ChoicePoint Hit With Large Fine For Data Theft

Lam1969 writes "The U.S. Federal Trade Commission has fined ChoicePoint $10 million for a data breach that allowed identity thieves posing as legitimate businesses to steal social security numbers, credit reports, and other data from nearly 140,000 people. This is the largest fine ever levied by the FTC. ChoicePoint also has to set up a 'trust fund' for people victimized by identity thieves. From the article: 'As part of its agreement with the FTC, ChoicePoint will also have to submit to comprehensive security audits every two years for the next 20 years.'" BusinessWeek has some background information on this breach.

Comments

Chump Change with their Revenues

[WebHostingGuy]

For the three months ending Dec. 31, ChoicePoint said it earned $27.68 million on revenues of over one billion dollars in 2005

Re:Chump Change with their Revenues

[crimoid]

Still, in this case $10 million is a 1/3 of one year's revenues.

Actually...

For the three months ending Dec. 31, ChoicePoint said it earned $27.68 million

So that is a little more than 1/3 of one QUARTER'S revenue.

Re:Chump Change with their Revenues

[WebHostingGuy]

Not quite. The profit is after expenses. However, if you have taken accounting you will know you get to take expenses out for which you did not actually pay any money for (think depreciation, it is a non-cash outlay expense for which you get to take over time.) To actually look at the impact of the fine you have to look at what their actual cash flow is. From their statement:

Net free cash flow (net cash provided by operations less capital
              expenditures) was $180.2 million for the twelve months ended December
              31, 2005, which compares to net free cash flow of $182.1 million for
              the same period in 2004. Excluding the cash paid during 2005 related
              to the fraudulent data access discussed above, net free cash flow would
              have been $193.8 million for 2005.
          - During 2005, approximately 2.9 million shares were repurchased for
              $125.6 million at an average price of $42.59, leaving $124.4 million
              authorized in the Company's buyback program.

If you see the end number they had cash coming in in 2005 of $180.2 million dollars. It would have been $193.8 million but they had to pay the lawyers fighting this fine. And if you add in what they spent buying back their own stock their cash coming in from revenues is $180.2 + $125.6 = $305.8 million dollars. And if you add in what they spent on legal fees fighting this equals $319.4 million dollars. Subtract $10 million from this number and you get chump change.

The sad thing is

[hsmith]

It is impossible not to have your ID stolen through not YOUR actions, but others now a day. I had mine compromised 3 times last year due to employers as well as corporations that have my personal information. I mean, what can you really do when a company refuses to protect your identity? You can't sue, because there are no laws on the books. Yes, I took my business elsewhere, but what happens when you lose money due to others mishaps and ignorance? I guess it is time to get "ID Loss Insurance" for another $30/month. Ugh.

More Material (B. Schneier)

[alfalfro]

Bruce Schneier usually covers this stuff pretty well, as he did frequently last spring. Punch this into google: "choicepoint site:schneier.com"

"Accidentally" leaked info?

[RandoX]

Not according to CNN. See Point #45 where Choicepoint SOLD the information several times, including to an identity theft ring.

Re:Fatal Assumptions

[LaCosaNostradamus]

"But Senator/Congressperson, consumer privacy is important. But think of all the lost jobs if ChoicePoint were to declare bankruptcy!!!"

Here's what our representatives (remember, they supposedly believe in the free market and Capitalism) should respond:

"Mr CheckPoint Executive, we in the Congress sympathize with the short-term hardship imposed by such a scenario, but we mostly have to be concerned with the long-term results. The long term in your case is that the assets from your failed company would eventually be bought out at pennies on the dollar and be put to use by whom we hope will be more moral and innovative businessmen. The jobs lost from your failed company would then be regained. At any rate, this is a free market, Sir, and you cannot claim Socialist protections on the basis of any privilege, real or perceived. Good day."

Of course, since our politicians have almost totally bought into the ideas of Socialism for the wealthy classes, and the "free market" for the poor and working classes, we're never going to hear this kind of response.