The Dark Side Of Expert Networks: 20 Ways Corporate Spies Get Information

don chuDon Chu

Photo: AP

Right now, expert networks are being lambasted by the press and the FBI for providing information to hedge fund clients that might be considered non-public, material information. Typically, expert networks operate by consulting with, for example, people who work in the retail business who can tell them how much consumers are expected to buy next month.

But there’s a darker side of the expert networks that operates by selling information that is more difficult to come by.

Some of the firms named in the investigation, funnily enough, are mentioned in a book by Eamon Javers, Broker, Trader Lawyer, Spy: The Secret World Of Corporate Espionage. The book says Goldman Sachs, SAC Capital, and KPMG have employed people whom the author calls “corporate spies,” people who might be called the “dark side” of expert networks.

Big Lots, for example, is currently suing an expert network, Retail Intelligence Group, for gathering what it calls proprietary information by “duping” 72 of their store managers to tell them how business is going. 

The tactics described in the Big Lots lawsuit are just like the ones described in Eamon Javers book about how “corporate spies” get their information.

First, says Javers, the spies apparently look for company sources who usually come in one of two flavours:

  • The first is a “male in his mid 20s who is somewhat bored, likes to party, needs money, likes women, sports and risk, is disrespectful to his managers, and is patriotic.”
  • The second is a young woman who is insecure, overweight, and bitchy. She doesn’t have a boyfriend and except for a strong relationship with her mother, has only fake friends.

But it’s not just about identifying potential sources. We’ve gone through Javers’ book and identified the 20 common tactics used in corporate espionage.

They get your secretaries buzzed at local bars, and probe them for information.

Around 2005, the Bermudan government hired KPMG to investigate IPOC International Growth.

Alfa Group desperately wanted to know what KPMG was finding, so they hired corporate spies. The spies flew down to Bermuda and during a round of drinks, probed KPMG secretaries for information about the corporate structure of KPMG. Identifying the key executives helped their case.

From the new book, 'Broker, Trader, Lawyer, Spy: The Secret World Of Corporate Espionage' by Eamon Javers

Spies will trick you into filling out a survey to find out what motivates you: sex, money, patriotism? Then they'll use it against you.

They'll call the biggest hotel near your company's HQ and find out when the ballroom is booked for your big party.

A Pharmaceutical company, for example, might be celebrating the launch of a new product.

They'll set up an account with job sites like Monster.com

They'll set up a fake documentary film company and ask to interview the company's CEO

They'll also tour your headquarters and film everything in range: labs, sales offices, documents, and more.

Enron hired intelligence to fly over energy plants. Knowing plants were preparing to shut down, Enron bet energy prices would rise.

The corporate spies hired by Enron flew over power plants looking for clues that they were preparing to shut down for maintenance. For example:

  • a low supply of coal
  • Port-a-Potties to accommodate contractors
  • a change in the # of parked cars

From the new book, 'Broker, Trader, Lawyer, Spy: The Secret World Of Corporate Espionage' by Eamon Javers

They'll call the local waste management to find out when your trash is collected each week

Nestle suspected that Mars was behind a grassroots effort to bring down one of their products, Nestle Magic, in the late nineties.

Nestle hired corporate intelligence, who called the local trash company near Mars headquarters in Virginia to learn their schedule.

From the new book, 'Broker, Trader, Lawyer, Spy: The Secret World Of Corporate Espionage' by Eamon Javers

Then they'll dumpster dive.

Once they knew when Mars had its trash picked up, the spies found it pretty easy to infiltrate the dumpsters behind Mars headquarters.

They always brought fake trash bags with them to replace any stolen trash.

From the new book, 'Broker, Trader, Lawyer, Spy: The Secret World Of Corporate Espionage' by Eamon Javers

At a hotel, they'll tip the janitors to save your trash

Nestle's hired spies knew that Mars executives would soon be on corporate retreat in Saint Michael's, Maryland.

At the Saint Michaels Harbor Inn and Marina, the spies tipped janitors $20 to leave the Mars executives' trash to the side of the dumpster behind the hotel.

From the new book, 'Broker, Trader, Lawyer, Spy: The Secret World Of Corporate Espionage' by Eamon Javers

They're skilled in the art of maintaining a quiet, meaningless conversation while listening to another conversation

At the Saint Michael's Harbor Inn and Marina, Nestle executives pretended to be having a quiet conversation at the table next to Mars executives.

Really, they were just eavesdropping.

From the new book, 'Broker, Trader, Lawyer, Spy: The Secret World Of Corporate Espionage' by Eamon Javers

They're trained to catch you lying and they'll listen in on earnings calls

At the time, the corporate spies were working for an anonymous hedge fund that needed to figure out whether executives were telling the whole truth about UTStarcom's health.

From the new book, 'Broker, Trader, Lawyer, Spy: The Secret World Of Corporate Espionage' by Eamon Javers

Michael Sophie, UTStarcom's CFO at the time, said, 'I think you saw the announcement at the end of June when we announced on the PAS infrastructure orders in China. And again, it's just the timing of deployment...'

That's a detour statement. Instead of giving an answer, Sophie referred to a past announcement.

From the new book, 'Broker, Trader, Lawyer, Spy: The Secret World Of Corporate Espionage' by Eamon Javers

In person, they look for grooming gestures like scratching or a person shifting their centre of gravity

SAC Capital and Goldman Sachs have both hired corporate intelligence for 'Tactical behavioural Assessment' training.

TBA teaches a person to watch for clues to tell if someone is lying. For example:

  • shifting gravity: moving from one elbow to another
  • grooming gestures: adjusting clothes, hair, or eyeglasses

From the new book, 'Broker, Trader, Lawyer, Spy: The Secret World Of Corporate Espionage' by Eamon Javers

Spies often attend investors' conferences on behalf of clients.

The spies use the same TBA 'deception detection' techniques to spot the winners among the dogs while start-up companies pitch investors. For example:

  • Do the presenters rock on the balls of their feet?
  • Were they using qualifiers like 'frankly' and 'honestly?'

If they use a 'cluster' of these signs at once, they might be lying or trying to paper over a bad quarter.

From the new book, 'Broker, Trader, Lawyer, Spy: The Secret World Of Corporate Espionage' by Eamon Javers

One edge you have is time: spies purposefully leak the documents over a long period of time

The corporate spies didn't tell Nestle everything about Mars at once. Just one secret document at a time was enough. They once found a fax that was worth $100,000 to Nestle, becase it detailed Mars' plans to derail an acquisition by Spillers.

The rest of the information, the spies doled out only so often.

From the new book, 'Broker, Trader, Lawyer, Spy: The Secret World Of Corporate Espionage' by Eamon Javers

Now if you want to get a Wall Street secretary drunk...

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