Broker, Trader, Lawyer, Spy

by Eamon Javers

  Finding Swigart’s home address—3119 Circle Hill Road in Alexandria—was easy. With that information, Beckett Brown found his home phone number. And it wasn’t much harder to find out who Swigart was talking to. Beckett Brown hired a small private investigative agency in New York to gain access to Swigart’s home phone records. That firm, Science Security Associates, Inc.,* submitted a detailed handwritten account of telephone calls from Swigart’s home phone number listed on the AT&T phone bills Swigart received in the mail in January 1998, and November and December 1997. The report listed about eighty long-distance and credit-card calls, and included notations about who was listed as the owner of each of the extensions Swigart dialed. Science Security billed Beckett Brown $1,250 for this intelligence.

  Beckett Brown also wanted to know about Swigart’s financial situation, and somehow gained access to records from his bank indicating that he had an account balance in January 1998. But there was nothing dramatic to be found there, either: Swigart had a modest balance of $14,410. The spies followed Swigart’s movements, issuing reports that read more like foreign agents’ intelligence dossiers than corporate e-mails: “Swigart appears to be working from home. He sets up a weekly schedule that rarely includes the Hawthorn Group.” And they had no hesitation about delving into his personal life, even noting the name and occupation of a woman he was dating at the time.

  Nothing in the record shows that Beckett Brown came to any conclusions about whether or not Swigart had been Deep Chocolate. And it is not clear that Nestlé ever solved the mystery. But both must have known they were getting close: Richard Swigart was Deep Chocolate.

  Working as a subcontractor for Hawthorn Group, which in turn was working for Mars, Swigart was one of the leaders of the covert effort against Nestlé Magic. As part of his campaign, Swigart reached out to consumer groups, government agencies, and the media, making the case that Magic was dangerous and noncompliant with the FDA’s rules. And even though Swigart had spent a career as a corporate consultant working against consumer groups like US PIRG, he needed to work with his old enemies on this operation. He dropped off packets of information against Magic at the offices of various consumer groups.

  Next, Nestlé’s hired spies turned their attention to Patton Boggs, a prominent law and lobbying firm in Washington that worked for Mars. The lawyers had pressed the case against Magic at the FDA, arguing that Magic violated a decades-old law against embedding toys inside food products. Beckett Brown identified the individual attorney within the large firm to investigate: a young lawyer, Daniel Kracov, who specialized in matters before the FDA. Working closely with Mars, Kracov had done what he could to nudge the FDA to take action against Nestlé.

  The operatives accessed the billing records for Kracov’s private phone at the M Street offices of Patton Boggs, jotting down the details of fifteen calls, noting which numbers were called most frequently and which states Kracov dialed in each case. Pinning down Kracov’s faxes proved more difficult. His fax line, as it turned out, was shared by a number of lawyers in the office. There was just no way to tell who Kracov had been sending his faxes to—any one of the attorneys in the office could have been using the same machine. The spies were temporarily flummoxed.

  They moved on to a phone number at Mars itself, pulling phone records there that showed a Mars executive calling the White House twice on January 15, 1998. What could that call have been about? They needed to dig. Soon, Beckett Brown learned that executives at Mars were planning a company retreat in February to the Eastern Shore sailing town of Saint Michaels, Maryland. It was Beckett Brown’s own home base, and this would be a perfect chance to gather intelligence to fill in the gaps in the information obtained so far. Beckett Brown deployed agents to Saint Michaels. They needed to know where the Mars executives would be staying. There are only a few hotels in Saint Michaels, but getting the right one would be crucial. The Beckett Brown team cased the Mars headquarters in Virginia, noting the placement of surveillance cameras and other security measures. They called the local waste management company to find out when trash was collected each week. And despite Mars’s reputation for nearly obsessive security, they found penetrating its complex easy. They headed straight for the rear of the Mars headquarters building, and into an area where decorative hedges hid the company’s Dumpsters from view. There, they swiped bags of Mars office trash, switching them with bags of old trash they brought along as replacements. They had to make sure no well-intentioned Mars maintenance people noticed that the bags were vanishing before trash day.

