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Equifax Board Forms Panel To Review Executives' Stock Sales After Data Breach (bloomberg.com)
An anonymous reader quotes a report from Bloomberg: Equifax's board of directors has formed a special committee to review the stock sales that top executives made days after the company found out it was hacked. Directors at Equifax have retained counsel and are conducting a "thorough review" of the trades, according to a Sept. 28 letter the company's outside lawyers submitted to the top Democrat on the House Energy and Commerce Committee. The examination adds to investigations already being conducted by federal law-enforcement agencies. "Equifax takes these matters seriously," the company said in its response to questions posed by Democrats on the panel, led by Frank Pallone, from New Jersey. "The board of directors has formed a special committee," according to the letter, addressed to Pallone and obtained by Bloomberg News.
The trades, which were first reported by Bloomberg, involve Equifax CFO John Gamble, President of U.S. Information Solutions Joseph Loughran and President of Workforce Solutions Rodolfo Ploder. They unloaded shares worth almost $1.8 million just days after the company says it discovered the breach on July 29. Equifax has repeatedly said the managers didn't know of the intrusion when they sold stock.
The trades, which were first reported by Bloomberg, involve Equifax CFO John Gamble, President of U.S. Information Solutions Joseph Loughran and President of Workforce Solutions Rodolfo Ploder. They unloaded shares worth almost $1.8 million just days after the company says it discovered the breach on July 29. Equifax has repeatedly said the managers didn't know of the intrusion when they sold stock.
"... and have cleared ourselves of any wrongdoing."
Several years ago, the Murdoch-owned Mirror Group newspapers in the UK became embroiled in a really nasty [sinister] story when it became known that a whole host of celebrities were being subjected to phone hacking, with their SMS messages and voicemails being intercepted. When the full implications became apparent - and it was clear that the scale of the illegal acts had the potential to put senior management in a *very* difficult position, former British Prime Minister Tony Blair started to offer advice to the then Mirror Editor Rebekah Brookes.
In emails which subsequently came to light in discovery during an investigation and trial, Blair advised Brookes and Murdoch to "hold an internal enquiry". There is an interesting explanation of that here:-
https://www.theguardian.com/uk...
The key point about Blair's advice is that he advocates a "Hutton-style" inquiry. This was a judicial inquiry, run by Lord Hutton, into the death of MoD scientist Dr David Kelly. The inference in Blair's advice to Brookes is to set up an *internal* inquiry, staffed by people who might look independent but would be loyal to her, then direct them to go and find the answer that Brookes wanted them to find. In other words, do something which looks official to outsiders, but which in reality can be a complete sham.
I am reminded of that episode in this context, because this is starting to look for all the world as though Equifax management are hoping that any further accusations of wrong-doing can be stopped at the feet of those who have already left the company. Right now, the worst possible outcome for them would be a wide-ranging SEC or Federal investigation that looked at their own internal controls relating to such things as the sale of shares.
Disclosure - I've worked for a major US financial institution who, through caution regarding this specific issue, regularly implements "share blackout" windows to literally *prevent* staff from trading shares in the run-up to the reporting of quarterly figures. In other words, I've seen some of the lengths that some companies are willing to go to in order to demonstrate that they are "squeaky clean" with nothing to hide. This latest from Equifax looks for all the world as though the Board are now worried that the SEC might sanction more of them, even further, if it can be shown that their internal financial and governance controls are wanting.
The idea would be to implement this bogus review and find issues which could then be "fixed".
There are several advantages to this for Equifax:-
1. It is an attempt to persuade the SEC that their own internal controls do not require additional sanction for other directors/employees - i.e. a last-ditch attempt at damage limitation...
2. If they find issues and implement changes to address them, the changes will be of their choosing and not imposed on them by an outside third party.
3. It is an attempt at a public message to major shareholders that the company still takes their fiduciary duty seriously. As if anyone would believe them at this juncture.
Of course, the thing to bear in mind here is that this is complete and utter tosh. If the company wanted to "do the right thing", they would either wait for the SEC to finish, or the board of directors would appoint a firm of outside auditors, given them wide ranging authority to go where the evidence took them, and arrange for discussions on the findings to be held with major shareholders in the room. That last would be important given the implications that any wrong-doing might include directors themselves...
The fact that Equifax *aren't* going to the trouble of implementing an externally-led inquiry really tells you everything you need to know about the validity of what they are doing...