Halogen Software Accused of Fraudulent Business Practices

Allegations of fraud lead to a number of ethical questions. Ottawa-based tech company, Halogen Software, is in hot water after allegations of fraudulent business practices surfaced last month.

Posted by Joe Gerard in Ethics, Ethics & Compliance, Fraud on May 24th, 2011

Allegations of fraud lead to a number of ethical questions. Ottawa-based tech company, Halogen Software, is in hot water after allegations of fraudulent business practices surfaced last month. SuccessFactors Inc., is a California company that has accused Halogen of setting up a bogus company, the Magnus Group, to gather information from them. SuccessFactors is suing Halogen for fraud and unspecified damages. Halogen has fired back at the allegations, filing a motion to dismiss the case – which has been scheduled for mid July.

The Allegations

In the Vancouver Sun article “Intrigue and mystery: lawsuit reveals cutthroat competition in software management industry,” James Bagnall notes that the spokesperson on behalf of Halogen failed to answer whether or not Halogen actually created the Magnus Group. Bangall then goes on to discuss how SuccessFactors came to the realization that the Magnus Group wasn’t a real company:

“In August 2010, SuccessFactors’ regional sales manager Scott Larkins fielded a call from Anna Rodriguez, who said she represented The Magnus Group and wanted a sales demonstration of SuccessFactors’ software. According to SuccessFactors’ complaint, Rodriguez said The Magnus Group had more than 500 employees and pointed Larkins to a website that claimed the firm was headquartered in Valparaiso, Indiana. During the summer, Larkins conducted several detailed web presentations of his company’s software for Rodriguez, tailored for customers with more than 500 employees.

When Rodriguez abruptly changed her mind in September about purchasing SuccessFactors’ products, Larkins grew suspicious. His company later determined that The Magnus Group was fake. For instance, the address listed on the firm’s website belonged until a year ago to The Family Express, an operator of convenience stores, which moved its headquarters. The property has been for sale ever since.”

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The article offers other claims in the SuccessFactors case that the Magnus Group was tied to Halogen Software, such as:

  • Emails from Rodriguez were sent from an IP address owned by Halogen.
  • The website for the Magnus Group was designed by a company outside of Ottawa, not one in Indiana.
  • The website design company information was removed from the Magnus Group website, which is no longer in operation.

SuccessFactors is claiming that Rodriguez was provided with a lot of detail about the company’s products and other services during the sales pitches and demonstrations she was given. Bagnall’s article also mentions that SuccessFactors claims that the features discussed in the meetings with Rodriguez have now been incorporated into Halogen’s products and services.

Halogen Fires Back

James Bagnall wrote an update on the Halogen case in the Ottawa Citizen article “Kanata’s Halogen seeks to dismiss fraud case,” which includes Halogen’s take on the allegations:

 “The gist of Halogen’s defense is that SuccessFactors freely provided information about its products to Magnus Group representative Anna Rodriguez without demanding a non-disclosure agreement. Halogen also argues that the pieces of information offered were not trade secrets, and that SuccessFactors hasn’t been able to establish that it suffered financially. “This does not constitute legally cognizable claims for trade secret misappropriation, intentional interference with prospective economic relations, or violation of the Federal Computer Fraud and Abuse Act,” Halogen said in its filing.”

It will be interesting to see what happens in July when the motion takes to the court room. In the mean time, this case raises some very important ethical questions that businesses need to pay attention to.

Joe Gerard
Joe Gerard

CEO, i-Sight

Spend my days showing off the i-Sight investigative case management software and finding ways to help clients improve their investigations. Usually working with corporate security, HR & employee relations, compliance and legal teams.

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