  In time, they began to bring old Mars trash back to the Mars Dumpsters, replacing the fresh bags with older material they had already scoured for clues. Most of the time, they also hired an off-duty police officer to join them for their raids. That way, the Beckett Brown team would have somebody to run interference on their behalf if they were spotted and questioned by the local cops. Although the legal issues surrounding “Dumpster diving” can be murky, and often depend on where garbage is situated and how it is secured, the Beckett Brown men operated on the assumption that everything they did was legal, since people discarding trash for public collection have abandoned the presumption of privacy for material. Still, they knew the police might be suspicious—or might not buy their legal reasoning—and they thought it was worth the investment to have a police officer on hand, and on the payroll. Beckett Brown gathered trash for months at Mars headquarters, bringing the discarded bags back to their own office, where they sifted through the material.

  Dumpster diving is one of the oldest tricks of the corporate-espionage trade. The term itself invokes images of private eyes rummaging through banana peels, desperately digging up dirt on a target. And that’s partly correct. But Dumpster diving is a time-tested technique, and it’s a lot more common than most businesspeople think. Amid all the detritus of a modern corporate office are documents that can be invaluable to corporate spies trying to re-create the activities going on inside a company: e-mail printouts, billing records, used calendars, and the like.

  As the Beckett Brown team spent hours plowing through the trash at the Mars headquarters office, they found documents covered with food, coffee grounds, and other foul-smelling waste. On one occasion, they found a pair of soiled underpants. Someone at Mars had a terrible case of diarrhea, and had simply thrown the dirty underpants into the garbage. Still, Beckett Brown’s spies pressed on. They found shredded documents—Mars had some security measures—but found that Mars staffers invariably threw all the shreds of a document into the same wastebasket. The pieces migrated around inside the bag as it was jostled out of the building and into the Dumpster, but they were all still in one place. Beckett Brown set about painstakingly re-creating each document. They developed a list of code words to look for as they read through the reams and reams of papers that they discovered in the trash bags. They created a smaller pile of papers that included the words “Nestlé,” “Magic,” “choking,” “attack,” and “go after,” or the names of any of the top executives of either company.

  And then they hit pay dirt. Deep in the trash, they found a guest room contract signed by a Mars executive, Bob Cargo, for ten rooms at the Saint Michaels Harbour Inn and Marina on Harbor Road for Thursday to Saturday, February 19–21, 1998. The contract called for access to the hotel’s meeting room, along with audiovisual equipment. It stipulated that Mars would be charged a rate of $95 per day for the rooms.

  Now Beckett Brown had all the information needed to mount an intelligence-gathering operation as well-paid operatives in the chocolate war. And they were opening a crucial new front in the long battle between the two companies: pet food.

  That winter, Nestlé announced its agreement to buy the Spillers pet food business from Dalgety, PLC, for $1.16 billion.5 After the debacle with Nestlé Magic, Nestlé knew it would have to be alert for any response by Mars to this encroachment. Fortunately, the corporate retreat in Saint Michaels would fall just two weeks after the announcement about Spillers.

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bsp; Beckett Brown dispatched Tim Ward, a former officer in the Maryland state police, and Mike Mika, a former Secret Service officer, along with a few other agents, to the hotel. The Saint Michaels Harbour Inn is a classic resort hotel: situated on a picturesque finger of the Chesapeake Bay, it features dozens of sailboat slips in its own marina, and balcony views of the Chesapeake Bay Maritime Museum just across the water. February, though, was off-season, when barren trees and chilly breezes keep tourists away. The influx of Mars executives and corporate spies from Beckett Brown would provide a noticeable boost to the hotel’s monthly revenue.

  Ward and Mika were among the best men Beckett Brown had to offer. Ward was one of the founding members of the firm, and Mika was a veteran of the Secret Service’s Counter Assault Team, with which he traveled the world in the course of missions to protect presidents and vice presidents. For a veteran agent like Mika, it was a simple matter of checking into the hotel, dropping his belongings in Room 209, and stepping downstairs to the restaurant, Windows on the Water, for dinner.

