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High-Tech Conspiracy Theory Is More than a Theory

When you hear the phrase "conspiracy theory," what comes to mind? The assassination of President John F. Kennedy? HIV? How about Silicon Valley? As it turns out, the golden aura surrounding California's lucrative high-tech firms isn't very golden. As revealed in federal court recently, a number of companies—including Google, Intel, Apple, and Adobe—agreed not to recruit employees from each other in order to hold down salaries.

The late Steve Jobs, former CEO of Apple, is accused of hatching this plan. Court papers portrayed him as a bully who threw tantrums when rival firms romanced his engineers. Between 2005 and 2009, over 64,000 employees may have been affected by the policy. Emails have surfaced, exposing high-level communications decrying recruiting attempts between the involved firms. In one instance, after a Google recruiter reached out to an Apple employee, Google fired the recruiter less than one hour after Jobs emailed a protest to Eric Schmidt, Google executive chairman and former CEO. Another email exchange even requested sharing the no-hire agreement with competitors verbally to avoid a paper trail and lawsuit in the future.

Fed up by the practice, tech workers filed an antitrust suit in 2011, citing losses in income and mobility. The case was granted class-action status by a California federal court in October 2013, with a trial date set for May 2014. In late April 2014, however, Apple, Google, Intel, and Adobe agreed to settle the lawsuit for $324 million. They may contribute to the settlement according to the number of employees each company has in the class. Pixar and Lucasfilm, both owned by Walt Disney Company, and Intuit managed to settle their cases for only $20 million by sliding under the radar before class-action status was announced. The principal terms of these settlements will be announced by May 27.

However, none of these settlements have been approved yet by U.S. District Judge Lucy Koh in California. The final approval for the Intuit and Disney deals is expected at a hearing at the end of April.

Court filings indicate that if the case against Apple, Google, Intel, and Adobe had gone to trial, plaintiffs would have asked for $3 billion in damages. This could have been tripled to $9 billion under antitrust law.

Interestingly, many of these same companies already settled a similar Justice Department lawsuit for anti-competitive hiring practices. Rather than go to court over antitrust allegations, the firms settled without admitting wrongdoing.

But if the companies did nothing wrong, then why settle? Intel and Adobe expressed a desire to avoid the burdens, costs and uncertainties of litigation.

On a more hopeful note, not all the tech firms cooperated in the conspiracy. Palm and Facebook managed to remain clean despite overtures from Google and Apple. Edward Collligan, former Chief Executive of Palm, rebuffed Jobs by saying the plan was "likely illegal" and that Palm refused to be "intimidated" by his threat. Sheryl Sandberg, Chief Operating Officer of Facebook, rejected a proposed agreement from Google.