Industrial Espionage Becoming 'Big Business'

By Stanton, John | National Defense, July 2001 | Go to article overview

Industrial Espionage Becoming 'Big Business'


Stanton, John, National Defense


Corporations increasingly are vulnerable to spies, say intelligence analysts

The world's economic globalization has intensified competition in every industrial sector, including defense, and with that has come a concomitant rise in industrial espionage, said business intelligence experts.

"Corporate espionage is growing," said Ira Winlder, president of the Internet Security Advisors Group. He spoke during a conference of the Association of Former Intelligence Officers (AFIO), in Washington, D.C.

What are the spies after? According to Winlder, oil, marketing plans, pharmaceutical formulas, merger and acquisition data and component technology Winkler's advice to industry is to "sweat the small stuff, because that's where the billions of dollars are. Use the 95-5 rule, and take care of the 5 percent stuff"

In 1999, that "5 percent stuff" cost industry an estimated $100 billion in losses from industrial espionage activity. According to a survey by the American Society of Industrial Security and Price Waterhouse Coopers, that worked out to about $50 million an incident. "High technology and service organizations led the number of reported proprietary information loss incidents with 530 and 356 incidents reported, respectively. ... Companies perceived on-site contractor employees and original equipment manufacturers (OEMs) as the greatest threat to their proprietary information," according to the report.

Rusty Capps, president of the Center for Counterterrorism and Security Studies in Alexandria, Va., told National Defense that those types of losses could he minimized if organizations and individuals availed themselves of counterintelligence education and training. "Accessibility is vulnerability, and employees are accessible in many common places and subject to tactics of the 'collectors.' Nobody will ever have the counterintelligence to match up against the collectors from a corporation or government. Making the employee or 'target' more resilient and aware through education can help."

Capps' organization provides training to government and defense industry employees through its SpyMaryland and SpyVirginia coursework. These one-day courses taught by former U.S. and Soviet government intelligence officials focus on counterintelligence and security issues. Capps said he has seen an increase in private-sector attendance at these security seminars.

Contrary to many media reports, commercial enterprises and individuals account for the bulk of international industrial espionage activity. For example, in the defense industry, 58 percent of industrial espionage is practiced by corporations and individuals, while only 22 percent is attributable to foreign government sponsored efforts, according to the FBI'S 2000 Annual Report to Congress on Foreign Economic Collection and Industrial Espionage.

In the United States, the CIA's Senior Deputy Counsel John Rizzo mocked sensational stories of the CIA "spying" on behalf of American companies. He indicated that there are good reasons why the CIA steers clear of economic espionage. But he admitted that the agency has "relationships" with American businesses, which are designed to counter government-sponsored terrorism.

Intelligence Collection

"The CIA is not in the business of industrial espionage and does not target foreign companies. Collection of intelligence to benefit American companies would be inconsistent with U.S. values, and it is not a matter of national security," he said. …

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