Case Study of Insider Sabotage: The Tim Lloyd/Omega Case

Computer Security Journal • Volume XVI, Number 3, 2000 1
Case Study of Insider Sabotage:
The Tim Lloyd/Omega Case
By Sharon Gaudin
The government has just sent a message to every
would-be hacker or corporate computer saboteur: you
can be caught and put away.
That’s the word coming down after the May, 2000
conviction of a former corporate network administrator
in the first federal prosecution of computer sabotage.
“This tells everyone that we’re capable,” says Assistant U.S. Attorney V. Grady O’Malley, who prosecuted the case for four weeks in Newark District
Court. “There are people out there who believe they
can’t be caught. They think [the general public] isn’t
as smart as they are, and if they are, they’re not in the
government… This shows them that we can track
down the evidence, understand it and logically present it to a jury.”
O’Malley, working in conjunction with Special
Agents of the United States Secret Service, won the
conviction against Tim Lloyd, 37, of Wilmington,
Delaware. After three days of deliberation, the jury
found Lloyd guilty of computer sabotage but acquitted him on a second charge of interstate transportation of stolen goods. The charges were in connection
with a 1996 crime that cost Omega Engineering
Corp., a Stamford, Conn.-based high-tech measurement and instrumentation manufacturer, more than
$10 million, derailed its corporate growth strategy
and eventually led to the layoff of 80 workers.
The government laid out a story that spanned 11
years. It was the story of a trusted employee who rose
through the ranks of a relatively small company to
the point where he ultimately planned out and built
Omega’s first computer network for its Bridgeport,
N.J.-based manufacturing plant—the heart of this
manufacturing company. But as the company expanded into a global enterprise, Lloyd’s prominent
position slipped into that of a team player. Feeling
‘disrespected’, Lloyd turned on the company, planting a software time bomb that destroyed the hub of
the network that he himself created.
And that one move destroyed more than a thousand
programs that ran the company’s manufacturing machines. It also brought a global enterprise, one that
supplies instrumentation to NASA and the U.S. Navy,
to its knees. All in the matter of a few seconds.
Today, Omega still is struggling to right itself and reclaim its position in the market. And Lloyd, who maintains his innocence, awaits sentencing, which is slated for
July 31, four years to the day after Omega’s file server
crashed. He faces up to five years in federal prison.
Omega faces an untold number of years trying to rebuild.
“We will never recover,” Jim Ferguson, plant manager at Omega South, Omega’s Bridgeport manufacturing plant, told the jury.
Industry analysts note that the high-tech community has long scoffed at government efforts to keep
track of them or even to keep up with them.
That gap in knowledge and skill seems to be growing shorter.
Ken VanWyk, corporate vice president and chief
technology officer of Alexandria, Virginia-based ParaProtect, a computer security portal, said this case will
have historical and legal significance, setting a precedent for how computer security crimes are handled.
“You’re looking at a lot of damage here,” said VanWyk. “The company has been greatly damaged. How
easy is it to track down digital evidence? How easy is it
to find the culprit following a digital trail? How easy is
it to make a jury understand the technology? These are
all questions that are being answered.”
And O’Malley said the answer has come in loud
and clear.
“These people should realize they are no longer invulnerable,” he added. “This type of crime is no
longer a mystery and there is some bite to computer
crime statutes.”
2 Computer Security Journal • Volume XVI, Number 3, 2000
Bomb cripples manufacturing
It was the morning of July 31, 1996. The first worker
in the door of the CNC (Computer Numeric Control) department at Omega South fired up the Novell
NetWare 3.12 file server just as he always did. But this
time, the server didn’t boot up. Instead, a message
popped up on the screen saying that a section of the
file server was being fixed. Then it crashed.
But it didn’t just crash. When the server went down,
it took nearly every program
down along with it, destroying any means of finding
them and scattering the millions of lines of coding like a
handful of sand thrown
onto a beach.
Omega executives didn’t
know this yet, though. All
they knew was that the server
was down and the manufacturing machines were sitting
idle, waiting for the tooling
programs that had been
stored on the file server.
