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Espionage lawsuits agitate parts rivals

Marcone Supply and 1st Source Servall -- for years have been America's leaders in the business of supplying hard-to-get parts for washing machines, stoves and other home appliances.

Some would call it a mundane business, one lacking excitement.

But last year, the fight for customers got vicious, with accusations of stolen customer lists, corporate espionage and destruction of evidence, according to lawsuits filed in state and federal courts.

Marcone, which has about 100 employees at its Northeast headquarters in Buffalo, accuses Servall of hiring former Marcone employees from the Buffalo area who stole inside information from the company, including a confidential list of 3,300 Marcone customers. Servall's attorneys deny the accusations.

Marcone officials claim the theft of their customer information resulted in a $12 million loss of business for the company last year.

"This is very serious conduct a classic case of corporate espionage," said James D. Donathen, a Buffalo attorney who represents Marcone. "Servall took all the financial information from our client and set up a Buffalo operation overnight."

One of Servall's Buffalo attorneys, B. Kevin Burke Jr., accused Marcone of trying to use court cases to stifle competition in the Northeast.

"I think the main reason they're suing Servall is that Servall is No. 2, and a lot of customers are better off with Servall," Burke said. "Customers are better served if there is competition."

Some Marcone customers have gone to Servall because it provides better prices and service, Servall attorneys claim.

A state judge in Buffalo on Friday unsealed an order that bars Servall from soliciting business from Marcone's top 640 customers.

State Supreme Court Justice John A. Michalek said two Servall executives working in the Buffalo area -- identified in court papers as Mark J. Creighton and Karl P. Rosenhahn -- tried to cover up the theft of confidential information by destroying the evidence.

Creighton has admitted that he used a vise to destroy a thumb drive and that he used a hammer to smash a hard drive that contained information taken from Marcone, according to the judge's ruling.

In Michalek's 21-page order, the judge said that Kevin Sullivan, chief operating officer for Servall, has admitted that "a customer list received from a former Marcone employee" was used by customer service workers for his company.

"The unrebutted evidence now demonstrates" that Rosenhahn and Creighton, with help from Servall managers, "intentionally took and/or received" Marcone's customer information, Michalek ruled.

Creighton and Rosenhahn are former top sales executives from Marcone who joined Servall's executive team last spring, the judge wrote.

Servall also hired "numerous" former Marcone employees last year and set up three new Northeast distribution sites, including one in Buffalo, Michalek wrote in his order.

The Buffalo News left telephone messages for both Creighton and Rosenhahn but did not hear back from them.

Burke told The News that Creighton and Rosenhahn "did have that list and I think that is what upset the judge."

"But nothing that was on that list was really confidential," Burke added. He said Servall has appealed Michalek's ruling and hopes to have it "completely overturned."

In court papers, Servall's attorneys argued that there is "no evidence" that proves Servall's sales executives ever used the information taken from Marcone to steal customers.

"[The] only information that Servall is claimed to have used was either publicly available [names of appliance repair companies] or readily obtainable [credit scores]," the Servall lawyers wrote. "Furthermore, there is no evidence that Servall used [Marcone's] information to obtain customers or sales."

David Cook, a senior vice president at Marcone, strongly disagreed.

"We believe in fair and open competition. We have never seen acts of dishonesty, theft and corruption like this in our industry," Cook said Friday.

Marcone Supply, based in St. Louis, is identified in court papers as the largest wholesaler of appliance parts in the United States.

Servall, based in Detroit, is identified as the second-largest.

In January 2010, Marcone established a presence in Western New York by purchasing AP Wagner of Depew, a company that, for decades, had distributed appliance parts in the Northeast.

Marcone early last year sent a letter to all former AP Wagner employees in Western New York, warning them that "their positions might be terminated" in April 2010, according to Michalek.

Some former AP Wagner employees -- including Creighton and Rosenhahn -- resigned from their jobs with Marcone and signed on with Servall, Michalek said.

"Creighton resigned [from Marcone] on April 20, 2010, and within six days became Servall's vice president of sales for the Northeast Region," the judge wrote.

The judge said there is evidence that both Creighton and Rosenhahn took information from Marcone with them to their new employer, which opened up an operation of its own in Depew.

So far, no trial date has been set for either the state or federal cases in the dispute.

"The [judge's] ruling does prevent Servall from soliciting those customers, but it does not prevent Servall from selling merchandise to the customers if they come to Servall," Burke said.

According to Donathen, the former employees did more than take information.

"Creighton used a hammer to wreck one disk with computer information, a vise to crush several thumb-nail memory sticks and a sophisticated computer-camouflaging program known as a 'shredder' to cover up his misappropriation of Marcone's confidential and proprietary information," Donathen said.

The alleged stolen material included records on Marcone's "active customers," such as contact information, accounting information, account numbers, credit limits, pricing information, monthly sales and freight costs, Donathen said.

In a related case in federal court, Michael Mangan, a former senior executive at Marcone and AP Wagner, is accused of using "confidential and protected" information from Marcone after he went to work for Servall.


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