Archive for April, 2009
Starwood & Hilton Hotels: A case of corporate espionage
The term `corporate espionage’ has been around for decades and is often used by the media to infer a top secret method used by a foreign power to winkle out industrial secrets which could make or break western civilization [Chinese American Scientist Lee Wen Ho, who was accused in 1999 by US Federal authorities of stealing nuclear arsenal secrets for China, springs to mind]. However, far more common than this is the corporate espionage that affects the business operations of everyday entities ranging from small businesses to large corporations. A case in point demonstrating Intellectual Property & Brand Protection abuse involving Hilton Hotels and Starwood are before the courts right now.
The type of information which is usually targeted during a corporate espionage operation is somewhat mundane in comparison to government backed spying operations but can be equally damaging to the victimized organisation. Likewise, the players in these operations tend more to be managers who happen to have access to crucial information due to chance, proximity or reporting structure rather than a grand design by a foreign spy network.
A good example is the recent stoush between the hotel groups Starwood and Hilton. According to media reports, Starwood has accused Hilton of poaching their senior employees as well as stealing thousands of documents regarding their successful W Hotel and St Regis Brands. Hilton denies this. Starwood claims that two of their top executives took with them thousands of documents when they jumped ship to Hilton. These documents supposedly contained the bulk of the Intellectual Property [IP] developed by Starwood over years of operating their luxury chain. This IP included such diverse information as how to negotiate with property developers, training employees, development plans, marketing, demographic data and methods for operating the whole hotel. Starwood contends that this IP is worth tens of millions of dollars and effectively allows a competitor to leapfrog the failures and setbacks of developing their own brand.
Fraud in the Gulf - `at alarming levels’
April 16, 2009 |
The ongoing investigation into the multi million dollar alleged fraud at Nakheel, part of the state-owned conglomerate Dubai World, in Dubai suggests that the uncovering of large scale corporate frauds in the Gulf may only just be beginning. A recent fraud survey by one of the big four accounting firms indicated that 40% of firms surveyed believed fraud was a major problem, whilst 60% of respondents expect fraud levels to increase over the next two years.
The Nakheel fraud has attracted worldwide media coverage due to the nature of the matter. The Dubai waterfront development, which was overseen by the Dubai Government, was to be twice the size of Hong Kong, it was to house around 1.5 million people, cost billions to develop, and some of those placed under arrest are foreign nationals [refers]. The authorities have also interviewed officials at the Dubai Islamic Bank relating to allegations of kickbacks, false invoicing and over payments in relation to some Nakheel projects.
Around twenty executives of Nakheel and other developers have been arrested so far, including two Australians, for suspicion of fraud. Many of these executives remain in detention though no formal charges have been laid. Though there has been widespread coverage of recent frauds in the local media, some fear that press freedom may suddenly be curtailed should a new media law be passed which would penalize `misleading news that could harm the national economy’ in the UAE.
Healthy Scepticism - Due Diligence Went Unheeded in Madoff Case
Now that Bernie Madoff is behind bars, and likely to remain there for a considerable time, recriminations have begun to ricochet amongst the various parties responsible for creating and sustaining the largest single fraud in history; investors, advisors, feeder funds, bankers, lawyers, hedge fund managers, regulators and government officials.
One oft repeated line is “How could Madoff continue to get away with this for so long?’ Indeed, had the recent economic meltdown been less severe, Madoff would probably still be operating his massive Ponzi scheme with investors and regulators oblivious to his shenanigans. The benefit of hindsight is usually always good as is the fact that so many are now reflecting on the extent of systems failure but why were those critics decrying Madoff’s financial system long before his collapse ignored.
One of the best known whistleblower’s was Harry Markopolos who spotted Madoff’s Ponzi scheme after an investment firm he worked for tried to emulate Madoff’s methods but failed to reproduce the same steady high earning results. Markopolos warned the Securities and Exchange Commission (SEC) about Madoff’s activities but his cries failed to ignite a serious investigation of Madoff’s affairs.
A number of major investors, including Deutsche Bank and Fund of Fund asset manager Ermitage Group were highly skeptical of Madoff’s operation and declined to invest any funds with him. A healthy suspicion that something too good to be true probably is, resulted in these investors being spared financial Armageddon.
FBI / IC3 annual report 2008 – online fraud figures set new high
The FBI / IC3 annual report was released yesterday indicating that the number of complaints received in 2008 had hit an all time high of 275,284, a rise of 33% from 2007. The estimated dollar loss relating to these complaints was US$265 Million. The report indicated the following:
- “Non-delivery of merchandise was the most common complaint last year, followed by auction fraud, credit card fraud and investment hoaxes…Research suggests that as few as 15 percent of cases of cyber-fraud are being reported to crime control agencies”
See http://www.ic3.gov/media/annualreport/2008_IC3Report.pdf for the full report.
Though incidents related to online sites such as eBay and Craigslist.com contributed the majority of complaints filed, a significant pattern was noted for larger per complaint losses such as investment hoaxes, financial crime, Ponzi schemes, false trading accounts and fake charity organisations. Fake recruitment agencies are being created to bilk job seekers of `recruitment fees’ for non existent positions before the agency folds and moves to another location.