Ferguson, who had immediately been called when
the server crashed and failed
to reboot, said he went
looking for the backup tape
while other workers tried to bring the server back up.
Even if the server was down, the programs could be
taken off the backup tape and the machines could run.
The backup tape was nowhere to be found, however.
Ferguson, as he testified in court, then went to the
individual workstations to retrieve any programs that
workers had saved to their desktops. There was nothing for him to find there either.
“It was an awful feeling,” Ferguson says.
With no programs and no backup tapes, Ferguson
says he had few options but to order the machines to
run with the programs that already had been loaded
on them the day before. He had to keep his people
working, his machines pumping out products. And
the machines did run like that—some for days, some
for weeks. They ran like that until they choked inventory or exhausted their raw materials.
“We were doing everything we could. The other
step would have been to shut down and lay off everybody,” Ferguson told the jury. “We were just starting
to get an idea of all the impact and what this was
going to mean and how it was going to affect us.”
It was only a matter of days before three different
people called in to do data recovery all reported that
the programs were nowhere to be found.
And that was the beginning of an IT nightmare
that still haunts Omega to this day, according to several executives who testified in the trial.
Ralph Michel, Omega’s
chief financial officer, testified that the software bomb
destroyed all the programs
and code generators that allowed the company to
manufacture 25,000 different products and to customize those basic products
into as many as 500,000
different designs.
“That department gave
us flexibility to modify our
products and gave us the
ability to lower our costs,”
said Michel, who noted
that Omega had shown 34
years of growth but started
slipping after the computers crashed. “We lost both
of those advantages in July 1996. . . I believe the
server crash was one of the principal reasons for the
drop in sales, if not the reason.”
Michel noted that Omega’s sales efforts took such a
hit because of the company’s inability to manufacture
products without a long lead time that within two
years after the crash, Omega was showing a 9% drop,
which equals about a $10 million loss. And Michel
added that Omega had shown only increases in annual
sales since 1962.
Tracking down the cause of the crash
And while the company suffered financial and market hits, Ferguson and other plant managers looked
to retrieve the programs and get manufacturing on
its feet again.
And immediately, their attention turned to their former network administrator—Tim Lloyd, who had been
Ferguson, who had immediately been called when the
server crashed and failed to
reboot, said he went looking
for the backup tape while
other workers tried to bring
the server back up. Even if
the server was down, the
programs could be taken
off the backup tape and the
machines could run. The
backup tape was nowhere
to be found, however.
Computer Security Journal • Volume XVI, Number 3, 2000 3
What happened to Omega Engineering, Inc. could happen anywhere
Here are a list of ways to protect your system:
❏ Make sure no one person is controlling the system front to back;
❏ Every logon should have a password;
❏ As few people as possible should have supervisory rights;
❏ Mission critical systems should be backed up every day, and every system should be backed up
❏ Have a strict sign-in/sign-out system for backup tapes;
❏ Always have a current copy of the backup tape stored remotely;
❏ Do backups of desktops and laptops, as well as servers;
❏ Rotate backup tapes – don’t keep using the same one over and over again;
❏ Change passwords every three months;
❏ Keep servers in a secured area;
❏ Stay up-to-date on software patches;
❏ Use intrusion detection software that alerts you when you are being hit and make sure your
response time is faster than a fast penetration;
❏ Code should not be put up unless at least two pairs of eyes have checked it over;
❏ Have an information security department (at least one person and then one other for every
1,000 users) that is separate from the IT department and reports directly to the CIO;
❏ At least 3% to 5% of the IS budget should be spent on information security;
❏ Information security personnel should be aware of any employee who is showing signs of being
troubled or disgruntled, particularly if that employee holds an information-critical position;
❏ Beef up security during certain events, such as mergers or downsizings, that could upset workers
and cause them to lash out at the company;
❏ If an employee, particularly an IS employee, is becoming a problem, start locking down—
monitor the network, set up software that will alert you if she is in a different part of the net
work than unusual or if she’s working at a different time than usual. Also, scan email to see
what’s going out of the company, double check backup tapes and have someone else do the
backups if that person is the one in question
fired three weeks before the crash.
