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Take a Lesson from Coca-Cola: Your Proprietary Information May Be Vulnerable to Employee Theft

We found this well written article in the Washington Post. Although this general news article has run just about everywhere, this is most comprehensive in explaining the story. It should be recognized as a warning about internal security for your business.

3 Accused In Theft Of Coke Secrets

Information Offered To Pepsi, FBI Says

Washington Post Staff Writer
Thursday, July 6, 2006; Page D01

The FBI arrested three people in Atlanta yesterday on charges that they conspired to steal trade secrets from Coca-Cola Co. and sell the information for more than $1.5 million to PepsiCo Inc., federal law enforcement officials said.The defendants, including one Coca-Cola employee, who worked as an administrative assistant in the company’s Atlanta headquarters, contacted PepsiCo officials in May, who tipped off Coca-Cola officials, who then contacted the FBI, according to Atlanta U.S. Attorney David E. Nahmias.Coca-Cola and PepsiCo, whose fierce rivalry in the soft-drink and food arena has provided case studies for generations of marketing students, worked together to help federal agents set up an undercover sting operation that led to yesterday’s arrests.A company surveillance camera caught Coca-Cola employee Joya Williams at her desk looking through files and “stuffing documents into bags,” Nahmias and FBI officials said. Then in June, an undercover FBI agent met at the Atlanta airport with another of the defendants, handing him $30,000 in a yellow Girl Scout Cookie box in exchange for an Armani bag containing confidential Coca-Cola documents and a sample of a product the company was developing, officials said.

The FBI agent promised $45,000 more would be provided later, after the sample product had been tested. On June 27, an FBI agent offered to pay $1.5 million for additional documents and information, the officials said.

The three defendants, who were in jail last night pending an appearance before a judge this morning, were unavailable for comment.

Coca-Cola spokesman Ben Deutsch would not comment on the information the three suspects are alleged to have stolen except to say it did not contain the tightly guarded recipe for Coke. “The secret formula was not and is not at risk,” he said.

The company released a memo that was sent by Coca-Cola’s chairman and chief executive, E. Neville Isdell, sent to the company’s 50,000 employees worldwide, detailing the arrests and saying the case has caused the company to reconsider security of trade secrets from the top down.

“As this is an ongoing criminal matter, we are limited in what we can communicate,” Isdell said in the memo. “However, it should be noted that no personal employee information was ever at risk.” The involvement in the alleged scheme by a Coca-Cola employee was “difficult for all of us to accept,” he said, but it underscored the need to safeguard trade secrets.

“I would also like to express our sincere appreciation to PepsiCo for alerting us to this attack,” he said.

Dave DeCecco, spokesman for Pepsi-Cola North America, said: “We only did what any responsible company would do. Competition can sometimes be fierce, but it also must be fair and legal.”

Federal prosecutors said the alleged conspirator who made the airport exchange, whom they identified as Ibrahim Dimson of New York, sent an e-mail to an FBI undercover agent saying: “I have information that’s all classified and extremely confidential, that only a handful of the top execs at my company have seen. I can even provide actual products and packaging of certain products.”

The third alleged conspirator, identified by prosecutors as Edmund Duhaney of Decatur, Ga., opened a bank account with Dimson the day the FBI agent agreed to pay $1.5 million for additional information, the officials said.

This is a most compelling story on many levels. One significant aspect that deserves mention is Pepsi’s ethical behavior in rejecting overtures from the alleged thieves. It should also be noted that this incident has caused the Coca-Cola Company to review its general security practices. We don’t know much about Coca-Cola’s security procedures, but we hope it doesn’t take a serious threat to cause a serious reevaluation. Security evaluations should be performed periodically and on a regular basis.Good security begins with a pre-employment background check. As this incident demonstrates, you can have all the security cameras, passwords and security codes, but a determined thief can access your most important proprietary information. While a preemployment background screening cannot guarantee protection against internal theft it is a good first line of defense. Background checks are inespensive and highly cost effective, especially when measured against your potential losses and liability exposure.While the Pepsi and Coca Cola companies have displayed commendable ethics and graciousness in dealing with in this situation, on a global basis there may be more than a few companies that would jump at the opportunity to snatch Coca-Cola’s special formula. Taking it one step further, no matter what your business, there is always a company somewhere in this world who would gladly pay for your company’s propriatary secrets. Whether it be your research and development projects, your special software, your mailing lists or intellectual property, there is always someone willing to steal it and always someone willing to buy it.With a global economy your risk epands accordingly. Chances are you are hiring workers from foreign countries, sourcing and shipping all over the world. It is wise in the case of foreign workers to conduct international background checks for those who have access to your sensitive information. For domestic workers there is any number of background checks your HR department may choose to utilize.There are enough precautionary measures you can take to prevent thieves from stealing your most valuable information and materials. These measures are cost effective, especially when compared to the potential damage that can be done to your business. Take these precautions, please. Conduct security reviews on a regular basis. Order background checks not only for your new canddiates but do periodic background screens for your current employees.Remember, Check Them Out Before You Hire.


By Gordon Basichis

Gordon Basichis is the Co-Founder of Corra Group, specializing in pre-employment background checks and corporate research. He has been a marketing and media executive and has worked in the entertainment industry, the financial, health care and technology sectors. He is the author of the best selling Beautiful Bad Girl, The Vicki Morgan Story, a non-fiction novel that helped define exotic sexuality in the late twentieth century. He is the author of the Constant Travellers and has recently completed a new book, The Guys Who Spied for China, dealing with Chinese Espionage in the United States. He has been a journalist for several newspapers and is a screenwriter and producer.