Statistical data on the scope of the problem on an international level are hard to come by. However, Richard J. Heffernan, a 30-year veteran of the corporate cloak-and-dagger game who runs a consulting firm based in Branford, CT, is co-author of two studies that have tracked corporate espionage incidents in the United States.

Two of the primary conclusions of the most recent study are that the incidence of theft of proprietary business information has risen a dramatic 260% at U.S. companies since 1985, and that foreign involvement in that theft is up fourfold.

"The targeting of technology and proprietary information that takes place in the U.S. certainly parallels what is going on in other countries," Heffernan says. "The same countries that are targeting U.S. companies are the ones targeting companies in other countries, as well."

Japan, with its well-developed electronics and automotive industries, is a particularly favorite haunt for corporate spooks, says Akira Odani, president of Odani Research Co., in Larchmont, N.Y.

Start-up companies are often where the most valuable new secrets are found.

"It is a daily problem for companies in Japan," Odani says. "The Japanese are always very curious about what their competitors are doing, so corporate intelligence is an accepted business activity there. But they have a real problem with illegal espionage."

To be sure, domestic cases of corporate espionage are a bigger problem for most companies, no matter where they are located, but the number of incidents involving foreign firms and even foreign government intelligence organizations is growing. And that presents big problems for many U.S. companies.

PLAYING TOO FAIR?

While some foreign firms have adopted win-at-any-cost strategies that often include state-sponsored corporate spying, U.S. firms have been loathe to do the same. Even though the CIA has indicated its willingness to expand the agency's activities into corporate intelligence, U.S. law currently forbids it. And there seems to be little sentiment to change that approach.

"In the summer of 1941, the U.S. Secretary of State (Cordell Hull) was offered a decoded Japanese message. He declined to read it because gentlemen do not read other gentlemen's mail," related Roderick P. Deighen, chairman and CEO of Wellington-Fox International, a Cleveland-based human resources consulting firm. "We all know what happened a few months later at Pearl Harbor."

Deighen's learned that the hard way. A few years back, he invested heavily to expand his firm into the field of corporate espionage. He finally had to pull the plug on the venture after several years of effort. The reason? Lack of interest on the part of potential customers.

So are U.S. companies fighting by Marquis of Queensbury rules while the rest of the world is rabbit-punching and eye-gouging? To an extent, yes, says Dan Himelfarb, president of the Society of Competitive Intelligence Professionals.

"Some international companies with ties to governments that are supportive of economic espionage are benefiting from that data," Himelfarb admits. But he is convinced American business people would oppose such a move. "Americans have a pretty strong sense of ethics," he says.

How, then, are they supposed to complete in a world wide market where foreign governments are providing this information to their companies? "Ninety-nine-point-nine percent of all useful corporate intelligence can be developed via ethical practices," Himelfarb maintains.

A play-fair-and-shoot-straight attitude dictates the actions of most U.S. companies.

Members of the SCIP subscribe to a strict code of ethics that limits their intelligence-gathering activities to legal channels only. They gather information through a variety of sources - from talking to competitors and suppliers to conducting computer database searches to watching CNN - all without misrepresenting themselves.

"What we do is akin to market research, but more decision-based," Himelfarb explains. "A company wants to know if it should build a plant in Mexico, acquire another company, enter a particular market or develop a certain product, and we provide the information necessary to make that decision intelligently."

In fact, such corporate intelligence activities are a much more accepted part of doing business in other countries. Some foreign competitors are puzzled by U.S. companies' lack of sophistication in this area.

"When a Japanese company wants to expand into an international market, it opens a small outpost there to learn as much as it can about that market and about the competitors it will be facing," explains Michio Hamaji, president and chief executive officer of Teikoku Databank America Inc., based in New York City. "They look at it as a pre-investment in acquiring intelligence information."

However, there is little demand on the part of American companies for the English-language intelligence information Teikoku Databank America and other similar firms provide, says Hamaji. "I can name 10 companies offering these services, and they are all suffering right now."

TALES FROM THE DARK SIDE

And what of the darker side of corporate intelligence, the theft of trade secrets, the leaked information about secret bids? Is this a real problem for American companies?

Yes, says Heffernan, who is a member and past chairman of the American Society for Industrial Security's standing committee on safeguarding proprietary information.

According to the study he co-authored with Dan T. Swartwood, managing director of Strategic Corporate Safeguarding Inc., based in Washington, D.C., foreign involvement accounted for about 30% of all misappropriation attempts against U.S. companies in the early 1990s, up from 21% in the period 1985-1988.

