Ernst & Young denies theft of industry data from competitor

In a new court filing, Ernst & Young has accused Express Scripts Holding Co. of making unfounded allegations against the “Big Four” accounting firm and one of its former principals.

Its motion, filed late Wednesday in the Circuit Court of St. Louis County in Clayton, came in response to a lawsuit that Express Scripts lodged recently against Ernst & Young.

Express Scripts, in its lawsuit, accused Donald Gravlin, a former Ernst & Young partner, of trespassing repeatedly at its corporate headquarters and stealing a trove of highly confidential computer documents.

Express Scripts accused both Ernst & Young and Gravlin of having “an evil motive” in misappropriating its trade secrets to win additional consulting business from the north St. Louis-based pharmacy benefit manager. The accounting firm and Gravlin “engaged in unlawful and malicious competitive intelligence gathering,” Express Scripts alleged.

The suit also alluded to what Express Scripts described as “suspicious and potentially fraudulent billing practices.”

But in its legal response, Ernst & Young called all of the allegations “false” and part of an effort to avoid an arbitration proceeding.

“None of the so-called ‘misappropriated’ documents were improperly used by any person,” Ernst & Young said.

The accounting firm also asserts that Express Scripts authorized Gravlin’s conduct and that its security protocols were lax.

Still, an Ernst & Young investigation found that Gravlin had exercised poor judgment, according to the accounting firm.

Express Scripts’ suit accuses Gravlin of repeatedly using “false credentials” over several months in 2012 to enter its corporate headquarters, with the aid of Ernst & Young partners and employees.

But, according to Ernst & Young, Gravlin’s presence at the pharmacy benefit manager’s headquarters was “welcomed” by its executives. Gravlin met with Express Scripts (ESI) executives many times in 2012, the accounting firm states. He attended multiple meetings with Express Scripts executives after March 2012 — the date that Express Scripts alleges Gravlin began “sneaking into” its facilities.

In its court papers, Ernst & Young specifies the dates, subject matter, and participants of these scheduled meetings that Gravlin attended. In one of these meetings, Gravlin presented a proposal for additional consulting work.

“Contrary to what ESI is saying in this case, I never used ESI documents or information for any improper purpose,” Gravlin said in a sworn affidavit. “I never used ESI documents or information for personal financial purposes. I did not disclose any ESI documents or their content to any third party.”

For a meeting on Aug. 29, 2012, Gravlin said, he gathered Express Scripts computer documents — and emailed them to his private Gmail account — solely to support his work for Express Scripts and prepare for an upcoming meeting with an Express Scripts executive.

Shortly before that meeting, Gravlin said in his affidavit, he discovered that he left behind at his office a binder of Express Scripts materials. As a result, Gravlin said, he logged on to Express Scripts’ computer to recreate documents he had prepared for the meeting — not to steal trade secrets.

Express Scripts’ suit accuses Gravlin of improperly using a colleague’s login and password to gain unauthorized access to its internal computer system. But the accounting firm says that employees at Express Scripts and Ernst & Young routinely shared passwords during the hectic days surrounding Express Scripts’ $30 billion acquisition of its chief rival, New Jersey-based Medco Health Solutions Inc.

In 2011 and 2012, Express Scripts underwent a marathon effort to integrate its business with Medco. Ernst & Young worked on dozens of projects for Express Scripts.

According to the accounting firm, Express Scripts “delayed issuing access credentials” to Ernst & Young consultants because of a backlog in its security office and instructed Gravlin and other consultants to bypass formal security protocols, including walking the hallways without an escort, attending meetings and accessing the computer system.

Express Scripts “allowed the sharing of password access information” to facilitate getting work done and did not advise Ernst & Young that such conduct violated Express Scripts’ security policies, the accounting firm said.

Express Scripts employees lent their security badges to Ernst & Young personnel so they could perform necessary tasks without always having an escort, and shared their computer access credentials, the accounting firm said.

Once the accounting firm learned from Express Scripts of a possible security issue, Ernst & Young said, it undertook an immediate investigation. Ernst & Young determined that Gravlin’s conduct was contrary to the written policies of both the accounting firm and Express Scripts.

“Mr. Gravlin’s conduct demonstrated poor professional judgment,” Ernst & Young states in its court papers. Gravlin resigned from his position.

Ernst & Young contends that this dispute should be governed by an arbitration provision in its master services contract with Express Scripts. The accounting firm has asked the court to dismiss Express Scripts case.

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Firm Management