Lloyd, who had started out at Omega in 1985 as a
machinist, had worked his way up the line until he was
the sole person in charge of the network—the network
he created. Lloyd handed out passwords, maintained
the server, loaded new programs and worked on any expansions. He also was in charge of doing backups and,
as Ferguson later discovered, had recently taken programs off the workstations and centralized them on the
one file server, telling workers not to store them locally
any longer.
“I had trusted Tim Lloyd completely,” Ferguson told
the jury. “We relied on Tim Lloyd… I trusted Tim to
maintain the backup tape. He was responsible for the
security of the system.”
And Lloyd had taken out the backup tape on July 1.
Now, weeks later, with the system down, the tape was
nowhere to be found.
“Tim, Tim do you have the backup tapes?” says
O’Malley describing Ferguson’s desperate call to Lloyd
after the crash. “Tim, we need those tapes. Are you sure
you don’t have the tapes?”
Ferguson says Lloyd told him he didn’t have the
backup tape. Lloyd, according to testimony, says he left
them in the upper left-hand corner drawer of his desk at
Omega. But Ferguson himself had helped clean out
Lloyd’s desk. There was no backup tape there.
Ferguson called Lloyd again and again. Once, Lloyd
said he would check around his house but never called
back. Ferguson called again and Lloyd said he hadn’t
had a chance to check. Ferguson called again and Lloyd
told him he had some tapes but not Omega’s tapes. Ferguson then recorded one of his calls and went to Lloyd’s
house to plead in person. While he was there, Lloyd
handed over a pneumatic pump, a computer case and a
power cord. No backup tape.
The plant manager says even while he was pleading
with Lloyd for information about the tape, he still was
having a hard time imaging that Lloyd would have damaged the system. Ferguson had held on to that kind of
trust even when Lloyd had become a problem employee.
About a year earlier, Lloyd went from being a star
employee to an angry man who lashed out, verbally
and physically, at his co-workers, bottlenecked projects simply because he wasn’t in charge of them, and
even knowingly loaded fault programs to make coworkers look bad, according to Omega executives. In
that year, he had received verbal warnings, was written up twice and demoted.
Lloyd was lashing out at his co-workers, as O’Malley
4 Computer Security Journal • Volume XVI, Number 3, 2000
The Code and How it Works
1. 7/30/96
n The date is the triggering point in the code string, executing the rest of the commands as
long as it is after July 30, 1996.
2. F:
n This line of the code gives access to the server.
3. F:\LOGIN\LOGIN 12345
n This automatically piggybacks User 12345, which has supervisory rights and no password
security, with whichever user first logs in on the file server.
n This line gives access to the public directory, a common storage area on the file server.
5. FIX.EXE /Y F:\*.*
n FIX.EXE is a DOS-based executable that served as the deletion command but showed the
word ‘fixing’ on the screen instead of ‘deleting.’ This is a slightly modified version of
Microsoft DOS’ Deltree.exe.
n /Y answers ‘yes’ to the implied question of ‘Do you want to delete these files?’
n F:\*.* refers to all files and folders on the entire server volume
n This line calls for all of the deleted information to be immediately purged.
told the jury, because his ego was bruised. He was the
genesis of the network and suddenly his status and clout
were slipping away from him. And a team player he did
not want to be.
The prosecution contends that Lloyd, who had
started interviewing for a new job early in June of 1996,
had started planning to leave Omega months before he
was fired. Either way he was going out the door, he was
planning on leaving a parting gift for the company that
had “disrespected” him, according to O’Malley.
On July 10, 1996, Lloyd was fired. “The day I fired
Tim Lloyd wasn’t a happy day,” says Ferguson. “Here
was an individual I worked
with for 11 years. I was very
frustrated with how things
worked out toward the end.”
And during all of this, no
one at Omega assigned someone other than Lloyd to do
the backups. No one checked
the file server before or after
he left. No one even hired a
new network administrator
after Lloyd was terminated,
assuming that all it needed
was simple maintenance and
an outside contractor could
take care of that. The comapny was running on trust.
The Secret Service takes over the investigation
On Aug. 12, 1996, Omega executives called in the U.S.
