he date loomed large on Dr. Martin Alpert's calendar. He was president off Tecmar Inc., a small computer company in Cleveland and on Friday, the 13th of August, 1982, he had a meeting scheduled -- a meeting that could shape his company's fortunes for years to come.
The man he was supposed to see was one William Erdman, an IBM Corp. executive serving as the front man for a group of IBM renegades who were peddling product designs for various devices that could be added on to an IBM Personal Computer, thereby increasing its power and versatility. As it happened, Tecmar was in the business of making such so-called peripherals for the PC, and Erdman had asked for the meeting to give Alpert a crack at the designs.
Under other circumstances, this might have been cause for jubilation, but Alpert was not rejoicing. On the contrary, the whole deal made him nervous -- so nervous that, on Wednesday, he suddenly decided to cancel the meeting.
Alpert had good reason for concern. For one thing, the renegades wanted big bucks for their wares. Prices of $15,000 to $150,000 had been mentioned, depending on the complexity of the design. With two or three dozen designs on the block, that could add up to a lot of money for a small, cash-tight company. But if Tecmar couldn't come up with it, somebody else surely would, and Alpert couldn't afford to let such a bonanza fall into the hands of competitors.
But, beyond all that, there were deeper issues involved, for these were not your ordinary, run-of-the-mill, high-technology renegades -- adventurers from the mother ship setting out to test the waters of entrepreneurism on their own. Indeed, they were still employees of IBM. Granted, they said that they planned to resign in the near future. They also said that they had developed the signs on their own time. Yet the fact remained that they were selling IBM-related products from inside Big Blue. "The implication was that there were secrets for sale," Alpert said later.
So what was he to do? If Alpert went ahead with the meeting, he risked becoming involved in a conspiracy that would inevitably invite the wrath of IBM itself. If he simply backed off and kept quiet, his competitors would do him in.
On Thursday morning, Alpert took the next step, placing a call to IBM headquarters in Armonk, N.Y. And that was when his troubles began.
Over the course of the next three weeks, Martin Alpert became, in effect, an undercover agent for IBM. His world was filled with clandestine meetings, hidden tape recorders, and debriefings in hotel rooms. Along the way, he emerged as the central figure in an elaborate "sting" operation masterminded by IBM security agents to trap a group of high-level employees, including, Alpert later learned, some of the best technical minds in the industry, men of whom he himself was in awe.
Afterwards, many IBMers claimed that this case had a far greater impact within the corporation than the better-publicized Hitachi espionage case, which blew up in June 1982. In that episode, Hitachi Ltd. of Japan paid some $600,000 to an undercover team of IBM and Federal Bureau of Investigation agents for stolen IBM plans. But those were huge corporations grappling for a wrestling hold. The Tecmar/IBM case is writ in more human terms, shaped by more intimate, personal acts of betrayal. And while IBM used the Hitachi case to issue a warning to other companies, foreign and domestic, the Tecmar case constituted IBM's warning to its own employees against renegade fever.
This is not, however, a story about IBM, nor even about renegades and betrayals of trust. Rather it is a story about the president of a small company who became a chess piece on a vast playing board, fending for interests much larger than his own. "The basic decision was that what was going on was wrong," said Alpert when it was over. "The second decision was not to participate. The third decision was to notify IBM -- and then, where do you stop from there? I don't know . . ."
Such questions came later, however. Back on August 11, only one thing was clear. Friday the 13th was going to be an unlucky day.
Martin Alpert is an energetic dumpling of a man -- at 34, he is both a medical doctor and a systems engineer, as well as president of what he describes as the fastest-growing company in Ohio. The only son of two Nazi concentration camp survivors, a wunderkind in both academia and business, he has a curiously diffident manner that does not quite conceal his tense, speedy energy. With his wife, Carolyn, who has a master's degree in management, Alpert founded Tecmar (the name is an abbreviated flip on "Marty's technology") in 1974 -- while he was still in medical school -- to develop diagnostic medical tools based on his own mathematical models of the human pulmonary system.
By 1979, Alpert was a resident at Cleveland's University Hospitals, still doing medical research, when he discovered that there was an eager market for the analog-to-digital conversion circuit Tecmar had developed for its own research. As Alpert later noted, the personal computer industry had been born in the mid-'70s, and he "just happened to be standing there when the train went by."
