We talk often about the security threats posed by criminals, competitors, contractors, and employees. But what about your customers... can you trust them? If you ask AMSC, an American solutions provider for the energy industry, it'll answer with a resounding "no."
AMSC claims that one of its largest customers -- Sinovel, a China-based company that is one of the world's largest manufacturers and exporters of wind turbines -- stole AMSC's proprietary intellectual property. The stolen IP included software that runs the electrical control systems used in Sinovel's wind turbines. In addition to basically aiming to cut AMSC out of the supply chain, AMSC claims that Sinovel refused to pay for $100 million of products and services AMSC had already delivered and backed out of $700 million worth of new contracts. AMSC has cut 500 jobs since the incident occurred in 2011.
Yesterday, a federal grand jury in Wisconsin charged Sinovel, two of Sinovel's employees, and one employee from AMSC's Austrian subsidiary, with one count each of conspiracy to commit trade secret theft, theft of trade secrets, and wire fraud.
According to the Department of Justice, US Attorney for the Western District of Wisconsin John W. Vaudreuil stated, "The allegations in this indictment describe a well-planned attack on an American business by international defendants -- nothing short of attempted corporate homicide."
Sinovel denies the charges, but the case nevertheless raises some important concerns for all companies -- especially OEMs.
First, as Bruce Rayner advised E2 readers when AMSC first filed suit against Sinovel, don't base your business too heavily on just one customer. Have a strategy to expand and diversify your customer base so that the catastrophic end of one relationship doesn't cause the catastrophic end of the company.
Second, you obviously need to enhance all security measures that protect your company against insider threats. IP theft is far more difficult to pull off if you don't have an insider like Dejan Karabasevic, the former employee of AMSC's Austrian subsidiary Windtec GmbH, who was charged in the indictment yesterday.
Complicating matters further is the fact that the US may not be able to successfully prosecute the accused, because they are not American. Although Karabasevic technically worked for AMSC, he worked in Austria, and is a Serbian citizen who has since moved back to his own country -- and neither Austria nor Serbia has extradition treaties with the United States.
However, if he is extradited, Karabasevic faces up to five years in prison on the conspiracy charge, 10 years for theft of a trade secret, and 20 years for wire fraud. In the meantime, according to the indictment, he was offered a contract to work for a Chinese turbine blade factory.
Whether or not the accusations against Sinovel are true, it's important for any company in the OEM supply chain to be wary anytime it looks as if a customer is trying to become a competitor instead -- whether they're doing it legally or illegally.
How would you prevent IP theft of this caliber? Would you ever voluntarily stop selling your goods and services to a major customer? Let us know in the comments below.