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1997— A look into the past: Manager was Bandag spy, Treadco charges

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Bandag spy Treadco charges

(Editor's Note: This story is part of our #TireBiz30 in which we feature one archived story every day of September to celebrate Tire Business' 30th anniversary. Each story represents one of the most relevant news story published in our pages for that year.)

FORT SMITH, Ark.—The bad blood between Treadco Inc. and its former tread rubber supplier, Bandag Inc., continues to boil.

In what could be called a case of corporate espionage, Treadco has charged that, over the course of more than a year, an employee purloined highly confidential information about pricing and business strategies and turned it over to Bandag before resigning from Treadco to work for a competitor.

Treadco decided not to treat the alleged breach of security lightly.

On Nov. 14, the Fort Smith-based company--ranked by TIRE BUSINESS as the second-largest truck tire retreader in North America--filed a lawsuit in the Sebastian County Chancery Court against Julian B. Spears, Treadco's former manager of national accounts.

Hired in September 1995 as a sales manager, Mr. Spears was promoted to national accounts manager in June 1996.

He resigned in August 1997 and began working for a Bandag franchisee, Tire Centers Inc., North America's No. 3 truck tire retreader and a direct competitor of Treadco.

During his employment at Treadco, the company claimed in its lawsuit, Mr. Spears had access to highly confidential financial and strategic information as well as company computers that contained confidential and proprietary Treadco business data.

The company maintains that he repeatedly turned over information to William Sweatman, formerly vice president of sales for Bandag, whom Mr. Spears knew while working for Bandag from December 1989 to January 1994.

Attempts by TIRE BUSINESS to reach Mr. Spears for comment were unsuccessful.

The suit was another chapter in a continuing saga that started in August 1995 when Treadco, then Bandag's largest customer, began severing its relationship with the Muscatine, Iowa-based tread rubber and retread equipment supplier, and switched over to Oliver Rubber Co.

Then in October of that year Treadco sued Bandag and five of its officers, claiming it was out to "destroy Treadco's business as a Bandag franchisee and prevent Treadco from competing in the retread tire business...."

Among other things, Treadco also charged in that lawsuit that Bandag had lured away former Treadco employees, including then-President and COO J.J. Seiter, and was soliciting Treadco customers to switch their business over to Bandag franchisees.

The information leading to the allegations against Mr. Spears came to light during the discovery process in the Treadco vs. Bandag suit, according to John R. Meyers, Treadco president and CEO.

Among Treadco's accusations against Mr. Spears are the following:

On or about Nov. 13, 1995, he faxed to Bandag's Mr. Sweatman a memorandum from an officer of Treadco to its plant managers regarding the litigation with Bandag and requesting information to assist Treadco's lawyers with regard to that lawsuit;

On or about Jan. 11, 1996, he sent Mr. Sweatman a memo from a Treadco officer to all managers which, in part, related to Treadco's relationship with Bandag and Treadco's conversion to Oliver Rubber;

Mr. Spears transmitted to Mr. Sweatman a Treadco brochure regarding the reasons why end users should continue to do business with Treadco;

He provided Mr. Sweatman with a Treadco document regarding Treadco's fourth quarter 1995 earnings as well as information relating to the company's business activity in the northwest portion of Arkansas; and

That Mr. Spears gave Bandag Treadco's price quotations to customers, and may have supplied other confidential information to Treadco competitors including, but not limited to, Tire Centers Inc.

Treadco stated that during the period beginning Sept. 18, 1995, until Aug. 14, 1997, Mr. Spears received a salary of $93,461 from Treadco--part of a total compensation package amounting to $102,575.

In addition to recovering that amount through its lawsuit, Treadco also is seeking punitive damages of at least $500,000 against Mr. Spears as well as court costs and attorneys' fees.

It also has asked that he be required to:

Account to Treadco for any and all confidential, proprietary or legally priviliged information he may have passed on to others;

Return to Treadco all such documents and information; and

Identity of all persons to whom he transmitted information, and the dates of any such transactions.

The company said it believes Mr. Spears received "consideration" from Mr. Sweatman and other representatives of Bandag for supplying the information or was "acting as an employee or agent of Bandag."

As Treadco's employee, the company said Mr. Spears owed it "an obligation to perform his duties in good faith"; obey all reasonable rules, orders and instructions; act solely for the benefit of Treadco; avoid conflicts between Treadco and its competitors; and not engage in acts that could injure Treadco's business and financial interests.

It said he "wrongfully, fraudulently, willfully and maliciously provided information to Bandag" that he knew or should have known "would be used to the benefit of Bandag and to the detriment of Treadco."

Mr. Meyers told TIRE BUSINESS that, in his opinion, "pretty significant issues were traded off.... We were hurt financially by the actions (Mr. Spears) took."

Although the company has not been forced to change the way it does business--nor has it begun to restrict employee access to sensitive information--he said Treadco operates "under the philosophy that our employees are loyal. And if we have to operate differently than that, it's a sad state of affairs...when you can't trust your employees.

"I certainly don't want to run a company that way.

"I've got to believe I can tell any manager or salaried person something within reason and in confidence, and feel it's not going to go over to a competitor."

Infractions similar to those of which Mr. Spears is accused have not happened "to this degree" before at Treadco, Mr. Meyers said. "I'm sure that in the past we've had a salesman leak information to his future employer, then jump ship. Some of those kinds of things we'll never find out about."

Treadco's lawsuit against Bandag currently is awaiting an arbitration hearing, and its discovery and deposition processes are ongoing. Mr. Meyers anticipates that litigation will be resolved within the next 12 months.

Despite what he described as "bad blood" between his company and Bandag, Mr. Meyers said Treadco hasn't significantly changed its strategies and is now in a position to begin growing again. "We now feel we can begin to entertain growth rather than just preservation of market share," he said.

He estimated that the company has approximately 4 percent of the retread market in the U.S., leaving lots of room for growth.

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