Secret Service, which splits its time between protective
service and conducting financial and high-tech fraudrelated criminal investigations. The Secret Service is
one of the government’s biggest weapons against
computer crime. A relatively new statute makes computer sabotage a federal offense if it affects a computer
used in interstate commerce and causes more than
$5,000 worth of damage to the company in a 12-
month span of time.
On Aug. 14, Special Agent William D. Hoffman arrived at Omega and began an investigation that would
span the next four years. Hoffman, who has been with
the agency for four years, began by interviewing about
50 Omega employees, everyone from company owners
to people working the lathe machines on the shop floor.
“It was apparent to me very early on that this was
not an accident,” says Hoffman. “The files that had
been deleted were surgically removed from the database. They specifically were the files the company
needed to survive.”
And early on, the evidence pointed directly at Lloyd.
Hoffman pointed out that Lloyd had Novell certification training; he had complete access to the system,
and he was the last one with the backup tape.
Hoffman also notes that they checked out Ray
Nab, another former Omega employee. Nab, who
was a friend of Lloyd’s, had been a CNC programmer and had quit the day the file server crashed.
Nab, however, took and
passed a lie detector test.
And Hoffman says Secret
Service agents searched
Nab’s house and didn’t
find anything connected
to the crash or to Omega.
Hoffman, along with several other Secret Service
agents, conducted a search
warrant on Lloyd’s home
Aug. 21, 1996. The agents
seized about 700 pieces of
potential evidence. That
haul included computers,
motherboards, keyboards, more than 500 disks, CDROMs, 12 hard drives and tapes.
“It was enormous,” says Hoffman.
What immediately stuck out from that haul were
two backup tapes, which had both been erased. One
was labeled Backup with the dates 5/14/96 and
7/1/96 and the words Tim Lloyd. July 1, 1996 was the
date that Lloyd had asked for and been given Omega’s
backup tape. Both had been reformatted, which erases
the tapes, the day before Ferguson visited Lloyd’s
house asking about the tapes.
“The moment I found out the backup tapes had
been reformatted, my level of suspicion was elevated
dramatically,” says Hoffman.
Tracking down the destructive code
While Hoffman was tracking down physical evidence,
technicians at Ontrack Data International Inc., a data
recovery firm out of Eden Prairie, Minnesota, were
searching what basically was a digital debris field on a
Computer Security Journal • Volume XVI, Number 3, 2000 5
The plant manager says even
while he was pleading with
Lloyd for information about
the tape, he still was having
a hard time imaging that
Lloyd would have damaged
the system. Ferguson had
held on to that kind of trust
even when Lloyd had become
a problem employee.
mirror image of the damaged file server. Omega had
called in Ontrack about a week after the server crashed
to try to recover the missing programs.
Months into the effort, Ontrack conceded that the
programs simply were not recoverable. Then they turned
the copy of the server over to Greg Olson, director of
Ontrack’s Worldwide Data Recovery Services. Olson was
focused on finding out what caused the crash.
“We do data recoveries when companies are losing
millions of dollars a day,” says Olson, who has written
data recovery tools for the NetWare operating system
and even was brought in by the U.S. government to
recover files off of some of Kuwait’s computers damaged during the Gulf War. “It’s not uncommon for
me to be working with
people in panic mode
but… I’ve never seen this
massive of a deletion in my
10 years of experience.”
Olson says there were
several things that raised
red flags for him right from
the start.
“It was odd that the user
accounts, most of them, had
supervisory rights,” he explains. “It’s odd that Account 12345 had supervisory rights and no password… Our system administrators would freak out if
they knew there were half a dozen accounts with supervisory access… It violated the principles of security.”
With these red flags in the back of his mind, Olson
started out doing searches for common commands or
phrases used in deletions, such as DEL /S; \*.*, DEL
“I was just thinking of common things to search for
and these were taking hits,” says Olson. “Immediately,
I knew this was hot when I saw PURGE take a hit.”
Olson continued to systematically pull programming strings, sitting in their raw form, out of the code
wreckage until he had pieced together six lines—six
lines that looked like they could do some real damage.
