Corporate spying in spotlight

Their ranks include former state police officers, FBI agents, Secret Service personnel, street cops, even postal inspectors. Some work for large national or international companies. Others operate as freelancers. A few have jobs in law firms.

They make up a discreet network of private investigators and investigative agencies that provide confidential services to companies of all sizes, as well as to attorneys and individuals.

And they are in the public spotlight in the wake of recent disclosures that Hewlett-Packard Co. commissioned a private investigation that secretly, and possibly unlawfully, obtained the phone records of the California computer maker's directors and journalists who covered it.

The disclosure -- which led to last week's decision to resign by HP chairwoman Patricia C. Dunn, who authorized the probe -- has ensnared a Needham investigations firm involved in the case, Security Outsourcing Solutions Inc., which the California attorney general's office confirmed yesterday is cooperating with an investigation into the matter.

It has also opened a window onto the quiet world of corporate spying, in which companies nationwide rely on investigators for a wide range of tasks, from relatively simple matters like scrubbing a prospective hire's background to complex ones such as conducting internal financial investigations.

``Corporations employ private investigators quite regularly and frequently, and it's surprising to me that some people are surprised by that," said legal ethics specialist R. Michael Cassidy, an associate professor at Boston College Law School and a former state prosecutor.

``Corporations have responsibilities to shareholders to detect illegality when it occurs, so in fact there should be internal private investigations going on to detect whether there's been company theft, company fraud, or whatever," Cassidy said. ``It's necessary from a business perspective to avoid liability."

It is the potentially illicit nature of the HP investigation that has drawn the scrutiny of state prosecutors. The company has acknowledged that, in an effort to ferret out boardroom leaks, it hired contractors who impersonated HP directors, journalists, and employees to get records of their home phone calls. The tactic, called ``pretexting," involves posing as another person to gain access to his or her personal information, and it is illegal in some states, including California.

Many of the investigators who work for agencies or as solo contractors are former law enforcement officials whose professional contacts -- and familiarity with the civil and criminal justice systems -- uniquely position them to do sleuthing for corporate clients.

Some companies hire private investigation firms directly. But it is more typical for company executives to ask their in-house attorneys or outside law firms to retain an investigator, since without a lawyer or law firm as a middleman, the investigator's work could be vulnerable to a subpoena.

``Certainly some big companies have direct relationships with security companies, and oftentimes that's in the context of executive protection or threat assessment," said Boston attorney Martin F. Murphy, who occasionally hires investigators when he is defending companies and individuals who are the subject of state and federal investigations. ``But it's more often the case that a law firm is involved, because that helps protect the activity of the private investigator under the umbrella of attorney-client privilege."

National and international investigative firms like Kroll Inc., Pinkerton Consulting and Investigations Inc., and Vance International Inc. are frequently retained by large corporate clients.

Some companies and law firms have in-house investigators or investigative departments; for example, the Boston law firm Choate Hall & Stewart used to employ James Ring, the former head of the FBI's organized crime squad, as its director of investigations, and Ropes & Gray once employed former FBI agent John Cloherty. But law firms and companies more often outsource that work.

Private investigators are hired for a broad array of services. They examine public records and electronic subscription databases to check driving histories, credit reports, and education and employment histories. They investigate backgrounds for criminal records or involvement in litigation. They locate and interview potential witnesses, and conduct surveillance .

More sophisticated tasks involve looking into allegations of internal fraud or accounting abuse , monitoring suspicion of insider trading, and using computer forensics expertise to analyze electronic files, hard drives, and e-mail systems.

Illegal conduct by an investigative firm can come back to haunt the company that hired it, as the Hewlett-Packard case illustrates, since corporations and law firms can be held liable if investigators they hire obtain information through illicit means.

As a result, ``you have to have absolute confidence in the integrity of the investigator or investigative firm you're working with, you have to understand that you're responsible for the methods they use, and you have to make sure that every tactic that's going to be employed is appropriate and legal," said Murphy. ``There's just no room for nods and winks."

``I don't know of anybody who would ask an investigator to take any means necessary to get information, because the company's brand and reputation could potentially be put at risk," said Susan Hackett, general counsel for the Association of Corporate Counsel, an umbrella group for lawyers who work for in-house legal departments. ``And that's a risk no company wants to take."

Sacha Pfeiffer can be reached at pfeiffer@globe.com.