Westjet VP steps down over alleged espionage
By JOHN PARTRIDGE
From Thursday's Globe and Mail
Mark Hill, a senior executive and co-founder of WestJet Airlines Ltd. who has been accused in a lawsuit of masterminding an elaborate corporate-espionage scheme to siphon sensitive flight data from an Air Canada employee website, has unexpectedly stepped down because of the continuing scrutiny of his actions.
In a terse statement issued from its head office in Calgary, WestJet said Mr. Hill, its vice-president of strategic planning, decided it was in the airline's and his own interest that he resign because of the scrutiny he has been under since Air Canada launched the lawsuit in early April.
However, WestJet also said it is "adamant that the information Mr. Hill obtained from Air Canada's website was neither confidential nor useful to WestJet in any respect." But it added that "in view of the current circumstances," it has accepted his resignation, which takes effect immediately.
Neither Mr. Hill nor officials of WestJet could be reached for further comment. Mr. Hill and co-defendant Jeffrey Lafond, a financial analyst at WestJet who had worked at Canadian Airlines but left after it was acquired by Air Canada, have been on paid leaves of absence since two days after the legal action was launched.
In court documents, Air Canada's lawyer, Earl Cherniak, has accused Mr. Hill and WestJet of "corporate espionage on a massive scale."
Air Canada has also acknowledged that, in preparing its case, it went to the extraordinary length of hiring private investigators to sift through garbage taken from outside Mr. Hill's home in Victoria's wealthy Oak Bay district.
Air Canada has alleged that Mr. Hill used a password and PIN number it had assigned to Mr. Lafond, along with automated computer technology designed by WestJet's systems department, to gain access to its employee website a startling 243,630 times between May 15, 2003, and March 19 of this year.
It contends that the information Mr. Hill and WestJet gleaned about passenger bookings on future flights enabled the six-year-old Calgary airline to schedule its own flights in an advantageous manner, in the process causing Air Canada "substantial loss, including loss of revenue, profits and good will."
Air Canada is seeking $5-million in punitive damages from WestJet, but its claims could ultimately be far higher if the court finds that its revenues and profit have indeed been harmed.
None of the allegations has been proven in court.
WestJet contends, however, that the information from the Air Canada website was not confidential and could have been obtained by "anyone with a web browser."
As well, it is seeking leave from the court to countersue Air Canada, for what it alleges is "unlawful seizure" of Mr. Hill's garbage, which, it says, contained confidential WestJet information.
As for Mr. Hill, court documents show that during a cross-examination by Mr. Cherniak, he sought to dismiss the importance of his having visited the Air Canada employee website so frequently.
"At the end of the day, you know, frankly it was an intellectual exercise by an information junkie" and "had very little use."
Air Canada's relations with WestJet have been stormy. But the espionage accusations have tarnished the smaller airline's reputation and some financial analysts have warned that if it loses the lawsuit, the financial damages could be substantial.
The lawsuit has come as Air Canada is trying to fight its way out of insolvency.
It has been under court protection from its creditors since April 1, 2003, but is now set to complete its restructuring by Sept. 30
Westjet VP steps down over alleged espionage
Moderators: sky's the limit, sepia, Sulako, lilfssister, North Shore, I WAS Birddog
Jul. 15, 2004. 01:00 AM
WestJet CEO's halo tarnished
Beddoe's first hire, Mark Hill, resigns
DAVID OLIVE - Toronto Star
Suddenly Clive Beddoe appears to have a character problem.
Consistently among the most respected Canadian CEOs in recent years, the co-founder of WestJet Airlines Ltd. has played the underdog role to near-perfection.
The folks at OPEC and the Weather Channel have yet to feel his wrath or ridicule, so far as we know. But long after Beddoe's 8-year-old airline had secured a reputation as one of the savviest carriers on the continent, he has continued to inveigh against the predations of Air Canada, the lunacy of upstart fellow discounter Jetsgo, the feds who imposed new security taxes after the 9/11 tragedy, and court rulings that denied WestJet favoured slots at Pearson International.
Seldom content to twit a rival, the former real estate developer typically jumps in with both boots. Early this year, Globe and Mail transportation reporter Keith McArthur invited Beddoe to shed a tear, a tiny droplet of sympathy, for bankruptcy-humbled Air Canada. Nothing doing. "They pursued a policy of destroying every competitor that come along," he said, "no matter what the cost to Air Canada." The idiots.
As for Jetsgo — or "Jetsgone," as Beddoe has dubbed his smaller rival since its inception — Beddoe dropped an anvil on the gnat in a New York investor presentation in February. "Jetsgo's on-time performance is appalling," claimed Beddoe, warming to his detailed indictment. "Their airplanes are filthy. Their pilots are desperate to get out. Morale is appalling. I don't think it's sustainable."
