Criminal Trial Begins in Case Against Former Executive Search Head

When an executive competes with a former employer by using its confidential information, the executive takes a substantial risk.  We’ve previously covered how one Hallmark executive lost hundreds of thousands of dollars by using and then deleting confidential info.

David Nosal, the former head of executive search firm Korn/Ferry’s CEO recruiting practice in Silicon Valley, is about to find out whether he is going to suffer an even more severe punishment: time in federal prison. 

Nosal’s trial on conspiracy and trade secret theft charges started last week, writes Vanessa Blum of The Recorder.  He is charged with stealing Korn/Ferry’s confidential search information and using it for a rival business.  So far, the evidence at trial includes some colorful vignettes, including Nosal’s e-mailed comment that he would “pee his pants” because he was so excited to be back “in business.”

In a prior decision that we discussed here on Suits by Suits, the Ninth Circuit barred the government from pursuing hacking charges against Nosal under the Computer Fraud and Abuse Act, holding that a defendant does not break that law by simply misusing information to which he is given authorized access.

The judge overseeing the trial has now addressed another major issue: whether Nosal can argue that the non-compete clause in his separation agreement was legally unenforceable.  The government contended that whether or not the non-compete clause was legal was irrelevant to  whether Nosal committed a crime.  The court agreed, but also barred the government from arguing that Nosal had the intent to defraud Korn/Ferry because he took its info at the same time that he was breaching his non-compete agreement.

The case of Sergei Aleynikov, the Goldman Sachs vice-president who was alleged to have stolen the company's "secret sauce" computer code and who we covered in this series of posts in October, reminds us that it's not impossible to win acquittal on these types of charges.  But Nosal won't be free of his legal battles even if he wins in this trial.  Blum reports that Korn/Ferry is seeking $27 million from him in a separate arbitration.

• Confidentiality