Sutherland Alleges Sitel is Responsible for Millions in Stolen Business

Sutherland Global Services and Sitel Operating Corporation –two of the biggest players in the global BPO industry– are gearing up for a trial over alleged claims of stolen trade secrets and the loss of at least one major client potentially worth hundreds of millions of dollars in services. The client in question is presumed to be T-Mobile.

The trial –set for April 23, 2023, in Austin, Texas – is the latest development in a court battle that has gone on for more than a year between the two CX organizations. (Nearshore Americas is the first publication to report on the suit.)

The proceedings began when Sutherland launched legal action in mid-2021, filing its action in the US District Court, Western District of Texas, Austin Division. Sutherland claims that Sitel “conspires with former Sutherland employees to steal and improperly use Sutherland’s trade secrets”, resulting in Sitel acquiring an advantage while competing for at least one contract with an unnamed major customer.

The defense admitted in court filings that Sitel had no active business with this customer prior to the summer of that year, when the contract was awarded.

Neither the complaint nor the defense’s response identify the customer by name. Nevertheless, a source familiar with the case assured NSAM that it is telecom giant T-Mobile, one of Sutherland’s largest clients.

The contract that Sitel allegedly won using confidential trade information from Sutherland would have been worth at least US$50 million a year for voice services and “a big sales component”, according to the source, who spoke to NSAM on the condition of remaining anonymous. The number could climb to hundreds of millions, depending on how long the contract runs and considering potential payout increases for performance and managed volume.

“That was the matchstick, if you will, for the suit, from my understanding,” said the source.

Sutherland’s complaint speaks only of damages “well over US$75,000”, asking for “temporary and permanent injunctive relief and monetary damages in an amount to be determined at trial”. In federal court cases under so-called “diversity jurisdiction”, US$75,000 is the minimum amount required for the court to hear the case.

NSAM reached out to Sutherland’s legal team, Fritz, Byrne, Head & Gilstrap, PLLC in May, requesting an estimated amount of the damages their client is seeking. The firm declined comment. Nevertheless, legal experts that spoke to NSAM estimate that Sutherland, if successful, could be awarded hundreds of millions of dollars in compensation.

In the middle of the clash stand two former Sutherland employees, Ratul Sengupta and Keith Lee, as well as Mike Small, who previously served as Sitel’s CEO in the Americas until October of 2021, several months after the complaint was filed. All three are listed as defendants in the lawsuit, alongside Sitel.

The lawsuit hit at a crucial moment for Sitel. The firm finds itself in an expansion binge that could lead to it becoming the second largest provider of voiced–based customer services in the world, just behind Teleperformance.

In 2021, Sitel closed a deal to acquire American competitor Sykes for US$2.2 billion. Back in June of 2022, the company was close to a deal to acquire Majorel, but the negotiations reached a halt months later. In 2015, Sitel was acquired by French group Acticall.

As of mid-September, 2022 the lawsuit remains active. Comments made by one of the judges during hearings as well as a report and recommendation from the same judge and the defense’s own court filings paint a dire picture for the defendants.

The trial will be held without a jury. The appointed judge will be in charge of evaluating the evidence and have final say on the matter.

An Inside Job

While Sitel is the biggest name among the defendants, the allegations nevertheless spring  mainly from the interactions between two people: Ratul Sengupta and Mike Small.

Sutherland alleges that Sengupta and Small coordinated to acquire confidential corporate information while Sengupta was still employed by Sutherland and just months before he went to work for Sitel. This would have resulted, allegedly, in Sitel using the information to proposition and, in at least one instance, win business with Sutherland clients.

“Before they [Sitel] hired Ratul [Sengupta], Mike Small internally distributed a list of customers that he had acquired. He told those on the distribution list he had acquired this list of customers from a guy they were bringing onboard,” an anonymous source familiar with the case told NSAM.

