A blend of advanced technology, increased litigation and rising fears about trade secret theft and financial fraud is driving law firms and corporate counsel to the doors of former FBI agents and ex-prosecutors with a knack for solving crimes.
These private investigators report that calls for help from law firms and corporate general counsel have increased substantially in recent years.
Attorneys are looking for assistance on a wide range of problems, including: corporate espionage, intellectual property theft and workplace discrimination claims.
At the core of many of these problems, lawyers note, is a mountain of computer evidence too technical and too overwhelming for attorneys to dissect on their own.
“Most lawyers do not have the technological experience or the accounting expertise to do almost any of the stuff that these guys do,” said attorney Alan Brudner, head of litigation and investigations of the U.S. division of UBS Securities LLC, an international financial services firm.
Brudner said that his reliance on former federal agents has grown in recent years. In his 13 years with UBS, he’s gone from calling on private investigators only rarely to calling them once a month. He said that’s largely the result of increased government regulation, investigations and inquiries into the banking industry.
“They’re credible,” he said of the hired help. “They’ve got experience. They know their way around the courthouse and understand how evidence is used and presented in court. There’s always a value in talking to these guys.”
UNDERCOVER WORK
The investigators, meanwhile, note that much of their work is done undercover: monitoring e-mail, tracking financial transactions and dissecting computer forensic evidence. They knock on doors, follow people around and question employees and ex-employees about any problems at work.
“You have to go out and hit the bushes. You have to kick the tires. You can’t do it sitting behind the desktop, and a lot of law firms have tried that,” said Ken Springer, a former FBI agent who now runs Corporate Resolutions Inc., a New York-based investigative firm that provides investigative services to law firms and corporations.
“We look for Deep Throats — someone who knows about what happened,” Springer said.
“A lot of law firms tried to do their own investigations in-house … but in the last three or four years, we’re seeing law firms come to firms like ours for litigation support,” he said. “We’re behind the scenes more than anything.”
That’s the way clients prefer it, said Erin Nealy Cox, a former high-level Department of Justice attorney who now works in the Dallas office of Stroz Friedberg, a digital forensic and investigative firm staffed primarily by former federal investigators and prosecutors.
“Part of our value to our client is being able to work with and solve really big problems without anyone knowing about it,” Cox said. “We can’t go out like law firms that splash their verdicts across the front pages of newspapers. We just can’t do that.”
Behind the scenes, Cox said, firms like hers are helping law firms win lawsuits, settle lawsuits and avoid them altogether. They help in-house counsel investigate internal problems, such as data breaches and intellectual property theft, to determine whether legal action needs to be pursued.
“The law firms don’t have the forensic labs that we have,” she said. “They don’t have the private investigator experience that we have. We look for that smoking-gun e-mail or document.”
It is true that former federal law enforcement officials can be helpful to lawyers, said Philip Berkowitz, a partner in the employment law practice of New York’s Nixon Peabody. His law firm has hired such “sophisticated investigators” for help with whistleblower claims, when an executive is accused of engaging in fraudulent activities or to assist in internal investigations concerning suspected wrongdoing.
Berkowitz stressed, however, that hiring PIs can be risky, particularly for surveillance purposes.
“It’s very easy to get on the bandwagon and get carried away in a sexy investigation,” Berkowitz said. “But employers need to be very cautious about doing this. This kind of thing can blow up in the press and it can backfire and turn into a [public relations] debacle for the organization.”
Wal-Mart Stores Inc. made headlines last year when it fired a top-level executive for allegedly having an affair with a subordinate on company time.
The relationship was discovered in private e-mails the company monitored while investigating the executive for allegedly accepting gifts from an advertising agency that had a contract with the company, according to court documents. The woman sued Wal-Mart for wrongful termination. The case settled last year. Roehm v. Wal-Mart Stores Inc., No. 2:2007cv10168 (E.D. Mich.).
Wal-Mart declined comment for this story. The woman’s lawyer, Sam Morgan of Gasiorek Morgan & Greco in Farmington Hills, Mich., also declined to discuss the lawsuit, citing a confidentially agreement. He would say only that corporate spying in general is a growing, widespread practice.
“It’s a big business, and they charge good hourly rates to keep track of employees to make sure the company assets are not finding their way to competitors,” Morgan said.
Dave Walton, a management-side attorney and member of Philadelphia’s Cozen O’Connor, who specializes in trade secret litigation, won a $7 million verdict in May with the help of a former U.S. Treasury official who searched the computers of two employees of a castor oil and derivatives distributor who unexpectedly quit their jobs.
The investigator proved that the pair took confidential information when they left to help a competitor. Jacob Stern and Sons Inc. v. Savaiano, No. 07-04253 (Montgomery Co., Pa., Ct. C.P.).
“I wouldn’t do it with everybody,” Walton said.
“You have to make sure that it’s the right case, and you have to be able to say, ‘All right, if I’m ever in front of a jury on this, will I ever be able to justify this type of surveillance,’” Walton said.
