ChoicePoint fined $15 million over data breach
ATLANTA — Derek Smith and the influential data broker he runs, ChoicePoint Inc., have labored to put behind them a headline-grabbing case in which con artists posed as legitimate customers in order to access its massive databases of consumer information.
Alpharetta, Ga.-based ChoicePoint made changes to restrict customer access in the past year — even winning praise from some critics — but is still finding it difficult to emerge from the shroud of scandal.
On Thursday, Smith’s company agreed to pay $15 million to settle Federal Trade Commission charges that the data warehouser’s security and record-handling procedures violated consumers’ privacy rights. It was the largest such fine in FTC history.
The episode also still lingers in the form of a Securities and Exchange Commission investigation into whether Smith and his chief operating officer improperly sold ChoicePoint shares after the company learned of the data breach but before it was made public.
Meanwhile, lawmakers in Washington might step in with tougher regulations that some say still need to be implemented to prevent another breach.
“I remain concerned that almost a year after revelations of data security breaches at ChoicePoint, Congress still has not provided Americans with what they urgently need — tough privacy safeguards to keep their personal information secure,” said Rep. Edward Markey, D-Mass., who has authored two bills on the subject.
All this has been a bit of a personal trial for Smith, who saw an alternative weekly publish his home address, telephone number and the value of his suburban estate — the kinds of details that ChoicePoint sells on consumers every day. The company’s customers include the federal government, insurance companies and businesses that want background checks on prospective employees.
Smith said Thursday he hasn’t considered stepping down.
“I would expect and certainly hope to continue as part of the strategic leadership of this company for a long time to come,” he told The Associated Press.
Company shares sank 7 percent Thursday, on a day ChoicePoint also reported a more than 29 percent decline in its fourth-quarter profit.
The FTC said that it had fined the company $10 million — the biggest the agency has ever imposed — and that ChoicePoint would pay an additional $5 million to compensate consumers.
Previously, the largest FTC fine was for $7 million against medical device maker Boston Scientific Corp. related to competition issues.
The FTC settlement came hours after the company reported its fourth-quarter profit fell to $27.7 million, or 30 cents a share, in the quarter ended Dec. 31, compared with a profit of $39.2 million, or 43 cents a share, for the same period a year ago.