In the fall of 1981, another big train appeared in the form of the IBM Personal Computer. David Wertman, Tecmar's vice-president for marketing at the time, bought the first two PCs sold to retail customers, and Tecmar soon surprised everyone in the microcomputer industry by displaying 25 add-on devices -- each a special-function unit tailored to the circuits and connectors of the PC -- at a November 1981 trade show. Even IBM was quotably impressed.
"Ah, but we've told some wonderful fairy tales about how we tore apart those first PCs and figured out the specs we needed," says Wertman with a chuckle. The truth, he admits, is that Tecmar's shrewd planning was aided immensely by the early acquisition of a pirate copy of the PC's technical reference manual -- about a month before it was legitimately available to other third-party vendors. "It just sort of landed on my desk one morning," he says with a grin.
Tecmar leveraged this great good fortune into advance sales and headlines, taking an early lead on the dozens of eager companies that crowded into the PC third-party arena as IBM began to pace the explosive growth of the personal computer industry. IBM is now estimated to have at least 26% of the entire market, while other micros designed to mimic the IBM machine (so as to use PC programs) have another 17%. Of course, the Lilliputian third-party vendors of PC add-ons occupy only one corner of this huge market, but add-on sales seem to double annually, so even the corner feels big. Alpert estimates that the 1983 market for PC add-ons will be $150 million retail. "We've seen it go from a business to an industry in just a couple of years," he says. "We've aIso seen it go from a friendly industry where I could call up people who had written software and ask for help. Now, the stakes are so high, none of that happens easily."
Within this arena, Tecmar has done quite well for itself. Its competitors estimate its sales at about $8.5 million for the 12 months ended June 30, 1983, and expect them to reach $14 million during the next year. But, even so, Tecmar is only one relatively large gnat in the swarm of third-party PC peripheral vendors that buzz around IBM's $34.4-billion mountain, and -- like the others -- it tends to regard IBM with fear and apprehension, as well as awe and respect. The contrasting scale has contributed to a peculiar industry mindset, wherein vendors actually expect IBM to step in and squash them when the profits justify it.
"What they have done," says Wertman, "is let the third-party people support them, develop the market, and do the market research to find out just what kinds of little products really make sense. They let them fill the void until IBM gets around to rotating that big gun on top and announcing: 'OK, now we'll take a piece of that back!' We just hope IBM doesn't take it all . . ."
Given this environment, it is easy to understand that a friendly call from a senior IBM marketing executive would be a major event at Tecmar. That call came in early July of 1982, and the man who placed it was Bill Erdman, Office Systems product-line manager for one of IBM's two international marketing groups, World Trade Americas/Far East Corp., and an 18-year veteran at Big Blue.
In the beginning, at least, Erdman seemed the soul of curious innocence. IBM wanted general information on Tecmar's new products, he told Wertman. "I just want to make sure we get information as soon as everybody else. I don't want to have to wait for a press release."
But it did not stop there. Over the next six weeks, Erdman telephoned Wertman, whom he had never met, perhaps 15 times. He tipped off Tecmar when IBM made a key presentation on communication-network standards at a little-noticed industry seminar. He had a dozen interesting, helpful observations on the state of the market. He even bought a Tecmar disk memory and expansion cabinet, and suggested modifications.
Suddenly, Tecmar had a Godfather.
Wertman was delighted. Alpert, too, soon developed an appetite for Erdman's tips and hints about IBM's plans. After all, when you dance between the legs of a rogue elephant, advance notice of which way the beast will turn can be priceless.
Then, around the beginning of August, Erdman made clear the nature of his interest in Tecmar. The pitch came in like a slow curve ball. He was planning to quit IBM, he told Wertman. He and a few other IBMers -- senior people, capable people -- were thinking of starting their own "third party" company to design and market add-on devices for the IBM PC. They were looking for venture capital, he explained, but, since they had already designed about 40 products for the PC market, they were also interested in selling or licensing some of these designs to an established company like Tecmar. There was potential for a long-term relationship.
Erdman stressed that the whole deal was clean and proper. "These products were developed on our own time. IBM has no recourse on us whatsoever." Wertman says he responded cautiously. These products were clearly from within IBM, so he had to tread carefully. Yet Erdman was so open, so bold and brash that, when he offered to come to Cleveland, Wertman advised his boss, "If it's not illegal, and he's talking everything all over anyway, you probably ought to get what information you can . . ."
Alpert was inclined to agree. "My initial reaction was, 'Well, it won't hurt to talk to the guy," he recalls.