Sengupta began working for Sutherland in 2007. In 2013, he was promoted to VP of Client Engagement and moved from India to Texas to manage “client relationships for some of Sutherland’s key clients within its Technology Vertical around the world”, Sutherland states in the complaint.

In 2019, Sengupta was promoted once more, this time to Sales Lead for the company’s entire technology vertical, which gave him access to an even wider array of information regarding Sutherland’s operations and clientele, according to the complaint.

Given the nature of the information managed by Sengupta, he signed non-compete and confidentiality agreements that barred him from seeking employment with Sutherland competitors, in any capacity and anywhere in the world, for a period of 12 months.

Though it is not clear when the interactions between Sengupta and Small actually began, the defendants themselves admit that Sengupta verbally agreed to be employed by Sitel –a direct competitor of Sutherland– in June of 2020.

Sengupta told his then employers on August 1 of that year that he would be leaving the company, which he did officially two weeks later. Nevertheless, he did so without mentioning he would be working for Sitel, a fact that isn’t disputed by either of the parties.

From June 2020 until he officially moved from Sutherland to Sitel, Sengupta remained in contact with Small, discussing matters such as “employee prospects consisting of non-Sutherland and Sutherland employees” and “the name of Sengupta’s job title at Sitel”. These claims were admitted to by the defendants in their own filings.

Sutherland alleges that these communications between Sengupta and Small were done covertly as a matter of strategy, resulting in the soliciting and eventual hiring of four Sutherland employees by Sitel. One of these new hires, Keith Lee, is listed among the defendants.

All of this, according to the plaintiff, was done as covertly as possible due to the murky nature of the actions. Sengupta would have, in essence, been competing with Sutherland while still employed by them, providing company information to a direct competitor and soon-to-be employer from the inside.

NSAM attempted to obtain a response from both Small and Sengupta, via Linkedin messaging, but neither responded.

NSAM also requested comment from the defendants’ legal team and Sitel’s PR team. Both declined comment.

The “Stolen” Customer

Sutherland’s complaint mentions a “Stolen Customer” from which Sitel obtained major business from a request for proposal (RFP) made in 2021 thanks, allegedly, to “pricing and bonus performance strategies” that the company had for this particular customer and that would have been obtained by Sitel through former Sutherland employees.

“[Mike] Small actively sought out intelligence on Sutherland’s pricing and bonus performance strategies for a Sutherland customer (the ‘Stolen Customer’),” states the complaint. “Sutherland supported (and still supports) the Stolen Customer in multiple locations throughout the world, and Sutherland developed its pricing and bonus performance strategies in connection with such support. Sitel had no active business with the Stolen Customer prior to the summer of 2021.”

Though not named explicitly in the complaint, the customer is widely believed to be T-Mobile. In another filing to the court, the plaintiff claims that Sengupta “was also involved in a presentation from Sitel to T-Mobile in connection with a 2021 RFP”, which eventually led to Sitel winning business with T-Mobile. This would have been, according to a source familiar with the case, the US$50 million contract.

Legal experts consulted by NSAM pointed out that, even if Sutherland manages to prove that trade secrets were stolen by Sengupta and Small, in order to claim damages, they will also have to prove causation between the allegedly stolen information and the RFP being won by Sitel. In other words, Sitel could have won that contract regardless. In their response to the complaint, the defendants claim that “plaintiff’s alleged damages, if any, were caused or contributed to by the acts, omission, negligence, recklessness, fault and/or wrongful conduct of third parties”.

Sutherland is, alongside Teleperformance, one of T-Mobile’s biggest partners in the BPO space. The defense admitted that Sitel had no business with “the customer referenced” prior to the summer of 2021.

“If you are somebody who has never operated in T- Mobile’s processes before, as a new entry, you’re at a disadvantage. Because how you’ve been running a call center is different than T-Mobile does, so your profitability targets get out of whack because you don’t understand how to officially run a T-Mobile program”, explained the source. “But if you have access to the profitability targets of, say, Sutherland, you as an outsider have an advantage over everybody else because you can take that pricing model and make it just a smidge less to win a deal and still understand how to make it profitable.”

