Broker, Trader, Lawyer, Spy (17 page)

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.

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:

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.

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 when 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.”

C
ORPORATE 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.