"That might not seem like much of an increase," says Heffernan. "But if the two trends of increasing incidents and increasing foreign involvement both continue, the impact on U.S. competitiveness cannot be ignored."

Among the countries known (or strongly suspected) to engage in state-sponsored corporate espionage are Argentina, Canada, Israel, Russia, France, Great Britain, India, China and Japan. What's notable, of course, is how many of those countries are U.S. allies.

France's security agency, the DGSE, is considered the most brazen of offenders. Its agents have posed as diplomatic officials to try to steal American "stealth" aircraft secrets and stolen the garbage of American computer experts.

The DGSE has planted "moles" in the overseas branches of major U.S. corporations.

The DGSE has planted "moles" in the overseas branches of major U.S. corporations, including IBM, Texas Instruments and Corning Glass. One of the primary beneficiaries of its covert activities has been Compagnie Des Machines Bull, a big computer firm that is partly owned by the French government.

While the U.S. intelligence community, including both the FBI and the CIA, has been active in warning American businesses about foreign spies and has actually made arrests in some cases, experts warn that the real burden rests squarely on the shoulders of the companies themselves.

Most large companies have already taken steps to protect themselves from corporate spies - foreign and otherwise. For example, the Heffernan-Swartwood study for ASIS found that 82% of companies with annual sales in excess of $500 million have formal programs in place to safeguard proprietary information.

Smaller companies generally don't have the capital to launch pervasive security measures, but there are steps they can take to improve their security. Experts say the best defense against corporate espionage is to assume your firm is a target, whether or not there is any evidence indicating that is the case. Educate employees to the possibility of corporate spying, and train them to implement routine safeguards such as locking desk drawers, file cabinets and office doors.

Instruct employees never to discuss proprietary information over the telephone.

Security professionals recommend a variety of other anti-espionage tactics. Whether a company needs to implement all or some of them depends on how likely a target is and how badly it could be hurt.

* Instruct employees never to discuss proprietary information over the telephone nor to transmit it via fax machine. If you must transmit such information electronically, use encryption devices.

* When traveling, always keep sensitive documents on your person. Traveling business executives are a favorite target of Russian SVRR (formerly KGB) agents. Corporate spies routinely break into hotel rooms in search of such documents to photograph.

* Make use of anit-espionage electronic technology. Have qualified experts periodically "sweep" rooms and offices where sensitive information is routinely discussed. Cover windows with sound-absorbing curtains to thwart powerful directional microphones. Consider state-of-the-are entry-control technologies such as voice-recognition for sensitive research and development facilities.

BACKGROUND CHECKS

* Conduct detailed background checks on job applicants. Make signing comprehensive non-disclosure and non-compete agreements a condition of employment. Don't overlook employees of third-party contractors, ranging from janitorial services to computer outsourcing firms.

* Keep confidential documents under lock-and-key. Have all employees who access the documents sign a time-and-date log. Burn or shred confidential documents before disposing of them.

* The information superhighway is providing new access points for corporate spies. Networked computers systems are particularly vulnerable. Invest in expert systems that can detect and thwart unauthorized attempts to access your company's databases.

The most common target for proprietary information thieves is customer lists, while the most damaging losses to U.S. companies occur from the theft of pricing data. Other targets include technology, trade secrets and business plans.

Thirty-two of the 246 companies included in one study provided detailed figures posting their combined losses at almost $2 billion. corporate security experts estimate that the total loss to U.S. businesses exceeds $100 billion a year and will hit $150 billion by 2003.

Much of the groundbreaking work in high-tech fields has traditionally come out of small companies. Among the smallest companies, those with sales of less than $1 million a year, only about one-third have formalized anit-espionage programs.

Virtually any company in a business that has foreign competition is a potential target for corporate espionage. But the two hottest spots, according to the FBI, are Silicon Valley in California and, believe it or not, the state of New Jersey, which is home to more than 700 research labs, 460 defense contractors and Princeton University's Plasma Physics Laboratory.

The information superhighway is providing new access points for corporate spies.

Corporate spying - especially state-funded efforts by other countries - is not a problem likely to go away any time soon. In fact, most of the evidence points to its getting worse.

In the latest ironic twist, U.S. security agencies have recently revealed that China, the world's largest remaining communist country, has infiltrated cadres of industrial spies into the U.S. and is using nothing less than bald-faced capitalism to motivate them.

China's spies are urged to steal or buy U.S. business secrets and can sell them back to the Chinese government at a hefty mark-up - all with the official blessing of those in charge. Looks like the Chinese want to get Mao's "Little Red Book" into the black for the 1990s.