The ethics of the situation were not, in fact, clear at that point. After all, the "spinoff" tradition is well established in American high technology. From the very beginning, renegade ventures have seeded the expansion of the computer industry, whose history reads like the bloodlines of Genesis: Sperry Rand begat Control Data; Control Data begat Cray Research; IBM begat Amdahl and Storage Technology; Digital Equipment begat Data General. Many a competitor has been born around the office coffee machine. "Historically, in this industry, ethics is whatever you can get away with," notes Alpert. Granted, industry standard employment contracts usually claim everything but the sweat from the brow of an employee as property of the employer -- but there is a lot of fine print in the varied state laws and much confusion about the nature of intellectual property in the so-called knowledge industries.
And, legal issues aside, there were other concerns, says Wertman. "[Alpert's] major concern seemed to be, 'Can I afford it? And if I can't afford it, do I want anybody else to have it?' " he recalls. "There were a lot of discussions on that, agonizing on it from different perspectives . . ."
In any case, Alpert and Wertman agreed that they should go ahead and meet with Erdman. Only when they knew whom he represented, and what he was selling, could they judge the legal, and political, difficulties involved. Wertman says that no one suggested contacting IBM. He himself didn't even think of it.
So, on Tuesday, August 10, Wertman called Erdman and confirmed the meeting set for Friday the 13th. At 9 o'clock on Wednesday morning, however, Alpert walked into Wertman's office and told him to cancel the meeting. Uncharacteristically Alpert was unwilling to explain himself.
Wertman called Erdman to cancel the meeting but he was totally confused. "We think you are probably some good people to talk to," he told Erdman, "but we really have to do some soul-searching . . ."
Erdman urged him to hurry; other companies were already dickering. "He had just talked to Practical Peripherals," recalls Wertman. "He had just gotten back from Georgia so he had seen Hayes . . . and he was on his way to see Xedex." The hint of an auction reassured Wertman. "My assumption -- a little naive, I guess -- was that if he's waving all this stuff around and none of it is in a plain brown wrapper . . . well, then, there shouldn't be any real problems with this stuff."
Wertman told Erdman he would be in touch and hung up, then reported the conversation to Alpert. The renegades, however, were not about to let things lie. Later that day, Erdman called Wertman back to hype the sale -- and, for the first time, described some of the product designs his group could provide. "I think their impression was that what they had to offer was so lucrative that anyone would have to be stupid to consider any alternative other than to work with them," Alpert later remarked. "And what they had to offer would have been very, very lucrative. There is no question to that."
Indeed, the renegades were selling a capability to encroach upon one of IBM's gold mines. Erdman described two products that would allow the IBM PC to "emulate" IBM's 3270-family of coinmunication terminals, the backbone of IBM's installed base of computer-linked terminals.
At the time, 3270-emulation was the most eagerly sought product in the PC market, and the "translator" could be revolutionary device, or so Wertman believes. The hard part of using a micro is the drudgery of typing data into the system -- data that is often being stored in a mainframe elsewhere in the same organization. 3270-functions would allow PC users to download a section of a database from the mainframe, store it on the PC, and play with it. "I had been beating on Marty for 10 months that we ought to be working toward that product," says Wertman with a sigh. Perhaps Tecmar's need for such a program was apparent to Erdman.
In any event, Alpert got the message, relayed through Wertman: If he did not buy the 3270 products, he would have to compete against them.
Wednesday into the night, Alpert and his wife argued about business realities and business ethics. For reasons of their own, they did not include Wertman in their discussions, but they did call on Tecmar's corporate counsel and their insurance broker. Together they wrestled with the pros and cons of warning IBM. "It was [a] much more difficult decision" than the one to cancel the meeting, says Alpert.
His fear was that he might be dealing with a "bunch of IBM insiders, with access to all of IBM's internal resources and long-term planning, who were making a private effort, while still IBM employees, to attack and control the PC add-on business." Although they worried about the risk of an industry backlash, Alpert's "kitchen cabinet" all agreed with his decision to blow the whistle. "We always knew there were negative things associated with it," says Carolyn Alpert. "But we also knew it was what we were going to do."
On Thursday morning, August 12th, Alpert called IBM headquarters and left a message asking IBM's president to call. On Thursday afternoon, IBM senior vice-president John Akers -- soon to be named president -- returned his call. "I'm not sure this is all that bad," Alpert began, "but maybe you should decide . . ."