“What’s unusual are these six strings together,” he says.
“First of all, the date was meaningful because the data
loss was the next day. The second thing was this login
account 12345, which had supervisory rights and no
password. We’ll say that’s not recommended. The next
thing unusual is the fifth line that refers to all the data
on the server and /Y is a common command line
switch to make the program default to yes.
“This is the type of stuff you’d find in a utility to do
mass something,” Olson adds. “The last thing is the
PURGE. Having the PURGE there with the F:\ refers
to the server and everything on it. And combined with
that date, it was very unusual. You’re not going to go into
another company’s file server and find that combination
of strings. That was definitely a red flag situation.”
And from there, Olson set out to determine what
part FIX.EXE, which is not a NetWare executable so
would not normally be found on a NetWare system,
played in the string. The way the strings were set up,
he says he knew FIX.EXE
must have deletion powers
but now it was a matter of
proving it.
So Olson went out on the
drive and pulled off 670 raw
executables. He tested each
and found one that appeared
to be DELTREE.EXE, a
DOS-based command that
enables administrators to
delete files off Windows operating systems.
“I pulled DELTREE and
executed it with these command lines to see what would happen,” says Olson. “I
was shocked when the normal DELTREE function,
saying ‘deleting this, deleting this’, was replaced with
‘fixing this, fixing this’… I knew I was on to something there.”
What he knew was that the DELTREE executable
had been modified to disguise its deleting message by
dropping in a ‘fixing’ message in its place. That was
FIX.EXE. That one step camouflaged the deletion
process so the user logging onto the system would
never know what was actually happening.
Testing the six-line program
To test the code, Olson took an exact copy of the
Omega file server and set up a test environment with
an attached workstation. He then set out configuring
the system for various dates prior to the July 30, 1996
date at the beginning of the code string.
6 Computer Security Journal • Volume XVI, Number 3, 2000
“It was apparent to me
very early on that this was
not an accident,’’ says Hoffman. “The files that had
been deleted were surgically removed from the
database. They specifically
were the files the company
needed to survive.’’
Olson configured the system for Jan. 1, 1996 and
logged in. Nothing unusual happened.
Then he configured the system for April 30, 1996 and
logged in. Nothing unusual happened.
He then tried July 29, 1996. Nothing unusual
Olson then tested July 30, 1996, matching the configuration date up with the date in the code. Nothing.
Then he configured the system for July 31, 1996,
one day after the date in the code and the exact date
of the crash at Omega. “I logged on and everything
on the system was deleted,” he told the jury. “On the
screen, it was saying it was
fixing an area of the system,
but actually it was deleting
everything… Everything
was gone.”
“The puzzle had been put
together,” he adds. “There’s
absolutely no doubt in my
mind that this is what
caused the data loss.”
And Olson says some
planning went into this.
Along with the six lines of
code that did the damage,
Olson also found three similar test programs. Those
three programs, each similar
to the six lines of code in the
damaging program, were dated Feb. 21, 1996, April
21, 1996 and May 30, 1996. The first two programs
had only one line that was dissimilar from the damaging code. That one line substituted a simple test folder,
which could have held as little as one word, for the line
in the damaging code that called for everything on the
server to be deleted. The third test program dated for
May 30 was set up exactly as the code that brought
down the system.
The government proves its case
“When Ontrack found the data string, I knew this was
it,” says Hoffman, who flew out to Minnesota to be
at Ontrack for three days in February of 1997 while
Olson figured out exactly what those six lines could
do. “Before that, we had not proven the [federal] violation for sabotage. We didn’t know what had
caused this massive deletion. When he called us, we
had intent.”
With the code in hand, Olson went looking
through the rest of the hard drives that Hoffman had
given him to examine. And in that pile, he found
those exact same six lines of code on one of Lloyd’s
personal hard drives that also stored his PR photos, his
checkbook software and personal letters.
“That’s when I knew we had our guy,” Hoffman says.
Lloyd was indicted on Jan. 28, 1998. After several
postponements, the trial started on April 17 of this year.
