ORACLE ADMITS TO PROBE; COMPANY PAID FOR DIRT ON MICROSOFT

The surveillance and covert searches began a year ago, after officials at software giant Oracle Corp. became outraged that some industry groups were aggressively supporting its rival Microsoft Corp. in that firm's federal antitrust fight with the Justice Department.

Oracle hired Washington-based Investigative Group International and told its private detectives to find documents that might be embarrassing to Microsoft. It was corporate hardball, and it was all supposed to remain secret.

But yesterday, after a series of revelations about individuals' rifling through trash and offering cash to janitors, Oracle chief executive Larry Ellison publicly acknowledged that his company paid the detectives to prove the three groups were public relations fronts for his company's biggest competitor. His mea culpa was a mixture of contrition and corporate bravado.

"Some of the things our investigator did may have been unsavory," Ellison said. But he added that what Oracle did was positive nevertheless because it allegedly exposed inappropriate ties between Microsoft and industry groups. Oracle said it gave instructions to IGI not to do anything illegal.

"I feel good about what we did," Ellison said.

The disclosures underscore the depth of bitterness between the world's two largest software makers. The revelations also raise ethical and legal questions about the line between corporate research and industrial espionage.

"The only thing more disturbing than Oracle's behavior is their ongoing attempt to justify these actions," Microsoft said in a statement that suggested this "may only be the tip of the iceberg of their activities." It added: "Oracle apparently believes its business goals are more important than the free speech and privacy rights of others."

Security specialists said that companies now routinely employ investigators to research their competition and find information that might help them or damage their opponents. The practice also has become more common among political candidates.

In part this is because information has become cheaper and more available on databases and the Internet, and because firms' appetites for financial information, telephone records and other data are growing. To meet the demand, many detectives still use old-fashioned techniques such as deception and sifting through trash.

Robert Douglas, a former private investigator who is now a security and privacy consultant, said investigators often cross legal and ethical lines on behalf of corporate clients, who generally do not ask how information is obtained.

"You go out and get as much as possible about your opponent, your opponent's associates. It's 'competitive intelligence,' " said Douglas, who has testified about such practices before Congress. "I doubt that's all they were doing. . . . It is very close to the line to go in and buy someone's trash."

IGI said in a statement that it "abides by a rigorous code of professional ethics and conducts all of its investigations in a lawful manner."

Oracle hired the investigators a year ago to examine the activities of the Independent Institute, a California think tank that opposes government regulation of market activity. The group had bought advertisements in The Washington Post and the New York Times that purported to show the breadth of support Microsoft enjoyed among academic figures.

The agency went through the group's trash and found documents showing that Microsoft had donated more than $200,000 to the group, an Oracle spokesman said yesterday. The investigators also found a letter from the group to Microsoft describing the costs of the ads, he added.

Microsoft's support "has not altered any aspect of the substance or conclusions of our consistent and indeed independent work," said the group's president, David Theroux.

The private investigators also went through the trash of the National Taxpayers Union, a group that said the government's antitrust case caused state pension funds to lose value, according to an Oracle spokesman. Microsoft has given the National Taxpayers Union $215,000 in software over the past two years.

A third target was a small group called the Association for Competitive Technology in Washington, which has received at least $100,000 in dues from Microsoft. Investigators rented offices in the same building under a phony corporate name and then offered $1,200 to janitors to hand over trash and documents from the organization. Group officials are livid.

"I'm shocked and saddened that one of the leaders of the community I represent has stooped so low in order to forward its political agenda," association president Jonathan Zuck said in a statement.

D.C. police have closed the investigation of the incident. "There was no indication that a criminal act had been committed," Sgt. Joe Gentile said. "Technically once you dispose of something as trash, that's what it is."

An Oracle spokesman said company officials did not know that the investigators would go to such lengths to get information. IGI was fired, and the lead investigator in the case quit the firm after news accounts of the incidents began appearing, first on the Wired.com Web site.

In a prepared statement, Oracle defended its decision to use private investigators, saying they turned up evidence that at least two of the group were "misrepresenting themselves as independent advocacy groups."

"Those people are not our competitors. We never ever targeted Microsoft for anything," said the spokesman. "These guys are different. They operate in a political realm. . . . Our instructions were that everything had to be perfectly legal."

Ellison's personal rivalry with Microsoft Chairman Bill Gates is well known in technology circles. Their relationship goes back more than a quarter-century, to 1977, when the men co-founded their respective firms. Nine years later, they both became multimillionaires within days of each other when they took their companies public.

According to Silicon Valley lore, the two first met at Ellison's home in the 1980s. Gates reportedly complimented Ellison on his mansion, then announced he was in the middle of building a bigger one. Each has publicly bashed the other ever since.

Staff writers Ariana Eunjung Cha and John Schwartz contributed to this report.

Articles appear as they were originally printed in The Washington Post and may not include subsequent corrections.