Spies Among Us? Corporate Espionage Is Big Biz

Just how far will your company go to protect information it considers vital? The latest development in the Hewlett-Packard Co. spying scandal indicates that HP apparently considered planting spies in the offices of two news organizations to locate, identify and plug corporate leakers.

According to The New York Times, a senior HP executive was briefed on the possibility that investigators could pose as clerical or custodial employees in the San Francisco newsrooms of CNET Networks and The Wall Street Journal. It's still not clear whether the plan was carried out.

"We are not commenting on today's media reports," Hewlett Packard spokesman Ryan Donovan told ABC News. He went on to say that the company is "in the middle of an ongoing inquiry by the state of California."

Corporate spying to protect information crucial to a product's development or marketing is not new in America. It's sometimes called "competitive intelligence" and is practiced by no fewer than 5,000 corporate spies, according to Business Week magazine.

Many large companies spend more than $1 million a year tracking their competitors, building the program right into their sales strategies, according to the magazine. The result? Companies avoid unnecessary costs by knowing their competitors' strategies and marketing plans.

"You snooze you lose" is the familiar mantra heard in corporate boardrooms. Anyone who believes the HP scandal is a "one-off case" is either "stupid or naive," said a former banking executive.

"This practice is highly, highly common. Though the HP case is on the relatively heinous side," Ira Winkler, a security expert and author of "Spies Among Us," told ABC News.

Winkler, once employed as HP's chief security strategist, said companies have resorted to all sorts of unethical -- if not illegal -- activities to try to get a leg up on the competition.

"Companies hire data brokers to lie, steal and cheat," he said. "In order to get corporate secrets, they will even break into cars or hang out at bars, get an executive drunk, and try to get information from them."

But how far can companies go before violating the law?

In the HP case, both U.S. and California prosecutors are conducting criminal investigations into the company's use of deceptive tactics to obtain phone records belonging to directors, employees and journalists, in its effort to find the boardroom leakers. Two directors have resigned and chairwoman Patricia Dunn has also stepped down.

"Crimes have been committed," said Bill Lockyear, the California attorney general. He said he "has enough evidence to indict people both within HP, as well as contractors on the outside."

Two other corporate cases have shed some light into the dark corners of what was once called industrial espionage, and they help illuminate what sort of behavior crosses the line.

In 2000, Proctor and Gamble hired spies to snoop on competitor Unilever. However, the company dumped the strategy when it found out that one of the spies had rummaged through Unilever trash.

Oracle Corp. also admitted that it had employed detectives to pay janitors to rifle through competitor Microsoft's garbage, looking for evidence to use in a court battle.

Still, there are so-called legitimate spies, and their ranks have increased exponentially during the last decade.

According to Fuld and Company, a Cambridge, Mass., intelligence consultant, nine out of 10 large companies have hired individuals to ferret out competitive intelligence. But the company draws a sharp line between spying and competitive intelligence.

Competitive intelligence, or CI, is "information that has been analyzed to the point where you can make a decision," the company states on its Web site. "Spying implies illegal or unethical activities. ... Corporations do not want to find themselves in court, nor do they want to upset shareholders."

The high-tech era has made spying a lot easier, Winkler said, and he gave the following example.

"Airbus can take overhead satellite images of Boeing to see how many planes are in production," he said. "That's not really illegal in fact, it's one of the main uses of satellites these days. You have to look at corporate behavior on a illegal, unethical and legal continuum. Frankly, what a lot of companies are doing may not be illegal, but there is a lot of very arrogant behavior." --

The Internet has made corporate spying, or competitive intelligence if you prefer, a lot easier.

Stories abound about hackers breaking through corporate security barriers to obtain customer records, marketing plans and banking information. No wonder 77 percent of American businesses now say they "spy" on their own employees by covertly reading e-mails, according to PC Magazine.

Once again, though, the question is how much is too much. Is your boss reading your e-mail for competitive information that should not be shared or to simply build a case in order to trim the ranks because of in-house downsizing?

In the case of HP, both California and the United States have indicated the company crossed the line.

Next week, chairwoman Dunn and HP's general counsel are scheduled to testify before a congressional panel investigating the $86 billion computer giant. The committee will also hear from HP outside counsel Larry Sorsini, who has defended the company's behavior and investigative tactics as "not generally unlawful."