I met Beddoe once. He stepped into the editorial boardroom at the Star, with its view of the Toronto skyline, and promptly declared, "So, this is the centre of the universe." I thought he was joking, but his tone was sour. Eastern bastards.
Never mind that it was the Ontario Teachers' Pension Plan Board that lent priceless credibility to Beddoe's then-paper airline by taking up one-quarter of its mid-1990s private placement, since bolstered by an additional $100 million investment by Teachers in the airline. Or that another pillar of the Eastern financial establishment, Boston's Fidelity Investments, is WestJet's largest shareholder.
The chip on Beddoe's shoulder has served WestJet well. For years, a fawning press, including this reporter, has feasted on the irreverent views of a David from Cowtown pitted against a Montreal-based near-monopoly whose insensitive treatment of its customers and its own employees is boundless.
As with The Body Shop and Ben & Jerry's, the model of enlightened corporate stewardship that WestJet seemed to represent generated sufficient media accolades that the early WestJet got by on word of mouth and was largely spared the cost of traditional advertising.
Then came the airline's first test of moral character, and WestJet's upper echelon appears to have come up short.
By now you're familiar with Air Canada's allegation, in a lawsuit dating from April, that WestJet engaged in "corporate espionage on a massive scale" in tapping into one of its rival's internal Web sites to obtain sensitive data on the profitability of Air Canada's routes.
Lawsuits are inherently arcane. But certain elements of the saga leap out.
For bizarre business practices, Air Canada wins a special prize for maintaining a Web site of sensitive data to which thousands of current and former employees and retirees are granted access. Also curious is Air Canada's judgment in waiting several months after it began to suspect WestJet of spying on it before launching its lawsuit. And most entertaining is Air Canada's conscription of a B.C. gumshoe to collect the curbside trash of a Victoria-based WestJet executive, Mark Hill, in its search for evidence to build its espionage case.
Those same factors loom large in WestJet's self-defence. The data it monitored was widely available from other sources, it says. Air Canada waited to pounce because it ached for the opportunity to use the courts to smear its adversary, it says. And Air Canada's own unorthodox data mining in the upscale Victoria suburb of Oak Bay was, it suggests, the grubbier conduct in the affair — albeit a practice to which the likes of Procter & Gamble Co., Oracle Corp. and British Airways PLC have also reportedly resorted over the years.
Beddoe's dilemma is that revelations of rough-house behaviour by Air Canada surprise absolutely no one. But that WestJet is alleged to have tapped Air Canada's proprietary Web site more than 240,000 times is a bit of a shocker given the carrier's holier-than-thou image.
WestJet's defence of its conduct is in some respects disingenuous. Contending the data it acknowledges having accessed was of no competitive value, it leaves unanswered the question of why its executives were obsessed with monitoring it daily for the better part of a year. Or why it troubled to develop a software program to analyze data that did not belong to it. And why, if WestJet did not actually use the data, as it claims, there appears to be a correlation between WestJet's market-share gains during the period of its data-gathering beginning in March of last year, and a subsequent decline in WestJet's performance since it was forced to stop gazing intently at its rival's inner workings last winter.
On Bay Street, which has experience in knowing to expect the worst in such matters, WestJet shares lost more than 11 per cent of their value within a few days of the initial espionage allegations. They are currently trading at about one-third below their January peak.
The accusation of spying strikes at least one analyst as credible. "We note Air Canada's domestic traffic figures have improved substantially since WestJet stopped obtaining information from Air Canada, while WestJet's load factor deteriorated significantly," wrote analyst Claude Proulx of BMO Nesbitt Burns earlier this month.
Even analyst Cameron Doerksen of Dlouhy Merchant, still a WestJet booster, allowed that the airline's image has taken a hit because of "at the very least, some questionable behaviour — WestJet can hardly take the high moral ground any longer."
Beddoe was asked by the New York Times in January how he planned to maintain WestJet's underdog culture even as the carrier expects to more than double its employee population over the next few years. Beddoe said the carrier's continued success is "very much a function of who you hire and how intolerant you are of people who don't fit the culture."
As it happens, Beddoe's first hire was Mark Hill, who abruptly announced his resignation last night. WestJet is the brainchild of Hill, an aggressive young real estate leasing agent in Beddoe's office who studied Southwest Airlines and other discounters in the mid-1990s, and persuaded a reluctant Beddoe to make the leap from pilot of his own Cessna eight-seater to one of the four Calgarians to spearhead the first viable competitor to Air Canada in modern times. The name WestJet was conceived by Hill's mother, Moira, after the likes of Altius and Trekker were mercifully rejected.
