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Have you read anything about ChoicePoint? Bad happenings
SEC, FTC launch probes of ChoicePoint
By BILL HUSTED
The Atlanta Journal-Constitution
Published on: 03/04/05
Both the Security and Exchange Commission and the Federal Trade Commission have launched investigations of Alpharetta-based ChoicePoint.
The giant database company said Friday that it will cooperate with both investigations.
If you get a letter from ChoicePoint saying your personal data was accessed illegally, we'd like to hear from you. You can e-mail Bill Husted or leave a message at 404-526-5982. Please give your complete name, city and both day and night phone numbers. A reporter may contact you. Only those who have actually received such a letter from ChoicePoint should contact us.
CHOICEPOINT TODAY
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In a brief telephone interview Friday, the company's chairman and chief executive officer said he was not aware of any subpoenas issued as part of the SEC or FTC investigations.
"We've received an informal inquiry from the SEC," said CEO Derek Smith, "and look forward to cooperating with that, and it's one of the ways that we can clear this up."
Smith also apologized to consumers for the recently disclosed breach of ChoicePoint's data files and said future incidents would handled differently.
The SEC probe -- labeled "informal" by the agency -- centers on "any possible recent identity theft, recent trading in ChoicePoint stock by our chief executive officer and chief operating officer and related maters," the company said in a prepared statement.
Smith and Douglas Curling, ChoicePoint's chief operating officer and president, made a combined $16.6 million in profit from selling company shares after the company learned scammers had invaded its database.
On Feb. 25, The Atlanta Journal-Constitution first reported that "13 days after the arrest of a suspect in the ChoicePoint identity theft case — and more than three months before the problem surfaced publicly — the company's top two executives began selling their stock."
At that time, Smith told The AJC he did not know about the security breach until well after he began selling the stock. Curling was not available for comment.
ChoicePoint has said the stock trading was prearranged under a plan approved by the company's board.
In an interview Friday, Smith said the trading was halted Monday.
In its statements concerning the investigations, the company said it would stop selling information files that contain "sensitive consumer data, including Social Security and driver's license numbers, except where there is a specific consumer-driven transaction or benefit, or where the products" are needed by government agencies or law enforcement.
The decision to stop selling some types of consumer information came in response to "consumers who have made it clear to us that they do not approve of sensitive personal data being used without a direct benefit to them," Smith said in the statement. In the later interview, Smith said the move is the result of "a fundamental shift" in how society views privacy and personal data.
ChoicePoint said the separate FTC investigation involves "our compliance with federal laws governing consumer information security and related issues. In particular, the FTC has asked for information and documents regarding our customer credentialing process."
The company said its decision to stop selling some products is expected to reduce core revenues by $15 million to $20 million and could reduce earnings by 10 to 12 cents a share for the year.
Personal information concerning approximately 145,000 consumers nationwide -- and 2,805 in Georgia -- was revealed to identity thieves who posed as legitimate business clients of the company. That breach of ChoicePoint's security was discovered by the company in October but only became public in February.
ChoicePoint initially said the October data invasion was confined to 30,000 to 35,000 consumers in California. Later it said the bogus businessmen viewed records of 145,000 consumers nationwide. Those records include Social Security and driver's license numbers, as well as credit information.
While the company learned of the invasion in October, it did not begin notifying consumers until February. It said that law enforcement authorities asked it to delay the notification while they investigated the crime.
"I certainly will be informed" if another major breach of the company's consumer records occurs, Smith said during the Friday interview. At various times, Smith has said he was first informed of the October incident in late December, early January, or -- in an interview Friday with the Associated Press -- in late January.
"Historically this was not something that would be reported to me," he said. "As the CEO, you would not be involved in this type of matter on a routine basis."
Smith was asked if any jobs at the company, including his own, are in jeopardy.
"I'm not going to speak about my own personal job, that's the responsibility of the board," Smith said. "At this time nobody has been terminated as a result of this situation. If something came to light that was of a substantial nature" that could change, he said.
ChoicePoint executives, including Smith, initially said the company had never experienced a similar database invasion. However, The Los Angeles Times subsequently reported that a smaller -- but seemingly similar -- breach did occur in 2000.
In that case, identity thieves -- arrested two years later -- set up business accounts with ChoicePoint and were able to view data from 7,000 to 10,000 ChoicePoint records. |
