*NEWS*DELL ALLEGES HP OF CORP. ESPIONAGE

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Dell calls on HP to investigate spying charges
HP says it discussed allegations that employees spied on rival, but Dell wants more thorough investigation
A corporate shoving match has begun between HP and Dell following new allegations that HP robbed Dell of trade secrets.Fortune magazine reported this week that it had unearthed information that appears to support claims made by Karl Kamb Jr, a former HP vice president. Kamb said in legal documents filed in January that in 2002 HP paid a former Dell executive to snatch trade secrets about Dell’s printer business.After the story, a Dell spokesman said HP had yet to respond to requests that the company investigate Kamb’s accusations. HP is suing Kamb for allegedly stealing some of its technology.In legal documents, HP denied spying on Dell. HP said in a statement that it has responded multiple times to Dell’s requests.”In January and February 2007, HP responded to letters from Dell’s general counsel,” HP said in the statement. “In addition, Dell’s outside counsel and HP’s outside counsel have spoken and met numerous times and continue to remain in contact in an effort to address any lingering concerns surrounding these issues.”

Dell suggested that HP is missing the point. Dell wants an investigation to determine whether its trade secrets were stolen.”We have a simple request that we have made twice and will continue to make,” Dell said in a statement. “We have specifically asked HP to conduct a full and thorough investigation. We have been waiting to learn the results of their investigation, or to receive an explanation of why they have chosen not to investigate this matter. Instead, we have heard nothing.”We do not know what investigation they undertook, what witnesses they spoke to, what conclusions they reached or what actions they intend to take in response to these allegations. At Dell, we believe corporate espionage is unacceptable and we take allegations of this nature very seriously.”If true, Kamb’s claims would contradict HP’s assertions that the hunt for a boardroom leak last year was an isolated event.Several HP executives, including Patricia Dunn, HP’s former chairman, were rebuked by a congressional committee after the executives acknowledged that spying on board members, employees and journalists — including three from ZDNet.co.uk’s sister site, CNET News.com — had occurred. HP investigators are also accused of tricking phone company employees into turning over private phone records belonging to journalists and board members, a practice known as pretexting.On Friday, an HP representative declined to say whether the company had launched an investigation into Kamb’s allegations, citing the court order that prevented HP and Kamb from discussing their case publicly.

HP faces claims of spying on Dell
Former executive says the company paid to obtain confidential information about Dell, while HP accuses him of stealing trade secrets
A former HP 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, 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 $100m in damages.
Kamb, who has denied any wrongdoing, filed a countersuit in US District Court for the Eastern District of Texas on Friday, according to legal documents. Among Kamb’s allegations are:
    * 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.
    * HP obtained Kamb’s private phone records through pretexting, the practice of obtaining 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 and has pleaded not guilty.

The new allegations leveled at HP by Kamb do not appear to be directly tied to the boardroom leak hunt. However, Kamb has pointed to some of the evidence that surfaced during last autumn’s investigation into HP’s pretexting, and a timeline indicates that the company had already employed pretexting for phone records around August 2005.Kamb was a vice president of business development at Compaq Computer when that company merged with HP in April 2002 and was fired sometime in the autumn 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 US 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 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.”While still employed by HP, these former high-level employees and their co-conspirators covertly organised 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.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 characterises it 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 with rumours that Dell was preparing to make a foray into manufacturing printers, one of HP’s most lucrative businesses.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 funnelled to Iizuka through a consulting firm called “Imagine That”, which was run by one of Kamb’s paramours.Among the documents Kamb included in his filing were emails he says were exchanged between himself, Iizuka and various HP employees.In a pair of emails from January 2003, Iizuka appears to be exchanging information on Dell’s upcoming printer lineup with HP employees. In one dated 16 January, 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.”In a 20 February, 2003, email 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 email 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 prior to the company’s entry into the printer business.Both HP and the defendants named in its original suit are accusing each other of civil offences. 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 (RICO). For his part, Kamb said HP is liable for breach of contract, civil conspiracy, invasion of privacy (because of pretexting), and also violations of the Computer Fraud and Abuse Act, and RICO.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 that he was pocketing some of the money meant to pay off Iizuka. He was ordered back to the US.Some of the details at this point are sketchy. What is clear is that Kamb’s then-wife, Susan Michelle Kamb, filed for divorce on grounds including adultery and sent HP a subpoena on 4 August, 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 including pretexting attempts aimed at T-Mobile, which were unsuccessful, and Sprint, which were successful. On 31 August, 2005, his 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 out of the pretexting of journalists — including three reporters from CNET News.com, ZDNet UK’s sister site — was a senior HP lawyer and its chief ethics officer.Kamb says that last autumn’s investigation into HP’s attempts to unearth a news leak demonstrate 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 25 August, 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 and 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.”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”.

HP denies spying on former employee
Computing giant admits firing former ethics attorney Kevin Hunsaker amid fallout of pretexting scandalIn a court filing on Tuesday, Hewlett-Packard denied allegations that it pretexted a former employee with whom it is engaged in a legal dispute.In 2005, HP sued Karl Kamb, a former vice president of business development and strategy, alleging he stole company trade secrets. In January, Kamb countersued HP alleging that his phone records were improperly obtained and also charging that he was instructed by HP management to spy on rival Dell.”HP denies that the so-called pretexting alleged by Kamb in the counterclaim occurred,” the company said in a filing made Tuesday with a federal court in Tyler, Texas. “HP denies that any so-called pretexting activities were part of a widespread pattern or practice at HP.”

While HP denies pretexting Kamb, the company has said that as part of a separate — and now infamous leak probe — it obtained or tried to obtain the phone records of more than a dozen people including current and former directors, employees and journalists, including three reporters from ZDNet UK sister site CNET News.com.Last month the judge handling the case, District Court Judge Michael Schneider ordered Kamb to withdraw his countersuit and issued an injunction barring both sides from publicly discussing the case. Schneider said that Kamb could refile the case under seal.Significant portions of HP’s filing Tuesday were also made under seal.Among the things the company did note publicly, is the fact that former ethics attorney Kevin Hunsaker was terminated by HP. The company confirmed in September that he had left the company’s employ, but declined to say whether he resigned or was terminated.Hunsaker has emerged as a central figure in both cases. In the leak probe, he faces felony charges over his role in allegedly overseeing the investigation, including the pretexting. In the current case, Kamb alleges that Hunsaker initially denied pretexting Kamb, but later admitted that HP did pretext him.In its filing Tuesday, HP denied that Hunsaker “ever acknowledged that HP had engaged in so-called pretexting against Kamb”.

HP’s Dirty Tricks Look Practiced: Fortune
Fortune magazine has been poking around those court-sealed charges that HP bought Dell’s printer plans from a former senior Dell executive before Dell entered the printer market and got a previously mum Dell to say that “The more we look into it, the more concerned we become.”Those claims, you’ll remember, were made in a countersuit by ex-HP VP Karl Kamb, the guy HP is suing for theft of trade secrets and plain ole theft of money along with a lot of other stuff.But in Fortune’s opinion, “As outlandish as Kamb’s charges seem…independent evidence suggests that the wildest of his accusations – that HP sleuths obtained confidential information about Dell and that HP pretexted him – are true.”This after the magazine says it examined 1,500 pages of court filings, exhibits, e-mails and hearing transcripts and interviewed 20 lawyers or participants in the Kamb saga.

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June 5, 2007 at 1:37 PM