Early on Friday morning, the 13th, two men showed up at Tecmar's Cleveland office: Richard Mainey, director of security for IBM's information systems group, and Gerald Blaine, one of the handful of IBM agents -- or corporate senior security counsultants, as they are called -- who work for Nicholas de B. Katzenbach, IBM general counsel and former U.S. Attorney General. "IBM moves, when so motivated, with incredible speed," says Alpert.
Alpert describes the two as "very professional -- coplike, clean-cut, heavyset. Blaine, a former New York City police detective, was the senior man; Mainey was chief security officer for the IBM group that managed the PC product lines.
At this point, Alpert was keeping Wertman in the dark -- at IBM's request, he later explained. "Suddenly, these two guys show up," Wertman recalls. "Big, good-looking guys, very nicely attired: wing tips [and] gray, two-piece suits. They could have been investment bankers. They were given an office, and they were making a lot of phone calls. So I went in and said, 'Marty, what's happening here?" Alpert told Wertman that the two were venture capitalists reviewing Tecmar's finances.
But Wertman couldn't help but notice that they never asked for the company books. "These guys were just sequestered in their room, and they're back and forth between their room and Marty's office . . . for two days, all day. They go out for lunch right on time, but the rest of the time, it was almost like one guy would be on the phone, and the other guy would be leaning over to listen." After one of Tecmar's junior programmers mistakenly assumed Wertman knew what the engineering vice-president had confided to him, Wertman angrily confronted Alpert. Why wasn't he told? Wasn't he trusted? Of course, Marty temporized, it's just that IBM . . .
(Wertman would never forgive or forget the lie; his voice carried wry bitterness when he described the incident many months later. Wertman left Tecmar in November, after being refused equity he thought he had been promised. There was much rancor in the parting, but Wertman traced the breakdown of trust between them to Alpert's lie on Friday the 13th.)
Meanwhile, the IBM agents were working in a near-vacuum. They did not know who or what was involved. They also had to worry about how such a conspiracy, and the company's inquiry into it, would later appear to the courts and to other IBM employees. The corporate role had to be passive, if that was possible. IBM would write the script, coach Alpert for every scene, prep him, and debrief him -- but the renegades had to hang themselves.
The first step was to reestablish contact. On Monday, August 16th, Alpert called Bill Erdman's Stamford, Conn., home on a telephone hooked up to an IBM tape recorder. Tecmar was interested in his "exciting" proposal, he told Erdman, who responded with a bold display of insider information. He talked about a number of follow-on products for the PC, which IBM planned to develop or announce in the near future. "He described some of the design features of those products and the market opportunities presented by them, and how he and his associates were prepared to take advantage of those opportunities," says Alpert, who declines to give details because of his uncertainty about what belongs to IBM and what does not.
Erdman warned him that "until someone wants to pay the right price," all negotiations were "nonexclusive," and he would continue to talk to Tecmar's competitors. Erdman also talked about his most prominent associates, whom he described as two men among several current IBM employees "ready to roll out of IBM." His hardware expert, he said, had "personally designed the IBM Personal Computer, the IBM Displaywriter, and the System 23/Datamaster" -- the spine and ribs of IBM's small-computer business. His software expert was a 10-year IBM veteran, currently working on PC software development, and a specialist in IBM communication protocals.
Alpert and Erdman agreed vaguely to talk again soon and hung up, but the report of the discussion lit fuses at IBM, and Alpert -- at IBM's urging -- called Erdman again the following day to push for a face-to-face meeting. Alpert let Erdman know how impressed he was with this talk of IBM's unannounced products; Erdman noted that it was just "some flavor" of what was available. When Alpert said he would be in Atlantic City for a trade show the following week, Erdman invited him to his Stamford home on Monday. Then, at IBM's prompting, Alpert asked Erdman about the renegades' plans to exploit IBM trade secrets and planning data.
According to Alpert, Erdman said that he himself had "access to some of IBM's highest-level business plans," and "already knew where IBM was going in the next couple years." But beyond that, said Erdman, his group had contacts all through the IBM PC organization. Keeping abreast of IBM product plans would be no hassle. "As we do our thing and build our software base, we'll be pulling off some of those people," Erdman explained. "We've identified the 14 key people associated with IBM's small systems and, you know, over a period of time we've talked to them . . . If we build an organization, we'll be pulling those people with us as the need occurs."
