AP Looks at Ridder’s Alleged ‘Espionage’

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His password was “Mocha.” But other data on Par Ridder’s laptop computer would have been even tastier to his new bosses.

Last month, Ridder left the publisher’s job at the St. Paul Pioneer Press — the newspaper his great-grandfather bought in 1927 — to become publisher of the Star Tribune in Minneapolis. The defection to the larger, more stable rival across the Mississippi River was a shock, given their intense competition for readers and advertisers.

Now the Pioneer Press claims in a lawsuit that Ridder handed over spreadsheet after spreadsheet of sensitive data to the Star Tribune — budgets, monthly profits, employee wage data, and perhaps most important, how much advertisers were paying. It claims that Ridder stole a file folder with his own non-compete agreement and that of other Pioneer Press executives, and the Star Tribune failed to return copies of the data he took.

The advertiser information alone would allow the Star Tribune to launch “an extraordinarily damaging” pricing campaign aimed at stealing advertisers, the lawsuit said.

When Ridder announced his resignation, Dean Singleton — chief executive of MediaNews Group Inc., which runs the Pioneer Press — said he wasn’t worried about trade secrets. Singleton felt much differently last week.

“I didn’t know at that time the magnitude of the heist,” Singleton said Friday. “I thought at the time that Par would make a gracious exit, and would be honorable, and I didn’t know he had stolen everything we had.”

The lawsuit filed in state court names Ridder, the Star Tribune, its parent company and two other executives Ridder recruited from the Pioneer Press and alleges fraud by Ridder and violation of state trade secret laws. Besides unspecified compensation, it seeks to have Ridder removed as publisher of the Star Tribune for a year because of a non-compete agreement.

The Star Tribune issued a statement by Chairman Chris Harte saying: “There are facts in dispute relative to the recent move of Par Ridder from the St. Paul Pioneer Press to the Star Tribune. We will address these matters point by point in our legal response to the complaint and look forward to a full resolution.”

Ridder issued a statement saying he was “absolutely confident we will prevail.”

Ridder’s job change came at a tumultuous time for the Twin Cities dailies.

At the Pioneer Press, Ridder had presided over months of uncertainty, layoffs and buyouts as the Knight Ridder newspaper company was broken up, eventually bringing the paper under MediaNews control. Meanwhile, the Star Tribune had been sold by McClatchy Co. in December to a surprise buyer: Avista Capital Partners, a privately held investment firm.

On Friday, March 2, Ridder told Singleton he was leaving to become publisher of the Star Tribune. The lawsuit claims Ridder promised not to recruit Pioneer Press executives or use company data.

From that point on, Ridder did exactly that, the lawsuit alleges.

On the following Monday, the same day Ridder was introducing himself to Star Tribune workers, the Pioneer Press dispatched a staffer to pick up Ridder’s old laptop. When he arrived in Ridder’s office, he found a Star Tribune worker copying items from the computer and was asked to wait in the lobby for nearly an hour before the computer was handed over, the lawsuit said.

The Pioneer Press said an examination of Ridder’s laptop showed that almost all of the data had been copied to an external storage device that day. According to the lawsuit, the laptop exam also showed:

— Ridder began drafting a speech to his new employer Sept. 19, months before he actually left. The draft was encrypted and given the password “Mocha,” according to the lawsuit. In the months following, Ridder continued to play a major part in forming the Pioneer Press’s competitive strategy.

— On March 7, his third day in his new job, Ridder e-mailed Pioneer Press documents to Star Tribune executives, including one e-mail with 16 spreadsheets that included “detailed information on almost all the key segments of Pioneer Press’ customer lists and advertising base,” according to the lawsuit. The data would allow the Star Tribune to figure out the price the Pioneer Press is charging thousands of advertisers, most of whom have negotiated secret custom rates, the lawsuit said.

— The same day, Ridder e-mailed detailed circulation information and budgets to the Star Tribune’s chief financial officer. One minute later, Ridder e-mailed the CFO another batch of data, including monthly operating profits dating to 1998.

— In the weeks after Ridder left, his laptop ended up in the hands of Kevin Desmond, then the Pioneer Press’ vice president of operations, who was in charge of the company’s computers. The lawsuit claims Ridder asked Desmond to delete personal information from the computer, and then he began recruiting him. Desmond interviewed with Ridder and joined the Star Tribune on March 30 as senior vice president of operations.

Singleton, who is vice chairman of The Associated Press and is expected to become chairman of the news cooperative in May, said the Star Tribune disclosed the contents of Ridder’s March e-mails during settlement talks between the two sides. He said those talks broke down Thursday morning, and the lawsuit was filed later that day.

Corporate espionage is nothing new, and there are lots of gray areas. Copying data wholesale from laptops isn’t one of them, said Dennis Farley, president of The Intelligence Group, which investigates corporate computer-related espionage.

“It’s a big no-no,” he said.

“We see these types of cases all the time,” he said. “For somebody to be that brazen and to leave with his whole laptop, and a competitor to feel that it’s within the bounds of fair play to acquire all that information about their competitor really surprises me.”

Such cases can catch the attention of criminal prosecutors. Earlier this year, a former secretary at The Coca-Cola Co. was convicted of conspiracy after federal prosecutors said she stole confidential documents and samples of products that hadn’t been launched and gave them to two men as part of a scheme to sell the items to PepsiCo Inc. for at least $1.5 million.

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