by Eamon Javers
Beckett Brown was becoming so closely involved with Nestlé’s business that Nestlé asked Tim Ward to fill out a nondisclosure form. In the legalese typical of such documents, Nestlé wrote to Ward, “You will have access to information which is confidential and proprietary to Nestlé, including but not limited to plans and future activities of Nestlé, marketing plans and strategies, business plans and information, and new product developments…. Because of the highly competitive nature of the food industry, policies and procedures have been established by Nestlé to protect its Confidential Information.” Ward signed the paper.*
It is worth pausing here to note just how strange all this was. After all, Nestlé was spending hundreds of thousands of dollars and deploying high-end crisis communicators, veteran Secret Service agents, and former law enforcement officials to find out what had happened to its new chocolate ball. But the chocolate industry has been secretive for generations. In fact, the famous children’s book by Roald Dahl, Charlie and the Chocolate Factory, has scenes eerily reminiscent of what happened at Nestlé. At one point Grandpa Joe explains to the child protagonist, Charlie, that chocolate can be a duplicitous business:
“You see, Charlie, not so very long ago there used to be thousands of people working in Mr. Willy Wonka’s factory. Then one day, all of a sudden, Mr. Wonka had to ask every single one of them to leave, to go home, never to come back.”
“But why?” asked Charlie.
“Because of spies.”
“Spies?”
“Yes. All the other chocolate makers, you see, had begun to grow jealous of the wonderful candies that Mr. Wonka was making, and they started sending in spies to steal his secret recipes. The spies took jobs in the Wonka factory, pretending they were ordinary workers, and while they were there, each one of them found out exactly how a certain special thing was made.”7
In this story, Willy Wonka resolves the problem of spies by hiring only the extremely loyal Oompa-Loompas to man his chocolate factory. Nestlé didn’t have that luxury. It hired spies of its own.*
Now Beckett Brown was poised to gather information on a new target: Nestlé’s own former manufacturer, Whetstone Candy Company. And in an ironic twist, Nestlé would run just the type of operation against its former subcontractor that, infuriatingly, Mars had run against Nestlé.
In the months after Nestlé recalled Magic, Whetstone continued to work on the concept of packaging a toy with a chocolate candy. The huge sales of Magic were clear evidence that the concept would be an enormous hit. After months of research, Whetstone developed a plan for a chocolate that could include a toy and still meet the FDA’s safety requirements. Hank Whetstone patented the plan, and then flew to the Glendale, California, offices of Nestlé to pitch it to executives there.
“They didn’t like it that I had the patents,” Whetstone recalls. “They asked me why I hadn’t come to them first.” Nestlé didn’t bite on the new idea; it told Whetstone that it wasn’t interested in the chocolate-and-toy category anymore. It had lost too much money on Magic to sink any more investment dollars into another try.
Whetstone went ahead with plans to develop the chocolate himself, and his relationship with Nestlé became more and more strained. All along, he had other business with Nestlé, producing various chocolates for it at his three-building manufacturing facility in Saint Augustine, Florida. But in October, he recalls, Nestlé ended its last contract with his firm. Nestlé, he says, was worried that he might do a deal with Mars—and what was worse, that he might use the facility Nestlé had paid for to produce chocolates for its archrival.
Soon after Whetstone says his contract with Nestlé ended, Beckett Brown’s records show that the corporate spies were sniffing around the manufacturing facility in Florida, trying to discover what it was producing, and for whom. Beckett Brown’s team was executing a play from a well-worn playbook when, at 3:45 A.M. on November 17, a car rolled up Coke Road in Saint Augustine, pulling into the parking lot of the Riverside Centre shopping area. Behind the wheel was Larry Dyer, a local private investigator subcontracted by Beckett Brown. In a surveillance report he dutifully prepared the next day, Dyer noted that his parking space gave him a “direct line of vision” toward the chocolate plant.
Everything was quiet, until 5:04 A.M., when Dyer spotted a trash truck from a private hauling company, BFI Waste Systems, pull into the manufacturing facility to collect the day’s garbage. When the truck pulled out, Dyer pulled his car into traffic right behind it. He followed the truck for several blocks, pulling alongside it when it parked at a branch of Prosperity Bank.
I exited my vehicle and approached the driver. The driver stated his name was Marc. I asked Marc for the garbage bags from Whetstones. He stated he had talked to his boss at BFI about giving us the bags of garbage. His boss told him if he did, he would be acting…on his own. The driver further stated he was afraid of losing his job. He refused to give me the bags. I asked him if we could work something out. He said no. Again he stated he was afraid it might somehow cause him to lose his job. He said to check with the other driver…because he might do it.
Dyer headed back to his office.
Somehow Beckett Brown was able to get materials from inside the Whetstone facility. And just as it had in the Mars case, Beckett Brown generated a torrent of information about this company.
Beckett Brown obtained a document showing that Whetstone took delivery of a high-speed machine from Germany that made hollow candy. “Although the equipment was shipped by Aasted-Mikroverk (Denmark), the invoice indicates the customer is M&M Mars, Waco TX,” noted a Beckett Brown briefing paper.