In the meantime, his group already had the brains that had shaped the PC line from concept to product plans, Erdman bragged. "I guarantee you that we know more about the way IBM's going to put [the PC product line] together than IBM knows," he said. The products he was selling were specifically designed to compete with presently planned IBM products." He had the same products, further "refined," some of which "would be out on the street before IBM comes out with them." Alpert duly impressed, confirmed the appointment in Stamford, and hung up to talk things over with IBM.
"I was probably catching my breath through the whole thing, from day one," Alpert recalls. "The thing that surprised me most was the kind of people involved." This was very quickly expanding into much more than he had bargained for. "We thought there would be one or two conversations that he would have to participate in," says Carolyn Alpert. "I don't think we had any sense of what steps and what time he would have to invest." She herself had to carry more and more of Tecmar's management as her husband became engrossed in his undercover role. "Marty really got into it," notes Wertman dryly.
IBM -- for its part -- was putting all its marbles on Alpert. It was desperate to find out how high the conspiracy went, who was involved, to whom else they had talked. The reports from Cleveland must have scorched the hallways in Armonk. "There was an awful lot of money involved," notes Alpert.
Erdman called Wertman one last time. "I appreciate your involvement," he told the Tecmar vice-president. "Whatever Marty's concerns were, we're in good shape now."
On August 23rd, Alpert parked his Avis rental car in front of Erdman's oceanfront home in Stamford. There was no yacht in the slip out back, and Erdman's Ferrari was not visible, but Alpert recalls an aura of Gatsbyesque wealth. Erdman himself -- a "typical, handsome, IBM salesman," says Alpert -- seemed to ooze charm and sophistication. Even his casual clothes seemed tailored, says Alpert with a laugh, and there is the faintest tone of impish satisfaction in his voice as he describes bluffing his way through Erdman's polished sell. Did he have the money? Erdman asked. Could he just sign a check for $100,000? On his own, without any board of directors involved?
Erdman revealed that the renegades were incorporated in New York State under the name Bridge Technology Inc. Bridge was still negotiating with potential investors, and it was eager for a Tecmar bid. They discussed various deals that could tie a design firm like Bridge with an established manufacturer like Tecmar, but Alpert insisted that he had to talk with the senior Bridge Tech engineers. Erdman agreed. Later, when Alpert pushed for evidence that Bridge would be able to exploit IBM's future plans, Erdman showed him two volumes of IBM planning documents: one for the IBM Displaywriter, the other concerning the PC. At least one of the volumes was very plainly marked "IBM confidential."
Erdman, the well-trained salesman, closed the session with the requisite low-commitment question guaranteed to elicit a positive response. "Do you think you could enjoy working with us?" he asked, all bonhomie. Alpert says he nodded and smiled in response.
Blaine and Mainey, the IBM security team, were waiting to debrief him at The Helmsley Palace hotel in New York City.
No doubt, IBM lost little time in obtaining the Bridge Tech incorporation papers; as it turned out, they had been signed on June 25th, three days after IBM security agents, working undercover for the FBI, had sprung the trap on Hitachi in California. The new company's address was that of a White Plains, N.Y., lawyer, who was also the only corporate officer identified. The document -- filed in the courthouse around the corner from IBM's huge White Plains facility -- said Bridge planned to design, make, and sell devices that would connect computers to other computers and incompatible peripherals; create proprietary software; and develop circuit boards that fit inside computers to give them new functions and performance. Such a bold declaration, even as the daily headlines sang of IBM counterespionage, suggested a certain amount of hubris.
Back in Cleveland, Alpert waited for Erdman to set up the big meeting, and he fretted. He had difficulty concentrating on business matters. "He was wired tight as a drum," recalls Wertman. "That spy-story stuff. He really took it to heart." When the two talked of IBM and Bridge Tech, says Wertman, Alpert would "close the door, open it again to see if anyone would run right up to put an ear to the door, then close it."
Counterespionage aside, the Alperts were also worried about an industry backlash. " [That was a] source of a great deal of stress. . . . We were certain that it wasn't going to help us as much as it could potentially hurt us," says Carolyn Alpert.
Working with IBM seemed to have become a bet-your-company proposition. Alpert agrees he was probably showing the stress. "This was rough-time stuff all throughout," he says, his voice weary with the memory. "This was all really tough."
Erdman called several times, finally arranging to bring his two star engineers to Cleveland on September 4th, the Saturday of the long Labor Day weekend. Alpert was nervous. There was an air of climax about this meeting. Friday after work, he met with Blaine, one of the two IBM security men, at the Tecmar plant. Blaine handed Alpert a miniature tape recorder. On his desk, they set up a long-playing recorder, built into the frame of a tan leather briefcase. A touch to the burnished clasp, and the tape would begin to roll.