  The Beckett Brown team knew that the Mars executives would unwind after their meetings each day at the small hotel bar and then adjourn to the restaurant. Each day the spies positioned team members inside the bar, sitting two to a table and trying to look as if they were attending some other business conference. They positioned themselves in the room so that wherever the Mars executives sat, they’d be within earshot of the Beckett Brown men. From their years in the Secret Service, the men were skilled in the difficult art of maintaining a quiet, meaningless conversation while straining to overhear every word said at the next table. It worked. The Mars executives didn’t notice they were being observed. From their perspective, they had walked into an already half-filled bar. They barely cast a glance at the spies.

  As the Mars team adjourned to the restaurant for dinner, the Beckett Brown men pre-positioned themselves at tables, again spreading out to cover as much territory as possible. But the dining room was too big for their small group to eavesdrop on every possible table, so they kept a two-man team waiting in the hallway. If the Mars people sat at a table not covered by a Beckett Brown listening team, the backups would walk in and claim the next table. Each night, they rotated the positions of their team members, with some in the bar, some in the restaurant, and some playing the backup role in the hallway. They didn’t worry too much about being recognized. Since the Eastern Shore plays host to so many corporate retreats, Mars executives would expect to see the same faces among their fellow guests over the course of a weekend. Nothing at all would appear out of the ordinary. On his first night in residence, the expense report shows, Mike Mika spent $184.24 on his meal at the hotel’s restaurant. But it was in every sense a working dinner.

  In a report to the client, Beckett Brown noted that its operatives had overheard some important conversations during dinner at the restaurant that evening. Mars executives, while choosing from the menu’s pan-seared rockfish, lump crab cakes, and veal sweetbreads, didn’t notice the spies at the nearby table. And they talked frankly about how the sales of Mars’s Milky Way bars in Europe had been “adversely affected” by Nestlé Magic. The executives worried that the small plastic toy included inside the Nestlé Magic candies could become a collector’s item. It could have turned into a fad like “Tickle Me Elmo,” they grumbled, becoming the must-have children’s gift of the year.

  The Mars executives were exulting in their victory over Nestlé, unaware that a team of eavesdropping spies surrounded them at that very moment.

  Each day, the Beckett Brown team paid members of the hotel’s janitorial staff to leave the trash collected from the Mars executives’ rooms off to the side of the Dumpster behind the hotel. They collected that trash, too, bringing it back to the Beckett Brown offices for analysis. One team member noted that the janitors did not look at all surprised when they were offered a bribe of about $20 to leave the trash for the snoopers to collect later. He wondered if the janitorial team took bribes like that often.

  Pulling together the phone records, hotel surveillance, and documents from the trash, Beckett Brown began to develop a torrent of intelligence on developments within Mars. But much of it was haphazard information, each data point seemingly unrelated to the others. The hardest part wouldn’t be gathering the information; it would be making sense of the hundreds of disparate pieces of information the spies gathered about their adversary. In the first few months of the year, Beckett Brown noted the following pieces of information in briefing reports prepared for their client:

  “Mars will donate $100K to the Moscow Tretyakov Gallery. Approved by Forrest Mars.”*

  “The Mars Hackettown plant has switched to using Canadian dairy products at a savings of $85/tonne.”

  “Mars may be developing a peanut butter plant in Mexico using Nicaraguan and Mexican peanuts.”

  “Due to a redesign of the British 2 pound coin, Mars’ product dispensing machines in the UK have been rendered unusable.”

  “Patton Boggs—Paid $2,597,916.70 for period ending 82097.”

  One challenge that confronts any intelligence operation is how to separate the important information from the enormous volume of information churned out by any global company every day. Beckett Brown didn’t distinguish between the pieces of information. It passed them all along to the Dezenhall P.R. firm. Executives there would decide what was important, and what needed to be sent along to Nestlé.