The defense denied any conspiracy with former Sutherland employees “to steal and improperly use Sutherland’s trade secrets.”

Other Sutherland customers mentioned in the lawsuit as alleged targets of Sitel’s attempts at business include Norton LifeLock, Ultimate Software, Idemia, RingCentral, Iron Mountain and Pillpack.

All the Way to the Top

According to Sutherland’s complaint, Sitel’s awarding of the 2021 RFP would have involved not only Small and Sengupta, but also top executives such as Michael Xu (Sitel’s CFO in the Americas) and Olivier Camino (Sitel’s Global COO).

Camino, who has served as Sitel’s global COO since 2016, is one of the founders of Acticall and is mentioned by Sitel as part of the “Global Executive Team” appointed to support Sitel President Laurent Uberti “in the definition and implementation of the Group’s strategy”.

Sitel reached US$4.3 billion in revenue in 2021. The global headcount hovers around 160,000 employees. The provider is located in 40 countries, owns 160 CX hub locations and serves over 700 customer brands, including Airbnb, Michelin, Renault and VINCI Construction.

Sources say that as Sitel pursued its growth strategy, pressure on Mike Small grew more intense.

“At the time, he [Small] was under intense pressure to deliver numbers as the CEO [of Sitel in the Americas]. There was some reduction in the client base, so Mike was under a lot of pressure to fill the erosion that was happening in the base with new clients,” said the source.

An Uphill Battle

Sitel’s defense appears to boil down to denying the enforceability of Sengupta’s non-compete and confidentiality agreements, as well as the claim that the interactions between Sengupta, Small and the rest constitute a misappropriation of trade secrets or that they led to Sitel directly benefiting from information that would be considered confidential and proprietary of Sutherland.

Nevertheless, several of the more damaging claims by Sutherland were not disputed by the defense. These include: Sengupta agreeing to employment by Sitel without disclosing the details to Sutherland; Sitel being provided a copy of Sengupta’s non-compete and confidentiality agreements; and Small and Sengupta discussing Sutherland employees as prospects to join Sitel.

The defendants did not deny that interactions between Sengupta and Small took place because Sutherland obtained several communications between both men during the period in which the former transitioned between companies. These communications were pointed to in the complaint as evidence against the defendants.

One of the judges involved in the case condemned Sengupta’s actions regarding his non-compete agreement, which, according to the judge, might be enforceable under New York law.

“The record clearly shows that Sengupta violated the non-compete agreement by doing the same or similar job for a direct competitor in the territory where Sutherland did business. In fact, at the hearing Sengupta himself expressly admitted that his actions constituted a violation of the Noncompete Agreement should the Agreement be enforceable,” wrote US Magistrate Judge Mark P. Lane in a report and recommendation.

In a court hearing, Judge Lane stated the following: “Here’s what I’ve got: I’ve got a guy who blatantly violated a covenant not to compete. He did it while he was still collecting a salary from his former employer. I’ve got a former employee who is not only subject to a covenant not to compete, but there was objective, unrefutable evidence that he violated it.”

In his report and recommendation, judge Lane granted Sutherland a preliminary injunction which effectively extended the effects of Sengupta’s non-compete agreement for six months. The injunction took effect on January 27 of 2022 and ended in late July.

According to Sengupta’s LinkedIn profile, he has been the company’s Chief Revenue Officer since August of 2020. Sengupta is presumed to no longer work for Sitel.

Small has been working as President in the North American region at engineering solutions firm Akkodis since November of 2021, according to his profile in LinkedIn.

Legal sources tell NSAM that, given the type of legal action and parties involved, there’s a possibility for settlement prior to the suit going to trial.

NSAM will explore the legal ramifications of the suit in new reporting scheduled to be published next week.