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Big Box meets Big Brother!

Our partners at the Wall Street Journal report details today of an ongoing corporate espionage case that Wal-Mart initially said involved just one rogue employee who overstepped his bounds when it came to investigating threats to the company.

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AP

That employee, Bruce Gabbard, a 19-year Wal-Mart veteran was fired last month by the company for his role in recording and intercepting phone calls between a Wal-Mart public relations executive and a reporter for the New York Times.

But now, the Journal reports a far more complex organization, operating within Wal-Mart, conducting electronic surveillance and other espionage missions.

The background: According to the Journal, Wal-Mart had a "Threat Research and Analysis Group," so secret and so high-tech that employees attached to the unit would enter through a special entrance that required a palm-print, biometric identification for access.

Today, Gabbard is stepping forward with details of what on their surface seem like far more nefarious and secretive investigations involving employees, customers, clients, and consultants. Gabbard's claims, according to the Journal, include sending a long-haired Wal-Mart employee to infiltrate an anti-Wal-mart consumer group, complete with wireless microphone; working with a company called Oakley Technologies to develop software that can detect fleshtones on computer screens so Wal-Mart could determine whether workers were downloading pornography; retrieving racy emails from a fired Wal-Mart advertising executive, Julie Roehm, allegedly detailing an affair she had with a co-worker, something she bitterly denies in a lawsuit against the company; monitoring internet traffic at McKinsey & Co. to try to determine the source of embarrassing, leaked, internal Wal-Mart memos. The company investigated the executives behind anti-Wal-Mart sites, including walmartwatch.com.

I spoke today with Nu Wexler, the spokesman for walmartwatch.com, named by the Journal as one of those individuals investigated by Wal-Mart. "It's childish, it's paranoid and honestly it's a little desperate," he tells me. "It says a lot about their corporate culture when the company is under attack for real legitimate, substantive reasons and they respond by wiretapping and eavesdropping on reporters and their critics."

Wal-Mart issued a statement today answering much of this. It reads in part: "As we have said, this group is no longer operating in the same manner that it did prior to the discovery of the unauthorized recording of telephone conversations. There have been changes in leadership, and we have strengthened our practices and protocols in this area. Mr. Gabbard and another associate were terminated for their actions of unauthorized recordings of telephone conversations and interception of text messages, and the company self-reported the incident after learning of the phone recordings and interception of text messages situation. Like most major corporations, it is our corporate responsibility to have systems in place, including software systems, to monitor threats to our network, intellectual property and our people. These situations are limited to cases which are high risk to the company or our associates, such as criminal fraud or security issues."

Yet what Wal-Mart doesn't address is the true nature of the so-called "Threat Research and Analysis Group." It says changes have been made, but exactly what they are remains unknown.

How big a deal is this? It's no surprise that any major corporation has an internal security department. And it's no surprise that in this information age, companies face threats today like they've never faced before. And that means they're likely to be far more aggressive in trying to protect themselves than ever before.

"What used to be hidden in a locked filing cabinet is now an asset that's moving all over the world at the speed of light. So to protect that you have to protect your internet and electronic media," says Ray O'Hara, a senior vice president at Vance and a renowned expert on corporate security issues. He wouldn't talk specifically about the Wal-Mart developments because of business with the company, but does say when these kinds of stories break, it's bad news for his entire industry, which was under the microscope last year following the corporate espionage case that rocked Hewlett-Packard to its core.

"It does get frustrating sometimes. The information is slanted in such a way that it makes it more believable that what it really is. But I believe the work that we do and the work that others do is very ethical, we have a good strategy and objectives at the beginning. We have good legal counsel on the client's side to help us on this work and we protect ourselves by doing it in the right way for the right reasons," he says.

But what happens when the ethical leadership a company is supposed to be providing, runs off the tracks because the company itself gets too fixated on a particular investigation, hoping the ends justify the means? It happened at HP; it may have happened at Wal-Mart. And heaven only knows how often it happens every day at thousands of companies around the country.

The fact is, a company has a responsibility to protect itself, but must do so legally, and the company must make its policies to that effect well-known to employees. Walmartwatch.com's Wexler says "Private citizens have a reasonable expectation of privacy. It's a little creepy, a little scary." But employees of a company do not generally have that same expectation. Their emails are fair game. So is their internet activity.

As companies like Wal-Mart collect data that may some day find its way into a court somewhere, Wal-Mart critics say the company has to be equally fixated on the court of public opinion.

"No retailers want to be stamped with an unfavorable image. The case with Wal-Mart, it is the 'Bully from ,' spying on its own employees, spying on news organizations and spying on consulting groups," says Harley Shaiken, a UC Berkeley professor who's an expert on corporate image. "The danger for the company is one more black mark that will turn consumers off and make them at least think about the Target and the Best Buys down the block."

Wal-Mart, he says, already is developing an "evil" image, and stories like this one simply do not help turn the tide.

"Wal-Mart within its walls is increasingly like East Germany; a more authoritarian kind of place, where privacy is non-existent and employee rights really leave a lot to be desired," he says.

Yet at what cost? Wal-Mart can make the compelling argument that it has a right, even a duty, to protect itself against any threat to its corporate welfare. If the company broke the law to do that, than it's no better than the criminals against which it is trying to protect itself.

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