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Trade Secret/Economic Espionage Cases - U.S. v. Rector (M.D. Fla.)



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Press Release
For Immediate Release
March 15, 2001
 

 TWO PLEAD GUILTY TO FIRST THEFT OF TRADE SECRETS
CASE PROSECUTED IN MIDDLE DISTRICT OF FLORIDA

March 15, 2001


TAMPA -- The United States Attorney announced today that JOLENE HILDA NEAT RECTOR and STEVEN MICHAEL SNYDER have entered guilty pleas to a two count indictment charging conspiracy to convey trade secrets and the substantive offense of conveying trade secrets. SNYDER entered his guilty pleas before Magistrate Judge Elizabeth Jenkins on Friday, March 2, 2001. RECTOR entered her guilty pleas before Magistrate Judge Jenkins yesterday, March 13, 200l. RECTOR was originally indicted on the same two charges on April 27, 2000. Both RECTOR and SNYDER were then indicted on both charges by a superseding indictment handed down on July 13, 2000. The original indictment against RECTOR will be dismissed at her sentencing which is expected to take place near the end of May or the first of June, 2001.

The superseding indictment charges RECTOR, age 44 and now living in Kentucky, and SNYDER, age 35 and living in Pinellas County, Florida, with one count of conspiring to convey trade secrets, in violation of 18 U.S.C. § 1832(a)(5), and one count of conveying trade secrets, in violation of 18 U.S.C. §§ 1832(a)(2) and 2.

The facts, as agreed to by both defendants in their plea agreements with United States, establish that at some time prior to August 20, 1999, the defendant, JOLENE HILDA NEAT RECTOR, obtained numerous pieces of proprietary information owned by R.P.Scherer, Inc. (RPS) from a friend(s) in Florida. This information included gel formulas, fill formulas, shell weights, and experimental production order (EPO) data. This information was known by the defendant to be proprietary information and trade secrets of RPS. RPS is a leading international developer and manufacturer of drug, supplement, cosmetic and recreational product delivery systems. RPS’s proprietary advanced drug delivery systems improve the efficacy of drugs by regulating their dosage, rate of absorption and place of release. RPS customers include global and regional manufacturers of prescription and over-the-counter pharmaceutical products, nutritional supplements, cosmetics and recreational products such as paint balls. RPS products are produced for and placed in interstate and foreign commerce.

On a date occurring between August 1 and August 20, 1999, RECTOR requested a friend, STEVEN MICHAEL SNYDER, then working for RPS, to send to her in Nevada information which he had obtained from RPS. SNYDER sent this information by mail, specifically including numerous EPOs, after RECTOR indicated she would use it to assist her in her current job with a competitor to RPS located in Nevada.

On or about August 20, 1999, RECTOR had a conversation with the Production Manager of Nelson Paint Ball, Inc. (NPB), located in Kingsford, Michigan. RECTOR advised him she had gelatin formulas that she wanted to sell for $50,000.00. RECTOR stated she had obtained the formulas while working at R. P. Scherer, Inc. (RPS) located in St. Petersburg, Florida. RECTOR stated she was living in Nevada and had been working for SOFT GELCAPS WEST (SGW) and had recently been fired. RECTOR stated she had worked in the paint ball plant and in the nutritional plant. After the conversation, the Production Manager contacted the company’s Executive Vice-President (EVP) with this information.

On August 23, 1999, the EVP received a phone call from RECTOR, who confirmed the previous information pertaining to the formulas and in addition to making a number of informational statements, she told EVP that she had sixty-five (65) paint ball color formulas and one hundred eight (108) gelatin formulas from when she worked at RPS and would like to sell them for $50,000.00. The EVP contacted the RPS corporate counsel office concerning the foregoing information. On August 31, 1999, the Vice President (VP) of Corporate Security for Cardinal Health contacted the EVP and asked him to contact RECTOR directly for the purpose of having her fax a sample of the information for sale, so that it could be evaluated.

