CNBC: Former Deloitte Insiders Say Firm Had Espionage Unit, Spied on Competitors

Chris Gaetano
Published Date:
Dec 20, 2016

Accounting is not a job that is typically associated with tales of intrigue (certain Ben Affleck movies aside), but a recent article in CNBC, citing former Deloitte insiders, reveals the existence of an alleged espionage unit that employed ex-CIA agents alongside accounting industry veterans to spy on KPMG, PwC and E&Y, as well as competitors to Deloitte's consulting practice. 

The unit engaged in practices that aren't part of your typical accounting job. CNBC said its roster was drawn from both the accounting and the intelligence world in order to do things like get access to other firms' pricing models and information about new product or service lines from competitors, developing a network of former employees and staking out trade shows in order to do so. To illustrate, the CNBC article talks about one of the unit's first operations: to gather intelligence about why a consulting firm, BearingPoint, was having an emergency meeting in Florida. The two leads in the case were a former private investigator and a former CIA case manager, both of whom now worked for the Big Four firm. The pair went to the Florida hotel where the meeting was supposedly taking place and spent time eavesdropping on conversations at the bar and the bathroom to find out more details, passing information on to a team in Virginia who analyzed it. 

According to CNBC sources, the team eventually learned that the company was in dire financial straits and was considering selling, something Deloitte found interesting because of its efforts to build its own consulting practice. In order to get specifics, particularly about what the company's federal practice was actually worth, the two people on the ground staked out the meeting room and, when it emptied, waited until they felt anything there was truly abandoned and collected the papers left behind. What they found was a treasure trove of information about revenue projections and breakdowns of revenues from specific accounts. Deloitte realized that, despite BearingPoint's financial issues, buying it could be a real coup for the Big Four firm, which it eventually did in 2009. 

A Deloitte spokesperson said that the firm's decision was based not on what was learned during the operation but on public court documents from BearingPoint's bankruptcy proceedings, according to CNBC. People familiar with Deloitte's intelligence team told CNBC that the unit was wound down over the following years, although a small number are still employed there. 

While certain types of corporate espionage are illegal, the former insiders CNBC interviewed all said that none of the unit's activities broke the law. The Economic Espionage Act of 1996 outlines exactly what types of corporate espionage are and are not legal. Basically, it is criminal to misappropriate trade secrets, or to engage in a conspiracy to do so, with the knowledge or intent that the theft will benefit a foreign power; it is also criminal to misappropriate trade secrets related to or included in a product produced or placed in interstate or international commerce with the knowledge or intent that doing so will injure the owner of the trade secret. 

Further, an article in Forbes argues that corporate espionage is rarely worth it anyway. Companies who engage in its illegal forms risk huge fines if they get caught, and even if the operation is successful it's not always clear whether or not it will impart a sustainable advantage. The Forbes article noted that Xerox was in heavy competition with IBM and Kodak in the copier market, but all three were eventually beaten by Canon, which was able to make its copiers cheaper than the other three. 

Not that it never happens at all, though. Bloomberg outlined some of the more famous cases throughout history, some of them stretching back more than a century, like when the British East India Company had someone smuggle plants and seeds from China to learn their secret to great tea so it could feed the empire's growing thirst for the stuff.

More recently, GM claimed that Volkswagen had stolen its trade secrets after it lost eight executives to the German car company, a spat that eventually resulted in a settlement where Volkswagen pledged to buy $1 billion worth of GM parts over seven years. A case study from the U.S. Department of Energy, meanwhile, notes that the former Prime Minister of France, Charles de Gaulle, had authorized widespread corporate espionage against the United States to help French companies be more competitive in the global market. This practice has extended into at least the 1990s when the CIA intercepted a French intelligence document saying that agents were to steal information from U.S. aerospace companies on things like telecommunications systems, strategic missiles and satellite projects. 

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