It is Hill, self-described vice-president of strategic planning "and paranoia," as related in Paul Grescoe's recently published book about WestJet, who acknowledges obtaining the password to the Air Canada Web site from a WestJet financial analyst laid off by Canadian Airlines in its merger with Air Canada, but still entitled to book two free trips a year with his former employer until 2005. That employee, it bears noting, immediately sought some kind of indemnification from WestJet should any legal problems arise from his actions.
In a sworn affidavit, Hill also revealed that it was Don Bell, another WestJet co-founder and vice-president, and a software entrepreneur in a previous life, who conscripted a colleague from WestJet's computer department to develop the software program for rapidly analyzing the treasure trove of data on the Air Canada Web site.
In the press release announcing Hill's resignation last night, WestJet said that "in view of the current circumstances, WestJet has accepted Mr. Hill's resignation."
A few years ago, Beddoe in an oddly high-profile manner, aborted Steve Smith's brief tenure as WestJet's CEO, explaining loudly that Smith lacked the consensual skills required in an employee-friendly firm where the executive lair at headquarters is labelled Big Shots and HR is the People Department. It was Smith, landing on his feet as head of Air Canada's WestJet fighter, Zip, who first alerted Robert Milton of his suspicions that WestJet was a Peeping Tom at the Air Canada Web site.
There is the scent of mere mischief and not almighty vengeance in Air Canada's legal gambit, in which Milton has wisely delegated the trash talking to his firm's lawyers. Given the industrial voyeurism to which WestJet has already confessed, Milton appears to have made his point. The hitherto sainted WestJet will have some difficulty explaining that there is not, in fact, a seamy side to its culture, residing quite tolerably at the top of the organization.
WestJet CEO's halo tarnished
Beddoe's first hire, Mark Hill, resigns
DAVID OLIVE - Toronto Star
Suddenly Clive Beddoe appears to have a character problem.
Consistently among the most respected Canadian CEOs in recent years, the co-founder of WestJet Airlines Ltd. has played the underdog role to near-perfection.
The folks at OPEC and the Weather Channel have yet to feel his wrath or ridicule, so far as we know. But long after Beddoe's 8-year-old airline had secured a reputation as one of the savviest carriers on the continent, he has continued to inveigh against the predations of Air Canada, the lunacy of upstart fellow discounter Jetsgo, the feds who imposed new security taxes after the 9/11 tragedy, and court rulings that denied WestJet favoured slots at Pearson International.
Seldom content to twit a rival, the former real estate developer typically jumps in with both boots. Early this year, Globe and Mail transportation reporter Keith McArthur invited Beddoe to shed a tear, a tiny droplet of sympathy, for bankruptcy-humbled Air Canada. Nothing doing. "They pursued a policy of destroying every competitor that come along," he said, "no matter what the cost to Air Canada." The idiots.
As for Jetsgo — or "Jetsgone," as Beddoe has dubbed his smaller rival since its inception — Beddoe dropped an anvil on the gnat in a New York investor presentation in February. "Jetsgo's on-time performance is appalling," claimed Beddoe, warming to his detailed indictment. "Their airplanes are filthy. Their pilots are desperate to get out. Morale is appalling. I don't think it's sustainable."
I met Beddoe once. He stepped into the editorial boardroom at the Star, with its view of the Toronto skyline, and promptly declared, "So, this is the centre of the universe." I thought he was joking, but his tone was sour. Eastern bastards.
Never mind that it was the Ontario Teachers' Pension Plan Board that lent priceless credibility to Beddoe's then-paper airline by taking up one-quarter of its mid-1990s private placement, since bolstered by an additional $100 million investment by Teachers in the airline. Or that another pillar of the Eastern financial establishment, Boston's Fidelity Investments, is WestJet's largest shareholder.
The chip on Beddoe's shoulder has served WestJet well. For years, a fawning press, including this reporter, has feasted on the irreverent views of a David from Cowtown pitted against a Montreal-based near-monopoly whose insensitive treatment of its customers and its own employees is boundless.
As with The Body Shop and Ben & Jerry's, the model of enlightened corporate stewardship that WestJet seemed to represent generated sufficient media accolades that the early WestJet got by on word of mouth and was largely spared the cost of traditional advertising.
Then came the airline's first test of moral character, and WestJet's upper echelon appears to have come up short.
By now you're familiar with Air Canada's allegation, in a lawsuit dating from April, that WestJet engaged in "corporate espionage on a massive scale" in tapping into one of its rival's internal Web sites to obtain sensitive data on the profitability of Air Canada's routes.
Lawsuits are inherently arcane. But certain elements of the saga leap out.