The spies also obtained a copy of a customs document showing British Airways shipping plastic candy molds to Whetstone’s plant.
And most important, Beckett Brown was able to prove that Whetstone had hired Stephen Cogswell—a marketing whiz who had worked at Nestlé on the Magic project.
Taken together, this suggested that Whetstone was gearing up to introduce its own version of Nestlé’s ill-fated Magic. If it could steer the new candy through the regulatory challenges in Washington, Whetstone would be in a position to steal market share from both Nestlé and Mars. Clearly, that would be unacceptable to Nestlé. Magic had been Nestlé’s idea, after all. The thought of Whetstone cashing in on the millions of dollars Nestlé had missed out on must have been unbearable.
So Nestlé, ironically, began the same type of coordinated media, consumer, and regulatory attack against Whetstone that Mars had run against Nestlé just two years earlier. And now Nestlé would do some rent-seeking of its own, pushing the government to shut down the rival product. The old game of spy versus spy had now become spy versus spy versus spy. At that moment, private detectives, veteran Secret Service officers, high-powered PR executives, well-connected lobbyists, and international corporate titans were engaged in an international secret war over the fate of a two-inch chocolate ball. It would be hilarious if it weren’t true.
“Two consumer groups ran to the FDA and the Consumer Product Safety Commission and attacked my product,” Whetstone remembers. “I knew what was going on, because Mars had done it to Nestlé. There was no question about it.” Whetstone became convinced that the spies were using Willy Wonka’s tactics on him. He fought back, and was able to bring his product—a chocolate-covered plastic egg he called Megga Surprize—to market. It was now legal because Whetstone’s hard work had paid off. He’d figured out how to create a toy-inside-chocolate combination that could pass government review. The safety commission concluded that even though the chocolates encased a rigid plastic egg that contained a paper toy, they weren’t hazardous.
And then something unusual happened: Megga Surprize failed. Not because of a stealth political campaign or an elaborate spying operation, but for a much more mundane reason—the customers didn’t like it. Whetstone says that in shaping his product like an egg, he made a fundamental miscalculation. Retailers didn’t want to buy egg-shaped chocolates unless it was Easter time. And w
hen Easter rolled around, Megga Surprize was up against hundreds of other egg-shaped candies. Whetstone’s product didn’t stand out enough, orders were slow, and he gave up on Megga Surprize.
Disheartened by the flop, and by now having lost his lucrative manufacturing contracts with Mars and Nestlé in the collateral damage of the chocolate war, Whetstone decided to get out of the candy business altogether. He entered an industry he thought might be somewhat less cutthroat: commercial real estate.
“Life,” Whetstone says, “is too short.”
CORPORATE LIFE WAS short for Beckett Brown, too. By late 1999, it began to splinter as rivalries among the founders developed into an all-out battle for control of the firm, which now had twenty-five employees. The key executives began fighting over cash flow, expenses, and allegations of unsavory activity. Back in Easton, Maryland, John Dodd, who had put up the money to start Beckett Brown, was hearing of all this and getting worried about his investment. He describes himself as the ultimate passive investor, who was unaware of the business Beckett Brown had built, but happy to take the money as it flowed in. Dodd says that in the late 1990s he began to ask to see financial statements. Each time he asked, he says, Beckett Brown’s management stalled. “It should have bothered me more in hindsight,” Dodd says now. “But they were saying, you know, ‘We’re doing great.’”
The meltdown began in August 1999, when Richard Beckett left the company that bore his name. The company changed its name to S2i for a while, but staff defections and ill will among the remaining employees drove it to near-collapse. One morning in 2000, John Dodd got a call from a staffer at the company’s headquarters who was loyal to him. “John, they’re packing up boxes and shredding documents. You’d better get over here.”
Dodd rushed to the office, stopped the shredding, and as legal owner of the company, took control of the remaining computers, office equipment, and boxes of documents. He’s been mired in litigation of one sort or another since then, and he keeps the documents he secured that day in the storage unit in Easton. Dodd says he wasn’t able to rescue everything, and he suspects that records of many of Beckett Brown’s most sensitive activities were the first papers fed to the shredder.
Many of the key officers at Beckett Brown stayed in the corporate intelligence industry, setting up shops with similar business models, and staying close to the Chesapeake Bay area. Tim Ward, for example, today has his own security firm, Chesapeake Strategies. Joe Masonis works for another security firm, the Annapolis Group. And Richard Beckett runs yet another firm, Global Security Services.
As the legal wrangling over the fate of the company continued, Dodd read through the documents, piecing together what he could about what the company had been doing. He also began to contact the people and companies he saw as the victims of Beckett Brown’s operations. Dodd says he called Mars to let officials there know about Nestlé’s spying operation, and Mars sent a squadron of attorneys from the white-shoe law firm Williams and Connolly to the storage unit in Easton, where they spent several days reading and copying documents related to the corporate espionage against Mars. Dodd also reached out to others to let them know about what happened in each case. Finally, Dodd went to the press, inviting several reporters to the storage unit to dig into the Beckett Brown saga.
The clandestine operations carried out by Beckett Brown remained secret for almost a decade. But in the spring of 2008, the magazine Mother Jones disclosed some of the most elaborate episodes in the company’s history.