Blaine speculated about the engineers. One -- he believed -- was a senior engineer by the name of Eggebrecht, the leader of the 12-man team that had come up with the final design for the PC. He thought the other was probably a software specialist from Yorktown Heights, N.Y., named Stearns, who managed a PC applications research team. "They were the most likely candidates," recalls Alpert, "but I think [that], until everyone saw them, there was significant disbelief." These were men of great prestige and authority within IBM, big game for an amateur spy. Alpert did not sleep that night. On Saturday morning, he rose shortly after dawn.
With his tiny recorder in an inner pocket of his new blue suit, Alpert met Erdman and the two other men at 8 a.m., in the coffee shop of the Sheraton Hopkins Hotel at the Cleveland airport. IBM had guessed correctly. Erdman introduced Lewis Eggebrecht and Peter Stearns. Over coffee, the two engineers talked about themselves and described their work at IBM.
Eggebrecht, a senior engineer in IBM's System Products Division, was a slender, 14-year IBM veteran in his late thirties whom IBM later described as the "chief architect and lead system designer" for the IBM PC. Eggebrecht told Alpert that he had personally designed "about 90%" of the PC. As head of the PC development team, he had reported directly to IBM chairman Frank Cary. Eggebrecht was also responsible for the conceptual and engineering design of the IBM System/23 Datamaster, another desktop computer announced in 1981. For the past year, he had been the ranking consultant for the IBM engineering teams developing PC accessories and designing the new IBM microcomputer systems that would occupy market niches above and below the PC. He was also senior adviser to IBM upper-management, guiding them as they determined future product technology and evaluated trade-offs between new PC functions and the revenue loss from other product-lines.
Peter Stearns, gray-haired and heavyset, the oldest man at the table, had helped found Interdata Inc. He had been at IBM since 1975 and was now manager of architecture and technology in IBM's Communication Products Division at Yorktown Heights. Prior to that, he had been leader of the development team at IBM's Thomas J. Watson Reseach Center, also in Yorktown Heights, which explored future office systems based around the PC and IBM word-processing systems.
It is, quite frankly, hard to imagine two men in a better position to betray their company. If someone at IBM came up with an idea for a new computer use, a new technology, a new way to program a PC for another function, the idea would sooner or later be seen by Eggebrecht and Stearns. Research and development people went to them for advice; top executives sought their counsel.
As Alpert bundled the brains behind Bridge Tech into his white, '76 Oldsmobile, he had the disconcerting thought that Eggebrecht and Stearns were the two most senior IBM officials he had ever met.
Alpert took the three back to the plant. Normally, there would have been at least a few workers around, but he had made sure that the place would be empty on this particular Saturday. After touring the production facilities, he led his guests to his tiny office. Soon afterwards, Carolyn Alpert came in, introduced herself, and settled into her own office next to her husband's, where she could overhear the entire conversation. The IBM security agents had asked her to be present; they might need a second witness if the case went to court. As they began to talk, Alpert absentmindedly thumbed the clasp on his tooled-leather briefcase.
The meeting lasted for hours. Alpert says Erdman, the salesman, dominated much of the conversation, but Eggebrecht took control whenever the discussion moved into technical and design matters. Stearns was quiet. By the hour, the IBM tape recorders gathered evidence showing the extent to which Bridge Technology's business plan depended upon IBM secrets -- which proposals had originated in IBM development groups; which products were refined copies of future IBM products; which IBM trade secret underlay this or that idea. Prompted by Alpert's queries, the renegade trio apparently explained how the Bridge Tech designs would exploit market opportunities recognizable only to those who knew exactly what IBM planned to do when.
As talent, the two IBM engineers -- particularly Eggebrecht -- made a strong impression on Alpert. He notes glumly that Eggebrecht struck him as a man "who is just incredibly intelligent, who started an industry revolution which . . . I feel privileged to be a part [of]. . . . His eyes lit up when he talked about technology."
At one point, Alpert says, he came right out and asked them why they were doing this. "Eggebrecht and Stearns indicated they thought IBM was a great company, the best company to work for, but they wanted to do things on their own." They wanted to be rich; to get one of the fortunes that others were making all around them -- "and I guess I can understand that. Here's Eggebrecht, who designed the PC, which is incredibly successful, and in his mind he's only got X number of dollars to show for that . . . And he was dissatisfied, and that's too bad . . ."
