January 24, 2007 10:50 PM PST

HP accused of spying on Dell's printer plans

A correction was made to this story. Read below for details.
HP accused of spying on Dell's printer plans 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.

CONTINUED: Incriminating e-mail thread?…
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pretexting, competitive intelligence, business development, Patricia Dunn, HP

 

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