IBM suing its former CIO

Jeff Smith

IBM is suing its former global chief information officer Jeff Smith claiming that he violated a non-compete agreement and demanding he repay US$1.7 million in stock bonuses.

Smith began a new role at IBM competitor, Amazon Web Services (AWS) this week, according to a report published in US publication, Westfair Online.

Big Blue last week sued Smith in the federal court in White Plains. On August 1, Judge Cathy Seibel issued a temporary restraining order barring Smith from starting work on Monday at AWS. The order said he may not solicit customers, recruit former colleagues or disclose confidential information until a full hearing is held.

Judge Seibel modified the order on August 2, allowing Smith to work in “listen and learn mode only” for staff training, the report said.

In its complaint, IBM said Smith was one of the company’s most senior executives with “knowledge of IBM’s most closely guarded product development plans.”

“He now threatens to violate his one-year non-competition agreement by going into direct competition with IBM as a senior executive of Amazon Web Services, one of IBM’s main competitors in Cloud computing,” the complaint said.

IBM said Smith was one of only a dozen high-ranking executives involved in top-level decision making discussions regarding the development of IBM’s next-generation cloud computing technology. This technology is due for release in the coming year.

“Smith knows such trade secrets as the product cost, design specifications, performance capabilities and release plans – all of which will be very valuable to AWS,” the complaint said.

IBM claims the secrets that Smith threatens to take to IBM’s competitor are “so sensitive that he was instructed not to retain copies of written project presentations.”

“Smith violated that simple confidentiality obligation,” IBM said in its complaint.

“In addition, Smith shared inside IBM information with the CEO of AWS, Andrew Jassy, while Smith was serving as a trusted IBM executive. Confirming that he cannot be trusted to protect and preserve IBM’s trade secrets, Smith wiped his company-issued phone and tablet, making it impossible for IBM to detect other communications with Jassy or to determine if he transferred any other IBM information,” IBM claimed.

Big Blue is accusing Smith of breach of his no-competition agreement, misappropriation of trade secrets, and a breach of fiduciary duty.

IBM has asked the court to stop Smith from working at AWS until May 2 next year. The company also wants to recover the $1,714,800 of shares it awarded to Smith a year before he quit.

A hearing is scheduled for August 21.

Smith was formerly Telstra’s chief information officer between November 2001 and April 2005. He also completed a stint as CIO at Suncorp between 2007 and 2010 before being promoted to the CEO at Suncorp Business Services.

A specialist in Agile methodologies, Smith was hired as IBM’s global CIO in July 2014, based at the company’s headquarters in New York.

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