The Maidstone Club sits high on a seaside bluff in East Hampton, New York. The quarter-mile drive from the town's main road to the parking lot is peppered with signs reading PRIVATE, MEMBERS ONLY, NO TRESPASSING. In August 2006, the CEO of a private-equity firm hired me to ignore those warnings, weasel my way onto Maidstone's opulent grounds, and stake out a golf tournament. Not just any golf tournament but an intimate, end-of-summer duel hosted by the head of a rival equity firm.
In this case, my client was convinced that his rival was plotting something far bigger than 18 holes of golf; he knew in his gut the man was closing in on a deal. It was up to me to uncover the plan. After phoning a friend for info on Maidstone, I hustled to the library in East Hampton and started researching the Wainwright family. Distant relatives of singer-songwriters Loudon and Rufus Wainwright, the well-to-do clan had ambled about Maidstone's lawns for three generations. On the day of the tournament, I dressed shabby-Wasp—white polo shirt, rumpled khaki shorts—and shouldered a bag of borrowed clubs. On the way to the course, I composed a dialogue in my head about the fictional match I'd be playing with Mr. Wainwright later that afternoon. I arrived early, I'd explain, to work on my putting.
Once I slipped past the pimply-faced valets, announcing with a little too much gusto that I was a VIP guest, I made my way to the pro shop, and there on a poster board were the tournament pairings. With a little green pencil swiped from a golf cart, I recorded the names on a scorecard, then returned to my car to phone my client. The info I read to him meant nothing to me, but he quickly identified the CEOs of two struggling airlines. Just like that, we'd discovered the blueprint of a prospective multi-billion-dollar merger.
While this little escapade may sound far-fetched, I assure you that it's not. If you had walked down Lexington Avenue on Manhattan's Upper East Side in January, beyond the blue police barricades and TV crews stationed outside Bernie Madoff's apartment building, then turned right onto leafy East 64th Street, you probably would have spotted a number of vans parked outside the four-story townhouses. Inside the vans were computer hackers hired by the private investigators working for Madoff's victims. Aiming their equipment at the Ponzi-schemer's penthouse, they tapped into his wireless network, searching for clues to where he might have hidden the cash he'd scammed from his clients.
Because today's Fortune 500 companies compete in a global market, because the Chinese eagerly pay Cold War spies from Russia to steal America's trade secrets, because—let's face it—money is an aphrodisiac, corporate espionage is a growing threat in every corner of the business world. Rex Tillerson, the CEO of Exxon, paid $9,000 last year for secure phones and communications equipment. Wal-Mart reportedly asked the former FBI and CIA operatives in its Threat Research and Analysis Group to sweep executives' offices for bugs. Hedge-fund managers hire polygraph experts to evaluate the sincerity of the company spokesmen who deliver financial forecasts. By one FBI estimate, U.S. firms lose up to $100 billion annually to the theft of proprietary information. At the same time, according to the Christian Science Monitor, these corporations spent $43 billion on "spy services" in 2007 alone.
That's how fierce the pressure to produce profits is today. In October, Raj Rajaratnam, the founder of the Galleon Group hedge fund, was arrested for securities fraud and insider trading. According to a witness now cooperating with the Securities and Exchange Commission, Rajaratnam once paid $10,000 for a tip regarding a takeover bid for Hilton Hotels. Armed with that info, Galleon reportedly reaped a $4 million windfall. Rajaratnam's employees were encouraged to go to ever greater lengths to produce such valuable data. As a former trader told the Wall Street Journal, the firm's ethos was this: "Get an edge or you're gone." Eight days before Rajaratnam's arrest, German prosecutors launched a criminal investigation into Deutsche Bank, which admitted in May to paying people to spy on a few of its own executives, a union rep, and a tax lawyer who'd been raising uncomfortable questions at shareholder meetings. The lawyer believes that the bank sent a 23-year-old Brazilian girl in a bikini to a café in Ibiza in search of damaging info on him. And in July, restaurateur Michael Chow filed a lawsuit against Philippe Chow (no relation) charging that he'd hired a 65-year-old man to steal the recipes for signature dishes from his kitchen by dressing up as a chef.
