Alleged software theft pits businessman, ex-employees He claims they started company using his data

March 29, 1996|By Elaine Tassy | Elaine Tassy,SUN STAFF

Four computer diskettes, small enough to fit into a jacket pocket, have become the focus of a big legal fight between two Baltimore County employment search companies.

The fight over the alleged pilfering of customized software illustrates an increasing problem nationwide, the theft of easily concealed but valuable information created on computers.

Adam A. Hardie, president of Hotel Executive Placement Inc. in Owings Mills, claims that three former employees stole custom-made software designed to place hotel executives in jobs and used it to start a competing company. He has filed a $1 million lawsuit and a criminal complaint against them.

The employees are fighting the charges, arguing in court papers that the disks contain information available through the phone book or industry publications.

Authorities say thefts of such material are common, hard to prove and growing as the computer industry expands and as people lose their jobs and seek self-employment.

"Any new thing that comes along, people steal," said Frank C. Meyer, a Baltimore County prosecutor who handles white-collar crime.

Texas, California and Massachusetts, which have many high-tech companies, are seeing many such information thefts, said Julius Finkelstein, deputy district attorney in Santa Clara County, Calif., the home of Silicon Valley.

"Trade secret thefts are extremely hard to prosecute," Mr. Finkelstein said. "The statutory elements are very hard to explain to juries and very difficult to prove unless you can catch someone red-handed close in time to the theft."

Sending files to a home computer via an e-mail message and copying data onto a floppy disk are common tactics, he said.

Roland Miller, a former Baltimore County detective now working privately, said about 10 of the 300 cases he handles each year involve such thefts. "Any employer that's not expecting stuff like that to be taken is very misguided," he said.

Mr. Hardie, however, did not expect such thievery.

In the late 1980s, he hired Joseph Bahler, a Herndon, Va.-based computer engineer, who spent eight months creating the "Recruiter's Assistant" software program, a framework in which to keep data. Mr. Hardie said he paid $25,000 for the program initially and has spent $100,000 each year to update it since 1988, when he began using it.

He hired Virginia Ann Speir in 1994 and Anne and Brian Zernhelt early last year to do marketing and recruiting for his 12-employee company.

The company, which was begun in 1979, has filled 50 to 100 executive-level hotel jobs in the United States and the Caribbean annually, charging each hotel a percentage of the new employee's first-year salary, Mr. Hardie said.

Mr. Hardie furnished the staffers with the program and a three-part database. The first part lists about 6,000 job-seekers' names, education levels, desired salaries, family information and willingness to relocate. The second has 15,000 hotel addresses, phone and fax numbers, and information on such things as ratings, guest rooms and restaurants. The third has 70,000 hotel contacts.

"Let's face it," Mr. Hardie said. "Our whole company's on a computer disk."

The software program can be placed on a disk that fits easily into a pocket, and the data can be copied onto about three disks, Mr. Bahler said.

Last summer, Mr. Hardie fired Mrs. Zernhelt, and Mr. Zernhelt and Ms. Speir soon resigned. It wasn't long before some of Mr. Hardie's clients told him they were getting calls and mailings from Hospitality Management Services Corp., offering the same services for less money, he said.

"Our normal fee structure is 20 to 25 percent of the first-year salary, and they were giving 10 to 15 percent," Mr. Hardie said. "We quickly figured the only way they could be doing that is if they took with them our computer program."

He hired Mr. Miller, the private detective, who poked through the trash of Cockeysville-based Hospitality Management for two months and found printouts of the software being used there.

In December, county police with a search warrant seized 22 items, including computers that were loaded with the database, computer disks believed to contain it and documents that it generated, according to the complaint and a police report.

When Anne Zernhelt was asked about the database, she replied, "We took something that we should not have; we'll give it back and make restitution," according to the police report.

In January, Mr. Hardie filed a $1 million civil suit in county Circuit Court that included allegations of theft, misappropriation of trade secrets, conspiracy and breach of loyalty.

He also filed a criminal complaint with the Baltimore County District Court commissioner March 1. The three former employees, charged with theft of property worth over $300, will be tried April 10. The charge carries a maximum sentence of 30 years in prison.

The Zernhelts and Ms. Speir declined to be interviewed.

Daniel V. Schmitt, their attorney in the civil case, has filed court papers stating that the program and database contain information available by "consulting the telephone directory, yellow pages or industry publications," or by calling the hotels.

The papers also state that Hospitality Management did not earn money from using the database, that Mr. Hardie didn't demand the return of the program and that he hasn't shown how the theft has caused him damage.

Mr. Hardie remains anxious. "I don't know that they still don't have the software," he said

Pub Date: 3/29/96

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