Corporate Espionage, E-mail Break-in Case Zaps Electronics Industry

A corporate espionage case in which an executive from electronics manufacturer, AMX Corp, broke into the e-mail system of the marketing firm working for a competitor Crestron Electronics to steal sensitive business information has rocked that industry.

David Goldenberg, a resident of Long Island and former vice president in the New York-area office of Richardson, Texas.-based AMX Corp., pled guilty this week in a New Jersey courtroom to felony wiretapping in connection with illegally accessing the internal e-mail at Crestron’s sales and marketing firm, Sapphire Marketing, based in Woodcliff Hills, N.J.

As part of the plea deal with the Bergen Court Prosecutor’s Office, which has spared Goldenberg from a criminal trial, the prosecutor there, Brian Lynch, is recommending probation.

[For more about corporate espionage, read the case study of Easton Sports versus Warrior Lacrosse. Also see definitions of trade secret and other key intellectual property terms.]

That’s in part because Goldenberg has been largely cooperative after being approached by the Paramus Police Department in February 2008 after Sapphire filed a complaint about suspicions that business e-mail concerning AMX was being intercepted and Goldenberg had something to do with it.

“It’s a third-degree wiretapping charge,” says prosecutor Lynch, noting Goldenberg has no prior convictions so he’s eligible for probation, which he called “fair and just” in the case. Lynch noted his office, where most cases focus on nabbing online predators, gets few corporate espionage cases.

However, probation may not necessarily be the outcome as Goldenberg’s sentence comes down from a judge as scheduled on June 26th.

Goldenberg and his attorney declined to comment, but at Creston Electronics, Jeff Singer, communications director, called what Goldenberg did, to which he admitted in his guilty plea, “outrageous.”

From what is known, says Singer, it appears that Goldenberg managed to get the passwords and log-ins for Web-based e-mail access for four employees at Sapphire, reading Sapphire e-mail on a daily basis for about seven months. Eventually Goldenberg was simply forwarding it to his own e-mail account.

But the day came when an employee at Sapphire, whose business function puts it in close contact with Crestron corporate and consumer customers for high-end access control systems for video, lighting and climate control, did notice her e-mail was being forwarded to an outside account.

Marla Suttenberg, owner of Sapphire Marketing, could not be reached for direct comment, but in a written statement this week she indicated she immediately notified local law authorities and let them gather evidence, and improved the e-mail security.

The revelation that Goldenberg was the source of the e-mail break-in was particularly devastating because Suttenberg knew Goldenberg and his family personally. Prior to working at AMX, Goldenberg had been a client of Sapphire’s buying Crestron products. Crestron says Goldenberg applied for a job at Crestron in 2007 but wasn’t hired but was hired by AMX.

Goldenberg also knew Crestron Electronics executive vice president Randy Klein, who states “the full damage caused by our chief competitor illegally obtaining this information is immeasurable and has seriously impacted our past, present and future business.”

According to Singer, Crestron believes Goldenberg, via Sapphire e-mail, obtained information about customers and pricing, upcoming contractual negotiations with dealers, and future product plans.

Singer may have also gotten access to weekly conference calls where Crestron sales and marketing strategies were discussed, due to his illegal access to Crestron e-mail.

Singer said there were times that AMX—which has said Goldenberg acted alone—seemed to know pricing and discount information that undercut Crestron in bidding situations.

In one episode, “our main competition knew what prices we were offering before the dealer did,” Singer asserts. Whether Crestron will press a civil-court case against Goldenberg or AMX remains to be seen, but is a possibility.

However, Crestron, which may have suffered millions of dollars in losses due to Goldenberg’s e-mail break-in of Sapphire marketing, also wants to move on past the distressing event. “We don’t want to be distracted,” Singer says, noting the firm has a new line of products out that makes it feel positive about the future.