Months later, Alpert still becomes visibly agitated and upset when he talks about the engineers and the disaster that awaited them. Such talent, he insists, will again make a significant contribution. Nevertheless, he walked both of them into the snare.
How could they be sure to get copies of all these IBM planning documents? he asked. "Well, let me put it this way," said Erdman, a man with a knack for phrases that IBM lawyers love to quote. "In some cases . . . you give it to your personal secretary, and she copies it. . . . I mean, something like that could exist. We certainly wouldn't know about anything like that, and we certainly wouldn't have anything like that in our possession. If anything like that did exist, it would be in some lawyer's possession some place so that it became client/lawyer privileged information."
Alpert will not say what the renegade engineers told him about specific product plans. With a laugh, he describes himself as trapped in the worst of all possible worlds -- full of incomplete (and sometimes incorrect) versions of IBM's plans, yet cut off from the rumor mill by the assumption of many in the industry that he knows all. Alpert's affidavit did note a number of future IBM products that were discussed at length: a PC "expansion cabinet," another micro tailored to a specific foreign market, and a medley of PC "follow-on products." Certainly, the so-called XT (an upgraded PC) and the rumored, less powerful Peanut home computer must have been among them. Eggebrecht was influential in the design of both.
(Within IBM, however, word subsequently got around about the products that Eggebrecht, Stearns, and Erdman had been offering to the highest bidder, and people were not happy. At one point, for example, Eggebrecht opened his briefcase and displayed a PC circuit board in an advanced stage of development. Eggebrecht described it as a "prototype," which showed how far Bridge had come in the development of its own 3270 PC product. The truth, according to several IBM sources, is that Eggebrecht was flashing a 3270 PC board that had been "borrowed" from another IBM engineer.
One of Stearns's colleagues at Yorktown Heights later commented, "The guy was personable enough and popular enough that the reactions were at first rather mixed. What was it that Peter was shopping around? Well, it was this guy's this, and that guy's that, and this girl's whatever! It was their work! . . . It's pretty disheartening to have someone selling your work out from under you.")
Eventually, the meeting wound down. Carolyn Alpert joined her husband and the Bridge trio, and they drove out to the airport for a late lunch at the Sheraton. She then went off to a Saturday matinee; Al pert lingered at the restaurant with the IBMers, who were waiting for their flights.
Erdman had asked Alpert to sign a "standard nondisclosure agreement." He also offered to come to a quick agreement on the terms of a Bridge/Tecmar deal. Alpert demurred on the first and stalled on the second. "I think they understood," he smiles, "how there would be some discomfort [about] signing something without reviewing it." It was 5 o'clock before the last of the IBM renegades was aloft and homeward bound.
Alpert met IBM agent Blaine at the bar at the Sheraton Hopkins Hotel a few minutes later. They each ordered a beer. Alpert was deeply exhausted, morose. "I just sat there for 10 or 15 minutes without saying anything at all," he recalls. "I just had to get away from it all." Blaine, a professional, drank in silence. "He seemed to understand," says Alpert.
Then Mr. Blaine from IBM turned to Dr. Alpert from Tecmar and explained that he had a small problem. It seems he had forgotten to bring cash.
Could Tecmar buy the beers?
On September 13, 1982, IBM brought suit in New York's Supreme Court against Eggebrecht, Erdman, and Stearns, who were summarily fired that same day. Pending further investigation, the company obtained a temporary restraining order that forbade the use of confidential IBM information by Bridge Technology, the exIBMers, and anyone associated with them. Armed with this document, two senior IBM attorneys made the rounds of five companies that had been negotiating to buy the product designs. At each, they conducted extensive interviews, demanding to know exactly what the renegades had revealed. "IBM made it clear they were willing to sue anyone to put a cork in this thing," said one observer. "No one took it lightly."
In the meantime, the Bridge trio had begun to splinter. William Greer, the lawyer for Stearns and Eggebrecht, declared that Erdman had never been a principal in Bridge Technology; he had simply been hired to solicit financial backing and subcontractors. In his eagerness, said Greer, Erdman may well have oversold" the enterprise, although the lawyer conceded that his clients went along with Erdman's exaggerations, even when they knew he was stretching the point.
In court, Bridge Technology responded to IBM's charges by asserting that 17 specific items of allegedly stolen information were already known in the industry. "Everything that IBM claims as confidential and a trade secret was referred to first by Dr. Alpert," said Greer. "He kept turning the conversation around. It would have been a perfectly innocent thing if Dr. Alpert hadn't been briefed by IBM security agents as to what questions to ask." He added that none of the other companies had asked such questions.