  It turned out that Beckett Brown had also pulled out of the Dumpster information vastly more important than the trivial details of day-to-day operations inside the rival chocolate company. The spies discovered that Forrest Mars had not been telling the entire truth in his dramatic fax to Nestlé’s Dr. Helmut Maucher. Although Forrest Mars wrote that he would not object to the $1 billion deal with Spillers, the spies found that his company had secretly put together an elaborate plan to derail the acquisition. For Nestlé, the spying effort was the corporate equivalent of Ronald Reagan’s famous line about the Soviet Union’s arms control commitments: “Trust, but verify.” They wanted to know whether Mars would keep its pledges. And they were willing to pay for the information.

  Discovering this one document, Beckett Brown’s spies figured, would be worth about $100,000 in fees for the firm. But they didn’t plan to leak the documents all at once to their high-paying client. Instead, they’d string out the revelations, doling out nuggets of information every so often, to keep the client’s interest up and to preserve the illusion that this information was difficult to gather—and thus worth the high fees. Holding back some of the details also gave Beckett Brown a backlog of information that it could save to give the client at some future point when other investigations weren’t panning out.

  As Nestlé discovered, Mars was mounting an operation very much like the operations companies around the world conduct when they calculate that it is easier to lobby governments to block their competitors than it is to compete in a free market. It was, of course, possible for Mars to undertake a free-market offensive against Nestlé, perhaps rolling out newer and better pet food products, or slashing prices on existing products. But that would require time and cost an enormous amount of money. It was far simpler and cheaper to manipulate European governments to think it was in their own interests to block Nestlé’s aspirations. Getting government help can be vastly more rewarding than anything many companies can do in the private sector. That’s one reason, for example, why they spend so much money lobbying the U.S. Congress for earmarks—those special, targeted, spending provisions often stuck into legislation moving through the Capitol. In 2005, on average, companies received as much as $28 in earmark revenue for every single dollar they spent on lobbying expenses.6 That’s a much better rate of return than many could get producing and selling products.

  In this case, Mars aimed its plan at the European legislators who would be in a position to keep Spillers out of Nestlé’s hands. First, Mars planned to convince the countries of the European Economic Area (EEA) that
the acquisition by Nestlé would be bad for consumers. The idea was to use Mars’s Pedigree dog food division to pull together factual and historical information to highlight inaccuracies in the material that Nestlé submitted to European bureaucrats. “The information would highlight Nestlé’s history of job cuts or consolidation after mergers,” noted Beckett Brown.

  Next, Mars would spur seemingly independent third parties to help thwart the conclusion of Nestlé and Dalgety’s deal. Beckett Brown noted that the plan called for Mars lobbyists to provide European politicians with negative talking points and tabloid newspapers with negative headlines about the deal. “BBI has obtained a copy of this plan,” the report noted helpfully.

  “To a degree, Mars is willing to be criticized, albeit lightly, by their own third-party people,” noted Beckett Brown. “For example, they will argue that a Pedigree/Nestlé duopoly would dominate pet-food markets within the EEA and would hurt suppliers and manufacturers as well as consumers.” That was an important discovery, and Beckett Brown didn’t lose the opportunity to emphasize the point in its report: “It could be significant that Mars is willing to suffer criticism over the Nestlé/Dalgety acquisition.”

  In the coming months, Beckett Brown would prowl ever deeper into the secrets of Mars. Through its contact at Science Security Associates, it continued to monitor phone calls going out of the Mars headquarters, tracing down the identities of people and firms that the Mars executives were calling.

  But the internal security at Mars proved daunting. By spring, Science Security Associates sent a note asking for payment on an invoice relating to James Kiss of the Hawthorn Group and Ed Stegemann, the general counsel of Mars. The subcontractor explained (in mangled grammar) that he wasn’t able to come up with all the phone records Ward wanted. “It appears that the ‘security blocks’ which are in place are such that my person can not overcome what is in place,” he wrote. “If you get any other thoughts reference to this I might attempt for you do let me know.” The firm submitted an invoice for $2,455 for the work already completed. “If you have any comments reference to the invoice do understand that the larger portion of it has been my expenses on this which, as you know, can run expensive,” the note read.