Ex-Intel engineer gets jail time

Electronic News, July 1, 1996 by Peter Brown

San Jose, Calif.--Former Intel engineer Guillermo "Bill" Gaede was sentenced last week to 33 months in federal prison and slapped with a $1,000 fine for attempting to sell Intel microprocessor secrets to its competitors.

Mr. Gaede was arrested last September for mail fraud and interstate transportation of stolen property. He pleaded guilty to those charges earlier this year (EN, March 25). Mr. Gaede could have received up to 15 years in prison and pay $500,000 in fines and restitution.

"This is not your typical industrial espionage case," said Tony West, assistant U.S. attorney. "This is one of the longest industrial espionage cases involving design secrets in history."

An applications engineer for Intel from late 1993 to June 1994, Mr. Gaede stole the designs for Intel's 486 and Pentium microprocessors, valued at $10 million to $20 million, when he was given access to the data from his home via modem. Mr. Gaede, however, was not allowed to download any of the information from his modem--Intel had disabled that function.

"So he uniquely found a way to capture the information. He set up a video camera and started taping the information that scrolled across the screen--the manufacturing designs," said Mr. West.

Mr. Gaede then mailed the designs to Intel competitor Advanced Micro Devices, which upon learning its contents promptly gave it back to Intel. Intel shortly thereafter notified law enforcement authorities.

"We had a very simple but important role," said Tom McCoy, AMD general counsel. "After we gave the designs back, we were from that point on involved in whatever extent Intel needed us."

The reason Mr. Gaede gave the secrets to AMD is still a mystery; however, Mr. McCoy said: "I guess he figured he owed us one."

Mr. West agreed, citing a letter that accompanied the package of videotapes sent to AMD. The letter said the videotapes were to compensate the company for when Mr. Gaede was working for AMD and stole AMD's 386 microprocessor designs and sold them to foreign countries.

Mr. Gaede fled to his home in Argentina after Intel had discovered he was selling secrets. Later, Mr. Gaede went back to Arizona and upon hearing this, the FBI obtained a warrant and arrested him in September 1995, said FBI special agent George Grotz.

The FBI is not commenting on whether or not Mr. Gaede did indeed sell the designs overseas to representatives of Cuba, China and North Korea, which he claimed to have done in interviews with the authorities, Mr. Grotz said.

The U.S. attorney's office is not conducting any independent investigation on those foreign countries currently, said Mr. West. "We don't know what he gave to the other countries," Mr. West added. "One of the risks in this kind of espionage is that it is hard to corroborate defendant's statements."

It is known that Mr. Gaede sent videotapes to Argentina. According to Mr. West, all of the videotapes have been recovered from AMD and Argentina.

"We will never fully know the extent to which he was successful (at selling technology to foreign governments)," said an Intel spokesperson. "But in this business, the best natural defense is the complexity of technology, the cost of building it, and probably most significantly, the speed of change. By the time you're able to learn a technology and are able to make something with it, it is obsolete."