The pressure on the defendants increased, however, when IBM produced evidence that, in early 1982, Eggebrecht and Stearns had served as consultants for a small IBM competitor, Syntrex Inc. of Eatontown, N.J. The consulting deal -- for which they reportedly received $4,500 -- apparently grew out of the engineers' earlier attempt to get Syntrex to bankroll their new company. A Syntrex official insisted that they had been "quite scrupulous about [not revealing] anything of a proprietary nature," but the revelation was damaging nonetheless.
To make matters worse, IBM was putting the squeeze on Erdman. Left in the lurch by his co-defendants -- and particularly vulnerable because of Alpert's tape recordings -- he finally agreed to make a full disclosure and to testify against Eggebrecht and Stearns. IBM announced the deal on November 19th and, at the same time, amended its suit against the engineers to include charges related to the Syntrex consulting job.
On November 30th, Eggebrecht and Stearns threw in the towel. Both agreed to a permanent injunction barring them from "disclosing, using, or applying" IBM trade secrets and proprietary information. They also agreed to repay an undisclosed portion of their past IBM salaries and to accept a wide range of specific job prohibitions for the next three years -- in effect, banishing them from the industry in which they had built their careers. Indeed, under a separate agreement with a large monetary penalty clause, they cannot even discuss the case in public.
As for Alpert, he began to feel repercussions from the case soon after it became public. Several of Tecmar's suppliers and distributors and a number of independent professionals sent letters of gratitude and congratulations, but there was also a steady murmur of criticism, particularly in California's Silicon Valley. At one national trade show, Alpert was openly insulted.
"I think there are many people who do not understand what happened, because it's not easy to explain in three words or five words or one sentence," says Carolyn Alpert. "To many, we were . . . finking on somebody, maybe to apple-polish IBM."
Industry rumors about the Tecmar "sting" betray a certain confusion about the facts of the case, as well as a more subtle dispute over what was being offered for sale: the men themselves, design capability, or actual designs? Within IBM, no one doubts that Tecmar was offered IBM product plans and technology. The general belief is that IBM phrased its accusations against the renegades quite conservatively, given the evidence, and executives mention Alpert's name with respect and gratitude. Robert Townsend, the IBM attorney who managed the security team during the investigation, speaks of Alpert's "extraordinary ethics," and credits him with saving IBM from serious harm.
But outside IBM -- particularly in the PC-peripherals market -- many take the view that the renegades were simply insiders who wanted to go independent. The discussion tends to focus on who the renegades were, rather than what they were trying to sell. In this view, Alpert betrayed the men solely because they were potential competitors (ignoring the fact that he did not know their identities when he first contacted IBM).
"I don't think there is yet a realization that there is an ethics issue associated with what they have done," says Alpert.
Then again, Tecmar will probably not suffer as a result. Former marketing vice-president Wertman, for one, believes that Tecmar now has a "favored vendor relationship" with IBM, despite strong denials from both IBM and the Alperts. Now president of Criterion Technology Inc., a new Tecmar competitor, Wertman says that Alpert's attorney met with the IBM legal staff in September to discuss his client's affidavit. Afterwards, Alpert told Wertman that IBM had indicated its enormous gratitude. When Wertman asked what that meant, Alpert said, "Well, they can't promise anything during the litigation . . . but the absolute impression was, there's no way we're going to lose."
About a month later, IBM executives from North Carolina called Tecmar to ask for a tour of the company's production facility, apparently to qualify Tecmar as a potential IBM supplier. According to two former Tecmar executives, IBM officials subsequently visited the plant and inspected Tecmar's manufacturing and quality control procedures. In December -- shortly after the consent decree was signed -- IBM reportedly invited Tecmar to submit a bid to design a new communications "modem" for the PC. (A modem is a device for linking computers through a telephone line.) For IBM to ask Tecmar to design such a simple and conventional circuit is "fundamentally silly," says Wertman, "unless you see it as a reward."
Alpert, for his part, adamantly denies that he has any payoff deal with IBM or is expecting any rewards. He says only that he is hopeful of landing an IBM contract someday.
But perhaps all that is besides the point. Wertman, for one, has no patience with those who sneer at Alpert. "I don't think it could have been handled any other way," he says. "His motives are not important. What counts is that he did the right thing."