has pleaded not guilty.
The new allegations leveled at HP by Kamb do not
appear to be directly tied to the hunt for the
boardroom leak. However, Kamb has pointed to some
of the evidence that surfaced during last fall's
investigation into HP's pretexting, and a
timeline indicates that the company had already
employed pretexting for phone records around August 2005.
HP on Dell: What happened
Hewlett-Packard allegedly paid an ex-Dell exec to
collect "competitive intelligence" about the
activities of its rival in the printer business.
Court documents provide a rare behind-the-scenes
glimpse into corporate skullduggery, including
code names used (Dell was "Everest" and Canon was "Fuji-san").
HP's complaint: Accuses ex-employees of
expropriating HP info when starting new LCD company.
Kamb affidavit: Ex-VP Kamb denies it; claims he
never used "any information proprietary to HP."
Response brief: Japan-based start-up, with Kamb
as U.S. head, denies any wrongdoing.
Kamb's counterclaim: Describes alleged spying on Dell.
Kamb exhibit: Outlines a "Competitive Intelligence Investigation."
Kamb was a vice president of business development
at Compaq Computer when that company merged with
HP in April 2002 and was fired in the fall of
2005, Kamb said in his suit. He was living in
Japan for much of that time and was assigned to
research new technologies and to build ties with
"computer industry experts," according to the
suit. Today he's the U.S. chief executive of
Byd:sign, the flat-panel TV company he's accused of founding unlawfully.
HP claims in its lawsuit--filed against Kamb,
Byd:sign and other former HP employees--that Kamb
had threatened to quit until he received a substantial pay raise.
HP asserts that Kamb owned, along with several
associates, a significant share of Byd:sign, but
failed to tell anyone at HP about his interest in the venture.
"While still employed by HP, these former
high-level employees and their co-conspirators
covertly organized and began operating a
competing business venture using HP's resources,
contacts and trade secrets," HP claims in court documents.
More specifically, HP charges that Kamb was
"siphoning" research and development funds from HP for Byd:sign's benefit.
In his filing, Kamb vehemently denied diverting
any funds. (Click here for a PDF of Kamb's affadavit.)
Besides Kamb and Byd:sign, HP also named as a
defendant Katsumi Iizuka, the former president of Dell Japan.
Kamb acknowledges meeting Iizuka in 2001 as part
of his mission to build links with computer
experts, according to court records. But Kamb
characterizes the meeting merely as a business relationship that benefited HP.
Allegations of corporate espionage
The most incendiary allegations come in the new
countersuit, which claims that HP executives
became concerned about rumors that Dell was
preparing a foray into the printer manufacturing,
one of HP's most lucrative businesses. (Click
here for a PDF of the Kamb's countersuit.)
As a member of HP's imaging and printing group's
"competitive intelligence team," Kamb said he was
in a position to know that HP senior executives
signed off on a plan to pay Iizuka to obtain
details of what Dell was up to. Iizuka turned
over the information to Kamb and he passed it along to HP, Kamb claimed.
Kamb alleges that Iizuka declined to receive any
money but instead requested that the money be
paid to a company called "Dinner Inc." Payments
were to be handled by a third party. "Iizuka then
obtained information on Dell's anticipated launch
of its printer business," Kamb claims. (Iizuka
had left Dell in 1995 to start his own company.)
HP's version of the story confirms some details,
but doesn't discuss the alleged corporate
espionage or senior management involvement.
HP's version, in its own lawsuit, goes like this:
In October 2002, Kamb arranged for HP to hire
Iizuka as a consultant to provide market research
regarding unnamed HP competitors. In addition,
Kamb arranged for additional consulting fees,
totaling about $10,000 a month, to be funneled to
Iizuka through a consulting firm called "Imagine
That," which was run by a Kamb paramour.
Correction: This story misidentified the
company for which Lexmark International builds
printers. Lexmark builds Dell's printers.