I was recruited to the corporate spy business in 2005 by two friends who were convinced my midwestern friendliness would serve me well in a line of work where a senior investigator can easily earn $250,000 a year. As a spy in training, I was told to rent the Leonardo DiCaprio movie Catch Me If You Can and study how simply and boldly his con-artist character shifts from one persona to the next—Pan Am pilot to Georgia doctor to Louisiana prosecutor. Among my colleagues, this is known as pretexting. While the basics of sleuthing are easy to learn, you've got to know instinctively how to ease yourself into a crowd—at the Maidstone Club in East Hampton or the Waffle House in Baton Rouge. The people who thrive in this business are the ones who loved to play dress-up and invent make-believe friends as children. "Both my parents worked during the day," says a colleague whom I will call Sarah. "I used to steam open their mail and read documents like their wills and tax returns."
At first glance, the headquarters of today's corporate-intelligence companies look just like the offices of law firms. If you visit the watercoolers, however, you're likely to find people chatting about ways to fish for data on Facebook. The conference room might be littered with "actionable intelligence" from a packaged-food company's recent marketing meeting, notes about new products and pricing snatched from a hotel ballroom. The closets no doubt hold the remnants of disguises—a bicycle courier's helmet and pouch, say, or garment bags from Barneys.
Some setups are complex. The CIA guys love to create "backstops"—paper companies with all the markings of legitimate enterprises, fake investment firms (usually with British-sounding names like Chislehurst Capital) complete with Manhattan offices, phony business cards, and vague yet professional-looking websites. (Some are even registered with the Delaware secretary of state.) The creators of these Potemkin funds schedule pitch meetings with corporate executives hungry for capital. They almost always take the bait, freely sharing their strategic plans with people they hardly know. It's an inexpensive ruse, and most security companies leave the fronts in place for future cases.
More often than not, though, the key to success is simple ingenuity. Sarah once worked for a food conglomerate eager to learn about the products in its rival's pipeline. "I started volunteering at an inner-city school through the Junior Achievement program," she says. "As soon as I had earned the confidence of administrators, I wrote the target company's public-relations department to say I had some high-school students who wanted to see firsthand how a food company worked. Could we tour their facility? On the way to the factory, I prepped the kids to ask all the questions my client had asked me: 'Are you going to start making your foods with zero trans fats? Are you going to re-label the products as healthier?' The company answered all the kids' questions without paying any attention to me."
For the most part, the work is rewarding—like getting paid to solve a puzzle—but you have to be willing to get your hands dirty. In the interest of self-preservation, my colleagues and I try to stay within the law—no stealing, no trespassing, no wiretaps (that's where Steven Seagal's pal Anthony Pellicano made his mistake)—but that leaves a lot of gray areas. You don't want to do anything that might land you in the newspaper, in a courtroom, or in front of a congressional committee. And yet, every once in a while, you pay someone to sleep with the homely sister of a CEO's nemesis and pump her for information. A Hollywood agent once text-messaged me while she was on a date to ask, "Does this guy own or lease his Mercedes?"
A few years ago, I was hired to investigate a group called FARM (Farm Animal Rights Movement), which had been quietly working for almost three decades to rescue the nation's cows, chickens, and pigs from slaughter. The group's protests had become so expertly organized and so well-funded that my client—one of the bigger names in the fast-food business—feared it might now be bankrolled by a competitor. Clearly, this wasn't an isolated case of paranoia. In a scene worthy of The Pink Panther, a handful of undercover detectives descended on a hotel ballroom in Tysons Corner, Virginia, to infiltrate one of the group's meetings, all trying a little too hard to learn everyone else's name. An agent from a hamburger joint was busy spinning tales for a spy from a Mexican chain. After the meeting broke up, five phony activists rushed off in identical rented white Ford Focuses.
As far as I know, the crew spying on Madoff found no secret money stash. In fact, Madoff reportedly led them to only one website during his months of house arrest: WebMD. I like to think that my colleagues and I help justice prevail every now and then. But, truth be told, money—and money alone—is the driving force in this business. I can name dozens of companies that bristle at the expense of research and development when they can hire someone, as Procter & Gamble once did, to rifle through their rivals' trash. A while back, an industrious group of Native Americans in search of land for a new casino tried to reclaim ancient tribal ground a short drive from a major tourist destination. Instead of relying on the investigative arm of a state gambling authority to keep them at bay, a certain well-known casino owner hired a team of detectives to discredit them. He didn't care how the issue got resolved. He simply wanted to know his cash flow was protected. In the end, we proved that the Native Americans were being fronted by overseas investors who planned to run the casino themselves. It took a few years and close to $2 million, but, for a short while at least, the client went to sleep knowing his billions were safe from harm.