EQT says ex-workers took data for Rice Energy
The plot of EQT Corp.’s pursuit of former employees who it alleges slunk away with company secrets has thickened into a complex stew. With Rice.
The Downtown-based gas company believes it has found a motive for the alleged theft of corporate secrets by two people laid off in January: to help “Toby Rice and Derek Rice, dissident shareholders of EQT who sold their company, Rice Energy, to EQT in 2017 but who are now openly involved in an activist campaign at EQT.”
On Monday, EQT unleashed a intriguing, albeit piecemeal, collection of text messages and emails between the two accused former employees — Jeffrey Lo and Charles Cunningham — along with excerpts from Mr. Cunningham’s depositions earlier this month. The company wants to gain access to Mr. Lo’s personal cell phone, computer and other digital devices.
EQT filed suit in February, alleging each took thousands of proprietary documents when they lost their jobs.
The case against Mr. Lo, filed in U.S. District Court for the Western District of Pennsylvania, appears to be benefiting from the one against Mr. Cunningham, which was filed on the same day in Allegheny County Common Pleas Court but has moved at a faster pace.
Mr. Cunningham, in a deposition, said he never intended to share the files with anyone. He said he took them, in part, because it’s industry practice to take your work product with you. Maybe he would use them to draw examples for future job applications or to keep in touch with former colleagues, he said.
There was also the possibility that if Toby Rice was successful in taking over EQT, Mr. Cunningham could be called back, he said.
“Even if he came back and even then, I have no guarantee from anybody, definitely not Toby, that I would get my job back,” he said.
Starting the battle
The Jan. 7 layoff that impacted some 100 EQT employees came about a month after the Rice brothers made their intentions to unseat EQT’s leadership public.
On Jan. 22, EQT released a presentation titled “The New EQT. New Company, New Leadership, New Focus.”
In a call with analysts at the time, new CEO Rob McNally painted the Rice team as small-scale operators and called their overtures to investors “fundamentally flawed” and “lacking in details.” He vowed to resist.
“This appears to be headed towards a long, drawn out, unnecessary proxy battle … but not surprising,” Mr. Cunningham emailed Mr. Lo that afternoon. “The remaining org is in shambles, given all the change and uncertainty.”
He signed the email “Charles Cunningham, Shalennial-wannabe.” The term “shalennial” had been coined by Canonsburgbased Rice Energy to refer to tech-savvy oil and gas workers.
Mr. Lo agreed. EQT was “being extremely stubborn and resisting change,” he said in a reply email.
He also said he was “working with Shalennial now.” Both Mr. Cunningham and EQT’s lawyers understood that to be a reference to Shalennial Group, a software consulting firm for the oil and gas industry that was founded by Toby Rice.
About a week later, Mr. Lo texted Mr. Cunningham to talk through a slide from that EQT presentation. The slide broke out well costs by operating area.
EQT and the Rice team have an ongoing spat over how each side calculates the costs to bring a well online.
Mr. Cunningham gave a mild description of the text and later phone exchange when he was deposed on March 8, saying he was just trying to stay friendly with old colleagues.
But in a deposition five days later, he was more direct: Mr. Cunningham believed that Mr. Lo was working for an enterprise helping the Rice team and that Mr. Lo was asking for confidential information.
And while Mr. Cunningham said he didn’t share any of the data he took from EQT and tucked away in his gun safe, he did talk through some calculations. He said those likely gave the Rice team more confidence in their own analysis of well costs.
The point of that analysis, according to Mr. Cunningham, was “to try to undermine EQT’s plan to make their plan look better.”
“With … a counter-investor proposal?” EQT’s attorney asked.
“Correct, at some later date,” he replied.
The date was Feb. 5 when the Rice brothers published a public rebuttal to EQT’s plan.
“Great slides,” Mr. Cunningham texted Mr. Lo while both were watching the Rice team’s presentation online. “Very ‘detailed.’”
“Yuhhhh!! Let’s go!!!” Mr. Lo responded.
Lo: Not a Rice employee
Mr. Lo never explicitly said he was part of the Rice team’s efforts, Mr. Cunningham said in the deposition. He was reading the signs, like a wink emoji in one message about the Rice effort.
Mr. Lo insisted he’s never worked with Shalennial Group and suggested the email to Mr. Cunningham saying that was aspirational. It was, as if to say, “eventually I will work with Shalennial … after everything is sorted out.”
During an interview Tuesday, Mr. Lo insisted: “I’m not employed. I haven’t worked with Rice.”
“Ever since my termination, I’ve been through two surgeries. I can’t eat anything and I can only drink.”
He said he can’t work with Rice or anyone else in Appalachia for six months because of his “extremely broad” non-compete agreement, which EQT has alleged he’s already breached. Mr. Lo said he filed for unemployment in early February.
Mr. Lo said he faced a culture of “discrimination against [former] Rice employees” at EQT after the two companies integrated following the acquisition.
He interprets the lawsuits as an extension of that mentality. “Everything is just extremely overblown.”
Trade secrets?
Mr. Lo made a prominent appearance in a different workplace lawsuit, when a former Rice Energy employee’s claim against the company alleged Mr. Lo took confidential data from a previous employer, EOG Resources Inc. and shared it with Derek Rice.
In its latest filings, EQT drew on that to paint the background for an exchange it had unearthed between Mr. Lo and another Rice brother, Ryan Rice, both then EQT employees.
The messages suggest that Mr. Lo uploaded to a Google Drive a trove of data from EOG’s wells in Texas while at the same time bragging that EOG is notoriously secretive.
In Tuesday’s interview, Mr. Lo said that, too, was taken out of context. The EOG data they were talking about was all publicly available, he said.
“In the oil and gas industry, there’s not a lot of trade secret information because it has to be constantly updated to the states,” he said.
He denied speaking to anyone involved in the Rice team’s effort to unseat EQT’s leadership.
A spokesman for the Rice brothers did not reply when asked if they’d been in contact with Mr. Lo.
The Rice brothers said, in a statement issued Tuesday, “Despite EQT’s transparent attempt to smear the Rice team, the fact is that all of our materials and analyses have been based on and sourced to public information. It is telling that EQT would try to divert attention from the real issue, which is how its poor operational performance has destroyed substantial shareholder value.”