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Search exec, worker indicted

April 15 2008

A former Korn/Ferry International Inc. (NYSE: KFY) executive and a former employee at the executive search firm have been indicted on federal criminal charges. However, the former executive, David Nosal, denied the allegations and said he plans to fight them. According to several reports, Nosal was once Korn/Ferry's top biller.

Charges include conspiracy to misappropriate trade secrets, unauthorized access to a computer, and mail fraud over alleged access to a Korn/Ferry database, according to the complaint. Nosal left Korn/Ferry in October 2004 and was to continue on as an independent contractor through Oct. 15, 2005, doing work solely for Korn/Ferry in exchange for $25,000 a month. However, the complaint alleges proprietary Korn/Ferry data was used for other searches. The counts of mail fraud have a maximum sentence of up to 20 years in prison.

Two other defendants in the case, Nosal's former executive assistant Jacqueline Froehlich-L'Heureaux and Mark Jacobson, have pleaded guilty to conspiracy charges, according to the San Francisco Chronicle newspaper. They are set to be sentenced in May.

Nosal, in a statement, said he was not involved in any criminal conduct and was never subpoenaed or approached to present his side of the story.

"These events relate to the specifics of my non-compete agreement, which Korn/Ferry breached within days of my departure from the company over three and a half years ago," Nosal said in a statement. "I welcome the opportunity to prove my innocence in a court of law ...  I was in no way involved in any criminal activity and expect the evidence to show that. I also challenge the assertion by the federal government that any trade secrets, as defined by the law, are involved in this case."

Sam Singer, a spokesman for Nosal said during the consulting agreement that Korn/Ferry was pleased with Nosal's services. "We believe the federal government has been mislead by Korn/Ferry and they are jealous of Mr. Nosal's success," Singer said. Nosal is now CEO of Nosal Partners LLC, an executive search firm based out of San Francisco.

Michael Distefano, senior VP and chief marketing officer at Korn/Ferry, said that in 2005 the company found what they consider misappropriation of data by prior employees and sent the case to the U.S. Attorney's office and that the events were investigated by the FBI. Right now, the case is a matter between the governing authorities and the defendants, Distefano said.

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