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    Double Duty for a Microsoft Investigator

    BY John Markoff and Matt Richtel
    06/27/2000

    pirates and counterfeiters of the company's software, it turned to a private investigative firm with a reputation for coming up with sensitive information for high-profile clients.

    So Microsoft was taken aback this month by reports that linked the firm, Investigative Group International, to mysterious efforts to obtain the trash of a pro-Microsoft trade association in Washington, presumably looking for documents that would embarrass the company as it fought a high-stakes antitrust case.

    Microsoft officials said today that they had had no idea that the firm was effectively playing both sides of the street in working for and against Microsoft.

    "It's bizarre and inappropriate that they would accept a Microsoft anti-piracy assignment while getting paid to attack the company with cash-for-trash tactics," said Vivek Varma, a Microsoft spokesman. "It seems an obvious conflict of interest." He said Microsoft would review the matter.

    Investigative Group International, based in Washington, has been in the spotlight before, most recently when it performed investigative work for President Clinton, including research on Paula Jones, one of the president's accusers.

    In a telephone interview today, the firm's chairman, Terry Lenzner, said he could not remember whether Microsoft was a client. "I'll have to check that," he said. "I can't confirm we've worked for Microsoft or any other client that hasn 't been publicly identified, but I'll look into it." Mr. Lenzner would not comment on reports that his company had been investigating trade organizations and research groups sympathetic to Microsoft. And he would not say whether his firm had taken or paid for trash as part of such an investigation.

    Microsoft said its involvement with Mr. Lenzner's company began in March, when a Microsoft law firm, Preston Gates & Ellis, retained the company's Los Angeles office to help hunt down pirates and counterfeiters. The firm was hired to order software and computers and check to see if the software was legitimate, as well as search public records for evidence of dummy companies that the counterfeiters frequently hide behind. When they found illegal activities, they were to notify the authorities.

    This month, however, the Lenzner firm and Microsoft were linked in an altogether different connection. On June 1 and June 6, a woman identifying herself as Blanca Lopez offered to pay a cleaning crew to hand over trash from the office of the Association for Competitive Technology, a pro-Microsoft trade group in Washington, according to documents from the company that manages the association's office space. The incident was first reported by Wired.com and The Wall Street Journal.

    The documents said the woman had gained entry to the building using keys from another tenant. The tenant, Upstream Technologies, appears to be a dummy corporation that rented the office only last month. And the person named on a credit application for the property, Robert Walters, has been identified in the past as an agent for the Lenzner firm.

    A receptionist at the Lenzner firm's Washington office told a caller today, "Mr. Walters is not employed here but I can get a message to him." Phone calls to Mr. Walters over the weekend and today were not returned.

    The Lenzner firm has been known to pay for or take trash on occasion, according to a person intimately familiar with its methods. He said the firm had used the tactic in "four or five" of the 8,000 or so cases it has investigated.

    He also said the firm had a policy of taking trash only if a lawyer had reviewed the tactic and deemed it legal and if the client who retained the firm had approved the actions.

    Who might have retained Mr. Lenzner's firm in an anti-Microsoft effort is not clear.

    The trash-buying attempt at the technology association failed, and the woman extending the offer has not been found. But embarrassing documents from other pro-Microsoft groups have found their way into the press in recent months, and at least two of the groups say the documents may have been on stolen computers.

    One case involves documents that were the basis for an article in The New York Times last September. It said that newspaper advertisements presented as independent views backing Microsoft in the antitrust case had actually been paid for by Microsoft. The Times said documents showing the connection between Microsoft and the group placing the ads, the Independent Institute, had been provided by a Microsoft adversary associated with the computer industry.

    David J. Theroux, president of the Independent Institute, a free-market policy institute in Oakland, Calif., said he believed that the documents "were surreptitiously taken" but "we just don't know how."

    "It could have been through our dumpster," he said, "or maybe someone hacked into our system."

    But adding to the intrigue, Mr. Theroux said two company laptops were stolen from the office on June 18, 1999. He said the police concluded that the theft appeared to be a "professional job" by someone who cased the offices earlier in the day.

    "We're not claiming these laptops were how the information was obtained," Mr. Theroux said, but he said he thought copies of the documents were on the laptops.

    In another case, Marty Reiser, a spokesman for the Citizens for a Sound
    Economy, a free-market lobbying firm, said laptops were taken from its Washington office on three occasions between September and December. A fourth laptop was taken from its Iowa office in January.

    Mr. Reiser said the laptops might have had information showing Microsoft among the organization's donors -- information that later appeared in The Washington Post.

    "We're fairly certain there is something going on out there and we need to be more careful," he said. "It's still all very coincidental, but who knows?"

    by John Markoff and Matt Richtel on 6/27/00.