New corporate espionage claims emerge, centered on two highly valued 401(k) admin startups

Another recent allegation of corporate espionage stems from the deeply murky world of employee onboarding platforms and 401(k) administration.

all year roundWe followed the running death match Between HR software titan Ripple and Deal, which is currently in place Blocked in a lawsuit Including allegations of planted moles and systematic data theft. Now, as First seen by AxiosAct Two Comes: 401(k) Management Unicorns, Human Interest and Guidelines, square off in federal court with charges so brazen they’re embarrassing.

Here’s a taste, plucked from Human Interest Litigation Against GuidelinesFiled in Utah federal court this month: “We’re going to tear up HI. It’s going to be the easiest thing to do.”

This is what Brandon Sterry texted his brothers on Jan. 29. According to the complaint, Brandon and his brother Brian, at that point, still drawing paychecks from Human Interest, still logged on to their company-issued laptops under reminders that access was “limited to authorized personnel” and that they agreed to “protect data confidentiality.” Their third brother, Eric, worked for the competition, Guideline.

According to the lawsuit, the Sterry brothers didn’t just talk big. They reportedly called their operation the “Steri Takeover,” a name that reveals either extraordinary hubris or a serious misunderstanding of how corporate espionage works, which is to say, very, very quietly.

The complaint alleges a months-long scheme in which Brian and Brandon, working as juniors among sales representatives at Human Interest, systematically leaked their employer’s most sensitive intelligence, including partnership leads, customer data and internal strategy documents, directly to the director.

But not just anyone in the guidelines; Human Interest alleged that the brothers were sharing it directly with the company’s chief executive, Kevin Bask, and its chief financial officer, Steven Wu.

Reached for comment, a Guideline spokesperson sent the following statement: “Guideline believes the allegations in this case are false and without merit. We are vigorously defending ourselves and we look forward to presenting facts and showing that these claims are unfounded.”

Human Interest did not respond to TechCrunch’s request for comment.

Two days after Brian Sterry resigned from Human Interest on February 24, he made a request that allegedly exposed the entire operation, according to Human Interest’s complaint. “Got a big favor to ask,” he texted a former colleague named Castro, who was still employed by Human Interest. Then came the question: “A screenshot of the total lead flow for the ISR team this month.”

Upon the accusation, Castro, perhaps more than he understood, replied: “May I ask why.” Brian responded with a smiley emoji.

The screenshots Brian wanted weren’t just sensitive; According to Human Interest it was the crown jewel. Total lead flow represents the fundamental pool of potential clients, an important determinant of growth trajectory and market penetration. This is information that Human Interest has spent years and millions of dollars cultivating through proprietary business processes and partnerships with payroll providers. That kind of information, in the wrong hands, creates what the lawsuit calls “a significant informational imbalance” and provides “significant strategic advantage.”

Reading the indictment, it seems Castro understood the gravity of what Bryan was asking and the nature of the treasonous transaction. “I’m sure I’m down to play dirty but you have to get me a job.”

Bryan, the lawsuit alleges, brazenly promised his employment to Guidelines in exchange for information. When Castro didn’t immediately deliver, Brian tried again the next morning: “I still need that favor.”

“Brian you know I can’t do it,” Castro allegedly replied.

According to the complaint, Bryan didn’t stop there. He allegedly called and texted and when Castro stopped responding, his wife McKenna reached out on his behalf.

The complaint paints a picture of systematic intrusion. Before their resignations, the brothers downloaded documents with titles such as “Leeds Data” and emailed the files from their work accounts to personal Gmail addresses — Brian’s and his wife’s. By logging into personal email on company laptops, they can bypass human interest detection systems entirely.

On February 27, after Castro allegedly shut her down, Bryan contacted another human rights activist, Chloe Garza, with whom Steris had a “close personal and/or family relationship,” according to the complaint. Request: Internal metrics from a Slack channel. Garza also declined: “Yeah so I can’t send you anything related to HI.”

Brian’s response, as characteristic of the complaint, is telling. In the same conversation, he alleged that “Mitch [another HI sales rep] The only person who can really give me the GDL info [Guideline] Will want.” The complaint argued that the admission is okay, text preserved.

After Human Interest’s leadership held emergency meetings to remind employees of their confidentiality obligations, the complaint alleges, Bryan scoffed at the effort. “Lol horn use scare tactics,” he texted Castro. “Heard a lot of people are scared today.”

What elevates this from garden-variety corporate malfeasance to alleged manipulation is the alleged involvement at the top. Human Interest claimed it was not rogue employees gone wild but a coordinated operation with executive blessing.

After Human Interest sent the cease-and-desist letter in early March, the complaint states, Eric Sterry texted his brothers with an update. He spoke with Guideline’s senior vice president of sales, Andrew Conley. The message: “Andrew is great. Also everyone has your back for real. Everyone has expressed how excited they are about the situation. It’s going to blow up and we’re all so fired up.”

Then came what Human Interest identifies as extortion. Guide has agreed to be acquired by Gusto, the $9.3 billion payroll giant, TechCrunch reported earlier this month. $600 million deal. As part of the transaction, Guideline planned to divest certain assets and accounts related to rival payroll companies. When Human Interest inquired about buying some of these assets, Guideline’s CFO issued an ultimatum: drop the case, or the deal would be closed.

TechCrunch’s Marina Temkin reported that Gusto was looking The account of the directive is closed is linked to a rival payroll company, according to multiple sources, but Gusto declined to comment on those investment plans at the time.

Today Gusto responded to TechCrunch’s questions about whether it plans to go through with that acquisition, and a spokesperson indicated that it does, writing that “the deal is not yet closed” and that “Gusto and Guideline remain separate companies,” but it also “[j]Bringing Force along with Guidelines means that payroll and 401(k) management will be more seamlessly integrated for the small businesses we serve – and we’re excited about that future.”

Gusto also clarified that it is “not a party to the case and is not involved in the allegations.”

Naturally, much is being made in the startup ecosystem about the HR software space becoming a theater of corporate warfare, with Rippling and Deal fighting allegations of espionage and RICO violations, among other things.

As absurd as it sounds, this is serious business for Rippling and Deal, and the stakes are equally high, if not higher, for humanitarian interests, for the three Sterry brothers, and for Guideline and its executive team.

Human Interest has raised more than $700 million at a $1.4 billion valuation from investors including SoftBank, Baillie Gifford, and TPG. Guideline has raised $340 million, hitting a $1.2 billion valuation in 2021 with backing from General Atlantic and Felicity.

This story has been updated with comments from Gusto.