'We were asked to find this gentleman that owed a diamond company in Belgium a lot of money. We mana

THE word espionage conjures up images of James Bond or the hit BBC TV show Spooks. But increasingly, it is corporations and not countries that are spying on each other. Industrial espionage - companies using illegal surveillance to gain a market edge over rivals - is big business.

One North-East firm that has been able to cash in - for all the right reasons - is Diligentia.

Co-founder Henry Hobson offers a counter-espionage service, helping companies keep their secrets in the boardroom or the research lab.

"It happens more often than you would suspect," he said.

"The financial stakes are so high that people are prepared to take the risk. The problem now is that the equipment to bug a phone or an office is very cheap and readily available.

"Companies can lose thousands just because somebody else is able to listen into a conversation in the boardroom.

"We do quite a lot of counter-espionage these days, especially de-bugging work.

"But we would never consider actually bugging someone on behalf of a client."

Mr Hobson, 42, moved into the private sector in London after leaving the Military Police in 1986.

He moved to Bellingham, Northumberland, in 1995 and established Hobson Associates.

It offered a corporate investigations service - carrying out background checks on potential employees, or finding people who did not want to be found.

One target he was asked to track down, a diamond dealer, was so impressed with Mr Hobson's professionalism that he became a client.

"We were asked to find this gentleman that owed a diamond company in Belgium a lot of money. We managed to find him and he agreed to pay the money back.

"A couple of months later, the man we had tracked got in touch and asked us to help him with something."

The "something" turned out to be finding an elusive conman in the depths of India, to prove their client was not a diamond thief.

Diamond dealers operate essentially on trust and transactions are often conducted with promisory notes rather than cash.

This means an unscrupulous dealer could potentially walk away with precious stones worth tens of thousands of pounds.

Mr Hobson's client had been charged with theft after an Indian man, posing as a dealer, falsely claimed the other man had taken his diamonds without payment.

"This Indian man claimed to be worth millions and have a chain of shops," said Mr Hobson.

"We discovered he literally lived in a hole in the wall in Old Delhi and the nearest he got to a shop was that his cousin had a stall selling tatty T-shirts.

"The CPS dropped the case and our client went away a very happy man."

Other areas of expertise include carrying out surveillance work on quarries whose owners suspected employees of stealing stock.

"You wouldn't believe how many people are out there stealing lorry loads of gravel or tarmac," he said.

From a hidden vantage point, he will watch a quarry weigh bridge and note how many wagons come in and out, while another team follows each truck.

"The number of people we have caught is phenomenal, despite the fact that employers would tell their workers they might be subject to surveillance."

More recently, he worked with Avon and Somerset Police to catch a gang who had stolen equipment worth £170,000 from their boss.

Diligentia was called in by the owner of a business who had found out three employees had left and set up a rival firm.

They used their inside knowledge to offer exactly the same service, but undercut his prices and aggressively targeted his customers.

Before the three had left, they recommended a friend to be employed as the company technician.

The business owner suspected stock was going missing and, using surveillance, Diligentia found the technician was stealing to order for his friends in the rival firm.

"We could see on camera that he literally came to work with a shopping list," said Mr Hobson.

With the evidence he obtained, the police stepped in and arrested all four, recovering a large amount of the missing stock.

It is an extreme example of a growing trend of what he calls "cuckoo tycoons", employees who use their position in a company to gain inside knowledge, then set up their own rival businesses.

"Through recent investigations, we have caught a substantial number of employees developing cuckoo companies," he said.

"We estimate that this must be costing UK businesses millions of pounds a year - it's clearly a serious problem."

Surveillance operations range from the deadly serious to some that raise a smile - his firm was once called in to catch someone who was leaving faeces on the desks of a company's senior management.

"It sounds all very glamorous and exciting. But nine-tenths is painstaking and boring.

"It is only the last few minutes when the adrenaline really starts pumping."

The investigations wing includes less cloak and dagger operations, such as carrying out customer standard surveys for retail chains. It also provides a service helping bookmakers and leisure chains fight gaming or liquor licence applications from rival companies.

Diligentia has four other divisions, introduced when Mr Hobson's brother-in-law, Stephen Lamb, came on board in 2003. Mr Lamb is managing director of facilities management, or contract cleaning. The group also has operations in security, risk management and, more recently, training.

There are now five satellite centres in Newcastle, Bristol, Liverpool, Birmingham and London.

"The problem with the investigations is, it is always famine or feast," said Mr Hobson. "The others provide us with more stable business."

It is the training operation that he expects to perform the best this year.

The Private Security Industry Act 2001 requires that all security guards and door supervisors will need to be fully licensed by the end of this year.

Those who do not have a licence will not be allowed to work.

Diligentia Training is one of only a handful of Government-accredited exam centres where candidates can be trained and assessed.

The group has appointed Richard Slater, vice-chairman of the Institute of Security Management as managing director for training.

Mr Hobson said: "There are very limited facilities for providing this training in the North-East. There are vast numbers of people employed in the security industry. To get them all trained by the end of 2005 is a huge task and we are well placed to do a lot of that work."