Ethical issues raised when workers start businesses

Many area business schools have recently revamped their curricula to address ethical, moral and lega
Phil Autelitano, left, and Bill Fry, right, deliver their publication, "Capital Counties Guide," to Matt Digiuseppe of the Schenectady Barber Shop at 1635 Van Vranken Ave.
Phil Autelitano, left, and Bill Fry, right, deliver their publication, "Capital Counties Guide," to Matt Digiuseppe of the Schenectady Barber Shop at 1635 Van Vranken Ave.

A new quarterly publication hit area newsstands two weeks ago. Full of advertisements for area businesses and events, the free distribution Capital Counties Guide was designed to compete with a similar publication produced by The Record in Troy.

Next month, another new publication will appear on newsstands: a weekly newspaper also intended to compete with The Record.

If the new publications seem bent on beating Troy’s daily newspaper at its own game, that might be because the two people behind them are former Record employees.

“We wanted to do something better,” said Capital Counties partner Phil Autelitano.

Employers have long had to cope with employees who believe they can “do something better,” and on their own. Those workers soon could become more prevalent, especially if Advanced Micro Devices opts to build a $3.2 billion chip manufacturing plant in Malta.

After a six-month stint as an advertisement designer for The Record, Autelitano left the newspaper in February. He was followed in April by William Fry, a three-year Record ad salesman.

The two teamed up to launch the publishing firm that put out Capital Counties, which had an initial circulation of 15,000, mostly around Troy. Capital Counties’ fall edition could have a circulation of 40,000 and be distributed throughout the Capital Region.

The weekly newspaper, whose name Autelitano would not reveal, will mostly focus on Rensselaer County news. As at The Record, Fry handles Capital Counties’ marketing and sales and Autelitano handles its production. The weekly will also employ two other journalists, but it is not clear whether they too will come from the Record.

“We decided to step it up and take over that part of the market,” said Autelitano.

Potential issues

A host of noncompete, patent infringement and antitrust issues could dog some of the spin-off companies expected to follow AMD to the Capital Region, area legal and business experts said.

While the Sunnyvale, Calif.-based AMD has until July 2009 to decide whether to give a green light for the chip plant at the Luther Forest Technology Park, many area business schools have recently revamped their curricula to address ethical, moral and legal issues. The schools want to better equip students to address those issues in a range of business situations, from accounting to proper conduct toward former employers.

At the same time, employers, especially small companies, are more readily incorporating noncompete agreements into their hiring practices to shield themselves from rogue employees, area education and legal experts said.

“The moral/ethical side is one with using someone else’s intellectual property or idea. The idea is basically an intellectual property. Was that idea truly your idea or do you owe that person something like royalties?” said Mel Chudzik, the dean of the School of Management at Union Graduate College in Schenectady.

Under pressure from accreditors such as the Association to Advance Collegiate Schools of Business, Union about two years ago moved to ensure that business ethics were being addressed across its curriculum and not solely a class devoted to that subject. Prior to that change, Chudzik said ethics usually made their way into course discussions, but “it was happening ad hoc.”

Autelitano said his Capital Counties has received The Record’s blessing, even though Fry has tapped some of the daily newspaper’s advertisers. Record Publisher Michael O’Sullivan declined to comment on his new rival publications.

However, cases in which entrepreneurs launch businesses that directly compete with their former employers can be costly to both parties. Chudzik noted that large corporations tend to be very protective of their assets and freely wield patent and noncompete clauses. But those assets are often less legally defined with startup companies.

“Things that are illegal are clearly illegal. But things that are unethical are not always clearly unethical,” said Anthony Pondillo, the assistant dean of the School of Business at Siena College in Loudonville.

Siena’s business school, too, is introducing more discussion about moral and ethical issues in its business classes. Last fall, it started offering elective courses called Franciscan Insights, which encourage students to apply Franciscan values to business situations. Siena is another AACSB-accredited school.

Filing suit

In December, electrical insulation manufacturer Von Roll USA sued a former executive, who allegedly tried to launch a rival company by using information fed to him from Von Roll employees in Rotterdam. In U.S. District Court in Albany, Von Roll accused Jack Craig, its chief executive officer of Western Hemisphere operations who resigned in 2006, of breach of contract. The Atlanta-based Von Roll also sued Craig’s son, Jason, and three other employees who allegedly gathered information for the competing startup.

An attorney for Jack Craig and the three employees challenged the suit, saying Von Roll failed to prove any information was stolen or that it sustained any immediate injury. The attorney also noted state law allows employees to form competing companies if they do not misuse an employer’s time, facilities or trade secrets.

In April, Joseph O’Hara moved to fold his Strategic Government Solutions, which had been buried by legal expenses from a federal lawsuit in Nebraska. The Lansing, Mich.-based MeccaTech accused SGS of using its employees to secure work with its client, the Nebraska Association of School Boards.

Both MeccaTech and SGS are financial consulting firms that help school districts recover money through Medicaid reimbursements. O’Hara, who previously owned the Albany Firebirds arena football team and Albany Patroons basketball team, sent SGS into Chapter 7 liquidation in U.S. Bankruptcy Court in Albany two months ago.

“For any company, the way to prevent such things is to have a system in place to protect what they consider to be proprietary,” said David Miranda, an intellectual property attorney in Albany.

In East Greenbush, X-Ray Optical Systems is fighting with the Russian physicist who helped create its X-ray guiding technology. In December, XOS filed a lawsuit in U.S. District Court accusing Muradin Kumakhov of Moscow of stealing trade secrets and aiding the East Greenbush manufacturer’s chief competitor in Germany.

XOS is a global provider of X-ray optics for material analysis systems used by everything from the petroleum industry to the military.

In 1990, Kumakhov, University at Albany physicist Walter Gibson and his son, David, founded XOS. Previously, the physicists developed revolutionary polycapillary X-ray optics, which are made up of small glass tubes that can direct X-ray beams. But the American and Russian scientists had a falling out in the late 1990s. XOS alleges Kumakhov has violated a 1991 patent agreement and is suing him for $10 million in damages.

Chudzik said cases involving divisions within startups or between partners “gets very sticky, very gray over whose original idea was it. And that’s where it becomes a moral point.”

Categories: Business

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