During the trial, Lloyd’s attorneys told the jury that
this is the case of a computer that simply crashed.
They also said this is the
case of Omega executives,
who had been lax in their
own jobs, casting aspersions
on someone else to cover
up their own failings. Defense contends that the
crash could have been
caused by an outside
hacker, by another employee or by a virus.
Lloyd, who did not testify,
said in an interview after the
verdict came in that he is innocent of the crime.
“There’s no way in the
world I did this,” says Lloyd. “I had complete access
to the mainframe system from home… If I was a vindictive person, do you think I’d go after a teeny, tiny
little network?”
But O’Malley told the jury it could not have been
anyone other than Lloyd who could have taken that file
server down in such a strategic and calculated fashion.
“Was the real guy sitting next to Tim Lloyd and fiddling with the system and changing dates?” O’Malley
asked the jury. “I suggest not. Who could do all this
and not be questioned by the administrator? No one.
It was the administrator… He was setting this up
months in advance.”
Protecting a company from the predators inside
What most industry analysts point out is that while
Lloyd may have spent months setting up his plan, it’s
Computer Security Journal • Volume XVI, Number 3, 2000 7
What he knew was that the
DELTREE executable had
been modified to disguise
its deleting message by
dropping in a ‘fixing’ message in its place. That was
FIX.EXE. That one step
camouflaged the deletion
pro-cess so the user logging
onto the system would
never know what was
actually happening.
more time than the company put in to protecting itself
from insider attacks. And that doesn’t make Omega any
different than what many say is a majority of companies
out there.
Analysts generally agree that while companies are hot
on buying firewalls and anti-virus software, they’re extremely lax when it comes to looking at the potential
risks that come from within. And most also agree that
inside attacks are more of a problem than outside
hackers—both more common and more potentially
Depending on the source, industry analysts say inhouse security breaches account for anywhere from
70% to 90% of attacks on corporate computer networks. Analysts note, however, that number is probably
skewed since they believe most insider attacks go undetected. Dennis Szerszen, director of security strategies at
The Hurwitz Group in Framingham, Mass., says that
for every in-house attack reported, there could be as
many as 50 that go either unreported or undetected.
Screaming newspaper headlines and news reports
about denial of service attacks or malicious teenage computer geniuses running rampant on the Internet have
garnered most executives’ attention—and their budgets.
That means if CIOs or CEOs aren’t paying attention to
the right risks, they’re not spending their security budgets
in the right place, either.
“I think a lot of companies will buy a firewall and
think they have a security infrastructure in place,” said
Amit Yoran, president and CEO of Alexandria, Va.-
based RipTech Inc., a $10 million security consulting
and service company. “That’s a big mistake. They also
consider anti-virus software to be a security solution.
Those are good things but they’re not everything.”
Most analysts say firewalls, anti-virus software and
another hot security commodity, Virtual Private Networks—all of which are focused on securing the
perimeter—are just part of a security strategy since
they may only be addressing 10% to 30% of a company’s security needs. Companies also need to look at
technology that will protect their information from
those who already are on the inside.
Companies need to remember that every employee,
whether a programmer, head of marketing or the network administrator, could potentially pose a problem.
And it’s the people on the inside who know exactly where
information is stored and what strikes will hurt the most.
Matthew Kovar, a senior analyst at The Yankee Group, says having too much faith gets many
companies in trouble.
“They think they know everyone. They
think they have trusted employees,” says Kovar. “That
philosophy breaks down sometimes—some would say
quite often… The reality is that most people aren’t deploying technologies to alert themselves (to inside
breaches). They don’t even know it’s happening.”
Sharon K. Gaudin is a features writer for Network World.
With four years of computer-related reporting under her
belt, she covers a broad range of topics for the weekly publication, including network security and management, operating systems, wireless technologies and employee
management issues. Before working at Network World, she
covered Microsoft Corp., Novell, Inc., software development
and the security beat for Computer World. And prior to
that, she held an array of positions for mainstream newspapers, ranging from executive editor to business editor and online editor. Today, she lives and works on the Maine Coast.
8 Computer Security Journal • Volume XVI, Number 3, 2000

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