Among the documents Kamb included in his filing
were e-mails he says were exchanged between
himself, Iizuka and various HP employees.
In a pair of e-mails from January 2003, Iizuka
appears to be exchanging information on Dell's
upcoming printer lineup with HP employees. In one
dated January 16, 2003, Iizuka says he has met
the person responsible for managing printer sales
for Lexmark, the company that builds Dell's
printers. He adds: "I could try to get some
information about Dell/Lexmark and Dell branded product over there."
Credit: KVVU Karl Kamb Jr.
In a February 20, 2003, e-mail exchange that
appears to be between two HP employees, one of
the employees said "Dell will introduce three
printer models in the late March/Early April
timeframe," according to the filing. The e-mail
includes prices and specifications of Dell printers.
Dell printers made their debut in March 2003. A
Dell spokesman declined to comment about the
court cases, but did say that Iizuka left Dell
eight years before the company's entry into the printer business.
Both HP and the defendants named in its original
suit are accusing each other of civil offenses.
HP alleges trade-secret misappropriation, fraud,
civil conspiracy and violations of the federal
Computer Fraud and Abuse Act and the Racketeer
Influenced and Corrupt Organizations Act. For his
part, Kamb said HP is liable for breach of
contract, civil conspiracy, invasion of privacy
(tied to the use of pretexting), and also
violations of the Computer Fraud and Abuse Act, and the RICO Act.
If any of the allegations are substantially true,
prosecutors could bring criminal charges as well.
Pretexting may violate state laws and common law
rules prohibiting fraud. Trade secret
misappropriation can be a federal crime under the
federal Economic Espionage Act of 1996, and
punishable by up to 10 years in prison.
More claims of HP pretexting
Following the alleged espionage campaign, Kamb
says in his filing that someone at the company
erroneously concluded he was pocketing some of
the money meant to pay off Iizuka. He was ordered back to the U.S.
Some of the details at this point are sketchy.
What is clear is that Kamb's former wife, Susan
Michelle Kamb, filed for divorce on grounds that
included adultery and sent HP a subpoena on
August 4, 2005, asking for information about her
husband's involvement with Byd:sign.
As a result, according to Kamb, sometime in
August 2005, HP "engaged in clandestine acts" to
obtain his private telephone records that
included unsuccessful pretexting attempts aimed
at T-Mobile and successful attempts aimed at
Sprint. On August 31, 2005, Kamb's attorney sent
Hunsaker, then an HP attorney, a demand that the company stop spying on him.
In a written response a few days later, Hunsaker
denied that HP had ever tried to obtain his phone
records. Hunsaker--who is also facing criminal
charges arising from the pretexting of
journalists, including three CNET News.com
reporters--was a senior HP lawyer and its chief ethics officer.
Kamb says that last fall's investigation into
HP's attempts to unearth a news leak demonstrates
that HP attempted to spy on Kamb.
Last August, when it became clear that the public
was to be made aware of HP's attempts to uncover
a news leak, the company hired attorneys to
interview everyone involved. Hunsaker was interviewed on August 25, 2006.
"Hunsaker first learned that HP had used
pretexting to obtain phone records in July 2005
in connection with an unrelated HP
investigation," attorneys working for law firm
Wilson Sonsini Goodrich & Rosati wrote in their
report, a copy of which was released by the
congressional committee investigating HP. "One of
the subjects of that investigation was going
through a messy divorce." Wilson Sonsini, which
had been hired by the board as an outside
counsel, no longer works for the board but
continues to provide services for HP.
A call to Hunsaker's attorney was not returned
Wednesday, but he has said in the past that his
client was misquoted by the Wilson, Sonsini attorneys who interviewed him.
Kamb is now living in Las Vegas. A local Fox News
affiliate, Fox 5, announced earlier this month
that it has retained him as a "Dream Team" member
to provide commentary on how to get more from new
"products and innovations to suit the Vegas lifestyle."
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