Computer Forensic Case Study - Breach of Fiduciary Duty (Part 2)

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Scenario

Type of Case: Civil Litigation
County: Dallas
Plaintiff: Voice/Data Cabling Company – “ABC”
Defendant: Mr. Operations; Mr. Project Manager

Description: Mr. Operations was an employee of ABC Company hired to run the voice/data cabling division of this growing organization. Mr. Project Manager worked for ABC Company since its inception and was considered the Senior Project Manager. Both Defendants terminated their employment with ABC Company providing no notice and did not provide ABC Company with any opportunity to inquire as to open issues with existing clients and jobs.

Complication: To complicate matters there was no employment contract, confidentiality agreement, security policy, nor employee titles. The employee handbook consisted of approximately two pages of text. No documentation existed showing Mr. Operations was an Officer of ABC Company.

Summary

Claims of Plaintiff
ABC Company purports that Mr. Operations was an Officer of ABC and as an Officer had a Fiduciary Duty of no harm. ABC Company believes Mr. Operations and Mr. Project Manager took both customer contact and proprietary data from company systems to use in direct competition. ABC Company also believed existing data had been modified or removed from the system by Mr. Operations and/or his accomplice Mr. Project Manager.

Defendants’ Response
Texas is a right-to-work State and doesn’t enforce non-compete agreements. Mr. Operations claimed no knowledge of his job title or responsibilities within ABC Company. Both Mr. Operations and Mr. Project Manager denied any tampering with, or possession of, ABC Company data, customers, or employees.

Computer Forensic Evidence Recovered
Due in part by the actions of Mr. Operations and Mr. Project Manager, the data recovery effort was extraordinary. A temporary Microsoft Exchange environment was established to restore and recover emails across two months of backups. All tapes were removed from rotation and replaced. Files, logs, dates, and timestamps had to be recovered and correlated across five systems and cell phones in order to determine, as closely as possible, what had actually transpired.

There appeared to be a concerted effort to cover electronic trails by deleting emails the same day they were processed, removing data from personal computers and network file servers, removing temporary files, running defrag utilities on computers, removing line item detail and closing bids to clients that had yet to be lost by ABC Company. While both Defendants had claimed in sales meetings at ABC Company there was no bidding activity in March and April, numerous bids were located, created by both Defendants, totaling over $350,000.

Here’s a sample of what was found:

• Mr. Project Manager made visits to a prospective client and created a bid for work worth about $17,000. This bid was provided to XYZ Company, purportedly as a subcontractor bid, in an email dated April 11, 2005 stating, “…it would be nice for us to do this through XYZ Company.” The response from XYZ Company was clear, “…I think the timing of the job will allow us to work it in house when we complete things.”

• April 21, 2005: Mr. Operations attempts to burn over 300 MB of ABC Company data to CD including; the bidding, job tracking, employee tracking, purchase order database system, client environment documentation, all contact information. When this attempt failed, Mr. Operations began to systematically, over the course of a few weeks, compress and email this same data to his personal Verizon account and to another co-conspirator.

• April 26, 2005: Mr. Operations sends an email to XYZ Company providing the required software to purchase, and the contact information for this purchase, to allow importing of the data acquired from ABC Company.

• April 27, 2005: Mr. Project Manager sends four proposals, for existing ABC Company clients, to XYZ Company stating, “…4 quotes to send to…” These proposals were removed from the ABC Company bidding system.

• April 28, 2005: Mr. Project Manager makes several attempts to copy client bid, purchase order, and documentation to floppy. These floppies would not hold all the data and were found left at his station. Mr. Project Manager then communicates with his spouse and created 19 emails, with approximately 219 Microsoft Word documents attached, addressed to her work email account.

• April 29, 2005: Mr. Operations sends proprietary work product for a client proposal worth in excess of $750,000 to XYZ Company. Mr. Operations continued to work on this proposal and on May 3, 2005 sends additional information to XYZ Company for preparing the final product.

• May 5, 2005: Mr. Operations receives an email from a prospective client, referred to ABC Company by a current customer, requesting information about ABC Company. This email was immediately forwarded to his personal Verizon account and no follow-up was performed from ABC Company. Mr. Operations, after May 11, 2005, provided a proposal to this prospective client on behalf of XYZ Company.

Conclusion

This is just the tip of this iceberg as there were numerous other items found with similar impact to those mentioned above. Of course, XYZ Company and its Officers were added as Defendants. Additional charges included: Conversion, Misappropriation of Trade Secrets, Texas Theft Liability, Unfair Competition, Conspiracy, and others.

All Defendants disastrously chose to continue the fight in an attempt to negate the computer forensic evidence mounted against them. Before granting the Temporary Injunction, the judge stated that the forensic evidence was “compelling”.

As the process moved into e-discovery and deposition, the Defendants found no end to their plight as the situation progressively worsened. Finally, a settlement was reached, but not until the Defendants lost numerous customers and countless dollars. In the end, the Computer Forensics could not be ignored.

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