The exclusive for Mother Jones, written by a veteran Washington investigative reporter, James Ridgeway, revealed Beckett Brown’s extensive client list:
BBI engaged in “intelligence collection” for Allied Waste; it conducted background checks and performed due diligence for the Carlyle Group, the Washington-based investment firm; it provided “protective services” for the National Rifle Association; it handled “crisis management” for the Gallo wine company and for Pirelli; it made sure that the Louis Dreyfus Group, the commodities firm, was not being bugged; it engaged in “information collection” for Wal-Mart; it conducted background checks for Patricia Duff, a Democratic Party fundraiser then involved in a divorce with billionaire Ronald Perelman; and for Mary Kay, BBI mounted “surveillance,” and vetted Gayle Gaston, a top executive at the cosmetics company (and mother of actress Robin Wright Penn), retaining an expert to conduct a psychological assessment of her. Also listed as clients in BBI records: Halliburton and Monsanto.8
A follow-up story detailing an extensive undercover infiltration operation generated national headlines because Mother Jones revealed that an operative connected to Beckett Brown, Mary Lou Sapone, had for years been posing as a gun-control advocate and had joined the boards of several important gun-control groups, even as she was secretly working for the National Rifle Association. Sapone was a multipurpose undercover agent. She also helped plant an operative inside an environmental group in Louisiana on behalf of a corporate client of Beckett Brown.9
These days, John Dodd is a sad figure. He’s in his early sixties and no longer works, instead living off the remnants of his fortune. He spends most of his time poring over old documents and calling sources, attorneys, and anyone else he thinks might be able to help him get the word out about Beckett Brown. He complains that his first set of attorneys left him the loser in his fraud lawsuit against the other participants in the Beckett Brown fiasco. He says he lost every penny of his initial start-up capital plus more than $1 million in legal fees in the years since the company’s crack-up.
IN VEVEY, A Nestlé fax machine spit out another letter from Mars on March 6, 1998, two days after the sternly worded letter from Forrest Mars to Nestlé’s chairman Helmut Maucher. This exchange took place one rung down the corporate ladder: Mars’s general counsel Edward Stegemann was reaching out to his counterpart at Nestlé, Dr. Hans Peter Frick, in an effort to call a cease-fire in the chocolate war.
Nestlé’s people were upset because a group of leftist consumer activists was about to hold a press conference on the danger of mixing toys with candy. Nestlé suspected once again that Mars was the real force behind the group. Stegemann explained that he had no idea how Nestlé could have come to that conclusion, and that Mars had been investigating the issue itself. “Mr. Maucher, and presumptively all of Nestlé, believe we are behind this press conference,” Stegemann wrote. He then made an attempt at humor: “If only I were this clever I could demand a triple bonus from my owners.” In fact, he insisted, Mars had been thinking Nestlé was putting up the press conference. “We began to get the sense that this was one of your Machiavellian ploys.”
But even as he insisted that he didn’t control the activist group, Stegemann told Frick that he had reached out to its leaders and asked them to postpone the embarrassing event. It seemed that Mars was making a peace overture by getting the consumer group to stand down. Now Mars expected the other side to stand down, too. Stegemann cautioned his counterpart at Nestlé against doing too much research to find out who was behind the group’s activities. “I believe the more you and we thrash about trying to find out just what is behind this—and regrettably we really have been thrashing about—the greater the chance that it will become a story and attract a hell of a lot more attention than it otherwise could,” he wrote. “I believe,” he declared, “that we should treat this as if we were making love to a porcupine—we can handle it, but very carefully and calculatedly.”
There may well have been a temporary cease-fire that year. But the chocolate war continues to this day. Many of the combatants and battlefields have changed, but the tactics are familiar. In June 2008, for example, the Associated Press reported that the Swiss chapter of a left-leaning antiglobalization group called Attac had filed a legal complaint against Nestlé in a Swiss court. The document alleged that Nestlé had hired the intelligence company Securitas—the firm that bought Pinkerton—to plant a spy inside Attac. It was a move the Pinkertons had invented more than 100 years before. The operative a
llegedly attended meetings, the Associated Press noted, at which the group planned a book to be titled “Attac against the Nestlé Empire,” criticizing the company’s position on genetically modified organisms, water privatization, and trade unions.10 Did Nestlé suspect that Mars, once again, was the secretive force behind an activist group’s efforts?
It is difficult to tell for sure. Nestlé wouldn’t say.
PART II
Techniques, Technologies, and Talent
CHAPTER SEVEN
Tactical Behavior Assessment
On August 2, 2005, a group of executives in Alameda, California, gathered around their telephones for a second-quarter “earnings call” with investors. As far as they knew, this call would be business as usual. Hong Liang Lu, the chairman and CEO of a company called UTStarcom, would walk through the numbers with a telephone audience of Wall Street investment bankers.1
With his slicked-back hair, rimless glasses, and wide smile, Lu projects an image of intelligence and competence. He began his call with a benign comment: “Thank you everyone, for joining us this afternoon. Q2 was a constructive quarter for UTStarcom.”