Indian-American faces 10 years in industrial espionage case

Atul Malhotra, who pleaded guilty last week to stealing trade secrets from his previous employers IBM and trying to pass them on to his new employers at Hewlett Packard Company, now faces 10 years in prison, a $250,000 fine and three years of supervised sentence. The sentencing is scheduled for October 29.

Malhotra's lawyer John D Vandevelde, a partner in the high profile Lightfoot Vendevelde Sandowsky firm in Los Angeles, said he expected a lighter sentence for his 42-year-old client as the 'the trade secrets had limited value.'
He alleged they were stolen in response to request from Malhotra's bosses at HP, and had 'no impact on any business transactions.' He would not name the bosses in question, but said there were different levels of bosses, and the ones that turned in Malhotra could be different from the ones that had instigated him.

"He is an honourable man with an impeccable record," Vandevelde added. "This was out of character for him." Malhotra, a naturalised citizen, "is a very private man and he does not want to talk to reporters," Vandevelde said.

Malhotra, a resident of Santa Barbara, is a former vice president of imaging and printing services at HP. He was charged on June 27 last year with theft of trade secrets. According to court documents, he was employed by IBM for nearly 10 years, and was the director of sales and business development in output management before he quit the company.

In pleading guilty, Malhotra admitted that before he left IBM, he requested and received confidential information concerning IBM Global Services, and CC Calibration Metrics. The trade secret information, marked confidential on each page, included data concerning product costs and materials that IBM used to compete in the market, according to court papers. Officials at IBM had clearly told Malhotra about the sensitive nature of the documents.

In providing the requested information, a pricing coordinator at IBM Global Services directed Malhotra not to distribute the information due to its sensitive nature.

In the plea documents, Malhotra says that soon after joining HP, he shared the trade secrets with his superiors through e-mail. He sent an e-mail with an attachment of the trade secrets to a senior vice president, with the subject field reading 'For Your Eyes Only'. Two days later, July 27, 2006, he sent the same secrets to another HP vice president.

The court documents also show that in the e-mail message, Malhotra noted that the trade secrets would help specific HP sales teams better understand their competitors' goals and help HP have an upper hand in sales. The officials informed IBM and the authorities. Malhotra was formally dismissed from his job in September 2006.

His deceit came to light just as HP was reeling under its own internal spying scandal. The firm had faced insider trading charges and accusations of taking inappropriate steps to find out who was leaking information to the press in 2006.

HP spokesperson Emma McCulloch said the charge against Malhotra involved action that 'was in direct violation of clear HP policies, including HP's standards of business conduct. HP detected this activity, conducted an internal investigation, terminated Malhotra from his employment, and self-reported the activity to all appropriate enforcement agencies and to IBM. HP has cooperated fully with the government's investigation.'