On August 31, 1999 the EVP contacted RECTOR and requested she fax a couple of pages of the fill and gel formulas, maintenance instructions, paintball facility layout map and the pilot plant notebook. Approximately ten minutes later the EVP received the faxed documents. The EVP recontacted RECTOR to confirm receipt of the pages received and then faxed what he had received to RPS. RPS then contacted the FBI, who opened an investigation on or about September 1, 1999.

This investigation established that RPS is a Delaware corporation and is a wholly owned subsidiary of CARDINAL HEALTH, INC. Investigation further determined that RECTOR was employed at RPS in St. Petersburg, Florida from April, 1994, through November, 1996.

On September 29, 1999, the EVP initiated a consensually recorded phone call to RECTOR in Stagecoach, Nevada. During this phone conversation, she advised the EVP that she had already sold part of the documentation to an unnamed buyer, however, was still willing to sell the remaining documentation to the EVP for $25,000.00.

On September 30, 1999, in another consensually recorded phone call made by the EVP, RECTOR stated in response to his statement to the effect that she didn’t sound like she wanted to come to Michigan, "Yeah, well on an illegal thing no...(laughing), because you know if I’m doing something that’s not ill.., not legally put down as like I’m doing a job...Yeah, then I’m setting myself up to get caught or whatever...you know wherever I go I’m setting myself up...but if there’s a contract and a job, you know a job contract, then it’s not a set up it, you know I’m basically doing a legal work...because it actually has...it doesn’t have nobody’s name on it , it is my stuff..." When the EVP asked RECTOR what she had done with the stuff in the book from the pilot plant, she stated that they re-hand wrote it and that she destroyed the book so that there were no names.

RECTOR later stated that the company that she had sold the pharmaceutical formulas to was also interested in buying the paint ball formulas if she still had them later on. RECTOR then described that what she still had to sell was a maintenance manual for Japanese Sankyo encapsulation machine, approximately 106 gel formulas, and 60 some paint ball formulas. RECTOR admitted that the examples she sent by fax were from RPS.

On October 14, 1999, an undercover agent of the FBI met with RECTOR pretending to have been sent by the EVP. This meeting was video taped. RECTOR turned over a maroon colored, three-ring binder containing machine maintenance instructions, paint ball and gel formulas, and list of shell weights. The undercover FBI agent then gave her a check in the amount of $25,000.00.

Immediately following the exchange, the FBI notified RECTOR that the meeting had been a sting and she consented to be interviewed even though she had been advised that she was not under arrest and was free to go. At this time RECTOR admitted that she received a RPS notebook from a former employee via the United States mail. Furthermore, RECTOR advised she burned a lab notebook containing experimental RPS products and notes while in Kentucky.

On January 26, 2000, RECTOR was arrested in Nevada subsequent to a MDFL complaint and admitted receiving the information which she had turned over to the undercover FBI agent from a specific individual in Florida through the mail.

Both RECTOR and SNYDER admit that the gel formulas, fill formulas, and EPOs are proprietary trade secrets of RPS, developed by them and used by them in the production of drug, nutrient supplement and paint ball delivery systems (capsules) as well as the fill material inside the capsules.

The prosecution of these offenses constitute the first ever prosecution under this statute in the Middle District of Florida, and one of a growing number of prosecutions under this statute nation-wide since the statute was enacted in October of 1996. This case has national significance because it reenforces the impact Congress desired to make in limiting the damage industrial espionage causes United States companies, both here and abroad.

The defendants face a maximum term of ten-years imprisonment and a fine up to $250,000 for each offense.
The investigation of this case was accomplished through the collaborative efforts of Special Agents of the Federal Bureau of Investigation in Michigan, Nevada, and here in the Middle District of Florida. This case also demonstrates a situation where a competitor corporation (NPB) actively cooperated with federal authorities and the victim corporation (RPS). Without the assistance of this competitor corporation, the successful prosecution of this case would not have been possible.

The case is being prosecuted by Assistant United States Attorney Donald L. Hansen, Senior Litigation Counsel for the Tampa Division of the United States Attorney's Office.

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