By Brooke A. Masters
Washington Post Staff Writer
Friday, October 13, 2006; D01
Deception, personal surveillance and sting operations are commonplace tools for private investigators hired by companies to handle low-level security problems.
These also happen to be among the aggressive methods Hewlett-Packard contractors used to try to uncover the source of boardroom leaks to the media.
The resulting scandal at HP has drawn new attention to intrusive techniques available to private investigators and has raised questions about when and how they are used. Many companies, big and small, allow -- at least tacitly -- their security contractors to push the legal envelope on uncontroversial matters, like combating employee theft or counterfeiting.
But news that a big-name corporation would permit the use of such tactics for a sensitive, potentially high-profile investigation has surprised many in the corporate security field. They say most large, public companies are far more cautious when it comes to high-stakes matters involving top executives and regulatory scrutiny. Increasingly sensitive to privacy considerations and public appearances, lawyers for large corporations routinely limit the techniques they allow and are far less willing to let investigators take the initiative on tactics.
"We've evolved from more of a free rein to a punch list of what we want. Particularly in cultures we're not familiar with, we will set up strict instructions," said Regis Becker, director of global security and compliance at PPG Industries, a Pittsburgh manufacturer with facilities and affiliates in 23 countries. "We make it clear we don't want any information we are not legally entitled to."
Some firms are so concerned about the potential public-relations impact of hiring an investigator that they choose not to do it at all. Take Riggs Bank. Back in 2004, the District firm faced the same issue that eventually led to criminal charges against HP's former board chairman and general counsel: persistent leaks from inside its boardroom. Struggling to survive a money-laundering investigation and perhaps sell itself to another firm, the bank's directors considered hiring an outside investigator to find the source of the information.
After much discussion, the board rejected the idea. "The logic was if it was lawful, it was probably not going to be successful and . . . it would be highly embarrassing to have it known that the company was investigating its own board," according to a participant in the discussion who spoke on condition of anonymity because board deliberations are supposed to be confidential.
Companies that conduct corporate investigations vary widely in size and orientation. At one end are the solo practitioners who track down stolen laptops and debunk workers' compensation claims. Many investigators are former law enforcement officers accustomed to having access to subpoenas and search warrants to get the information they want. Discretion is rarely a crucial part of their assignments.
At the other end are the highly profitable multinational corporations that do background checks on top executives, conduct discreet witness interviews and provide assistance to lawyers doing corporate fraud investigations. These firms, by contract, promise to place just as high a priority on how the investigation reflects on the client as they do on getting results.
PI Magazine, the leading industry publication, estimates that there are 60,000 licensed investigation firms in the United States, but that understates the market because six states do not require investigators to be licensed and many states allow a single licensee to employ dozens if not hundreds of people, said Jimmie Mesis, the magazine's editor in chief .
With 3,900 employees and 2005 revenue of $946 million, the largest firm by far is Kroll Inc., which bills itself as a "risk consultant." A unit of financial conglomerate Marsh & McLennan Cos., Kroll tackles everything from crisis management to substance-abuse testing and business investigations.
Other large firms tend to have dozens of employees, or at most, a few hundred. The best known among them work almost exclusively for law firms and general counsels of large companies and pride themselves on their willingness to say no.
"You should hire the guy who tells you no a lot," said James Mintz, founder of the Mintz Group. "You have to do things that are not only legal but acceptable in the eyes of a judge or a jury."
Mintz said his firm had been asked in the past if it could obtain bank and phone records using pretexting -- the method of lying that has led to criminal charges for HP's former board chairman, general counsel and several of the investigators they hired. "We've told clients you would be insane to do that."
His firm largely shies away from deception and from digging into irrelevant details of personal lives. While they will pose as buyers in a counterfeiting case, the investigators generally do not misrepresent themselves when interviewing potential witnesses or doing background checks, he said.
Some techniques have the potential to backfire if they become public, so different investigators draw the line in different places. Take garbage-stealing. It's legal as long as the trash is removed from the street rather than private property.
But Oracle Corp. was deeply embarrassed in 2000 when investigators it hired from Investigative Group International were caught going through the trash of think tanks and nonprofit groups that had been supportive of Oracle rival Microsoft Corp. The IGI team rented offices in the same building as the Association for Competitive Technology in the District and paid janitors $1,200 to hand over the trash.
As a result, some of the biggest firms say they won't engage in trash-stealing, and many prominent lawyers say they won't allow investigators to do it when their client is a big public company or a prominent individual.
"With a big corporation, the cosmetics are as important as the substance," said attorney Robert G. Morvillo, who represented Martha Stewart at her criminal trial. "If you get caught, it looks like you are doing something wrong. . . . You've got to exercise veto power every now and then."
But some investigators and lawyers do not take as hard a line. They avoid introducing stolen trash as evidence in court because they would have to explain where it came from. But they're sometimes willing to engage in a little Dumpster diving behind the scenes.
Larry Lopez, the owner of a small Cambridge, Mass., agency called Strategic Research, recalled a case in which he was working for a business that suspected one of its former employees had violated a non-compete agreement. The standard ruse in such cases would be to pose as a potential investor and approach the person directly, but because the matter was already in litigation, legal ethics canons prohibited direct contact with an opponent.
So Lopez arranged to have the former employee's trash removed and identical bags substituted in its place. His firm went through the garbage looking for names and addresses from the former employee's correspondence. The lawyers would then subpoena the correspondents directly, yielding evidence that could be introduced in court without embarrassment. "For six months, we took trash on these people and they never found out. There was nothing illegal or unethical, but the jury would have turned up its nose," if it knew the whole story, Lopez said.
Surveillance is similarly legal -- as long as it's done on public property and avoids the appearance of harassment or stalking -- but image-conscious firms often limit the practice, said Robert Seiden, chief executive of Fortress Global Investigations Corp., which has about 100 employees. "When we do surveillance for corporations, we're very cognizant [to avoid] allegations that the surveillance was over the line or intrusive," he said. "We have a code of ethics. If we see someone is with their children, we pull away."
By contrast, some investigators trying to disprove disability or workers' compensation claims openly shadow their targets. Insurance investigators say that claimants who know they are being watched sometimes agree to lesser settlements.
Faced with a need for phone records, image-conscious firms generally shy away from pretexting and try the direct approach.
"They say: 'We have a fiduciary duty to look into this. We want your phone records; give them to us or resign,' " Lopez said.
Staff writer Ellen Nakashima contributed to this report.