For bizarre business practices, Air Canada wins a special prize for maintaining a Web site of sensitive data to which thousands of current and former employees and retirees are granted access. Also curious is Air Canada's judgment in waiting several months after it began to suspect WestJet of spying on it before launching its lawsuit. And most entertaining is Air Canada's conscription of a B.C. gumshoe to collect the curbside trash of a Victoria-based WestJet executive, Mark Hill, in its search for evidence to build its espionage case.
Those same factors loom large in WestJet's self-defence. The data it monitored was widely available from other sources, it says. Air Canada waited to pounce because it ached for the opportunity to use the courts to smear its adversary, it says. And Air Canada's own unorthodox data mining in the upscale Victoria suburb of Oak Bay was, it suggests, the grubbier conduct in the affair — albeit a practice to which the likes of Procter & Gamble Co., Oracle Corp. and British Airways PLC have also reportedly resorted over the years.
Beddoe's dilemma is that revelations of rough-house behaviour by Air Canada surprise absolutely no one. But that WestJet is alleged to have tapped Air Canada's proprietary Web site more than 240,000 times is a bit of a shocker given the carrier's holier-than-thou image.
WestJet's defence of its conduct is in some respects disingenuous. Contending the data it acknowledges having accessed was of no competitive value, it leaves unanswered the question of why its executives were obsessed with monitoring it daily for the better part of a year. Or why it troubled to develop a software program to analyze data that did not belong to it. And why, if WestJet did not actually use the data, as it claims, there appears to be a correlation between WestJet's market-share gains during the period of its data-gathering beginning in March of last year, and a subsequent decline in WestJet's performance since it was forced to stop gazing intently at its rival's inner workings last winter.
On Bay Street, which has experience in knowing to expect the worst in such matters, WestJet shares lost more than 11 per cent of their value within a few days of the initial espionage allegations. They are currently trading at about one-third below their January peak.
The accusation of spying strikes at least one analyst as credible. "We note Air Canada's domestic traffic figures have improved substantially since WestJet stopped obtaining information from Air Canada, while WestJet's load factor deteriorated significantly," wrote analyst Claude Proulx of BMO Nesbitt Burns earlier this month.
Even analyst Cameron Doerksen of Dlouhy Merchant, still a WestJet booster, allowed that the airline's image has taken a hit because of "at the very least, some questionable behaviour — WestJet can hardly take the high moral ground any longer."
Beddoe was asked by the New York Times in January how he planned to maintain WestJet's underdog culture even as the carrier expects to more than double its employee population over the next few years. Beddoe said the carrier's continued success is "very much a function of who you hire and how intolerant you are of people who don't fit the culture."
As it happens, Beddoe's first hire was Mark Hill, who abruptly announced his resignation last night. WestJet is the brainchild of Hill, an aggressive young real estate leasing agent in Beddoe's office who studied Southwest Airlines and other discounters in the mid-1990s, and persuaded a reluctant Beddoe to make the leap from pilot of his own Cessna eight-seater to one of the four Calgarians to spearhead the first viable competitor to Air Canada in modern times. The name WestJet was conceived by Hill's mother, Moira, after the likes of Altius and Trekker were mercifully rejected.
It is Hill, self-described vice-president of strategic planning "and paranoia," as related in Paul Grescoe's recently published book about WestJet, who acknowledges obtaining the password to the Air Canada Web site from a WestJet financial analyst laid off by Canadian Airlines in its merger with Air Canada, but still entitled to book two free trips a year with his former employer until 2005. That employee, it bears noting, immediately sought some kind of indemnification from WestJet should any legal problems arise from his actions.
In a sworn affidavit, Hill also revealed that it was Don Bell, another WestJet co-founder and vice-president, and a software entrepreneur in a previous life, who conscripted a colleague from WestJet's computer department to develop the software program for rapidly analyzing the treasure trove of data on the Air Canada Web site.
In the press release announcing Hill's resignation last night, WestJet said that "in view of the current circumstances, WestJet has accepted Mr. Hill's resignation."
A few years ago, Beddoe in an oddly high-profile manner, aborted Steve Smith's brief tenure as WestJet's CEO, explaining loudly that Smith lacked the consensual skills required in an employee-friendly firm where the executive lair at headquarters is labelled Big Shots and HR is the People Department. It was Smith, landing on his feet as head of Air Canada's WestJet fighter, Zip, who first alerted Robert Milton of his suspicions that WestJet was a Peeping Tom at the Air Canada Web site.
There is the scent of mere mischief and not almighty vengeance in Air Canada's legal gambit, in which Milton has wisely delegated the trash talking to his firm's lawyers. Given the industrial voyeurism to which WestJet has already confessed, Milton appears to have made his point. The hitherto sainted WestJet will have some difficulty explaining that there is not, in fact, a seamy side to its culture, residing quite tolerably at the top of the organization.
