ChoicePoint Defends Executives' Stock Sale

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As the Senate gears up for hearings on identity theft and information brokers in the wake of the ChoicePoint consumer data breach, questions have been raised about two company executives' stock sales that occurred before the incident was made public.


The Associated Press reported last week that ChoicePoint CEO Derek Smith and president Douglas Curling made $16.6 million from selling shares of the company's stock after the discovery of the breach in October but before public notification began in late January.


In an interview that appeared in yesterday's Atlanta Journal Constitution, Smith said he did not do anything inappropriate and he was not even aware of the breach until late December or January.


The company defended Smith's and Curling's actions in a statement yesterday.


"Articles published recently raise questions about the pre-arranged stock trading plans of ChoicePoint chairman/CEO Derek Smith and president/COO Doug Curling," the statement said. "The record is not only clear, it is public. In November 2004, Mr. Smith and Mr. Curling adopted plans that provide for pre-arranged sales of stock over a six-month period. These plans are typical for senior executives of public companies and the plans were approved by the company's board of directors."


Alpharetta, GA-based ChoicePoint, which houses billions of data points on businesses and nearly every adult in the United States, realized in October that some requests for names, Social Security numbers and other information it had filled might have been fraudulent. Since then, the company and law enforcement have discovered nearly 50 bogus accounts posing as legitimate businesses. After an investigation, the company was cleared in late January to notify California consumers, as required by law in the state, that their information may have been accessed.


ChoicePoint initially confirmed that data on 35,000 California consumers might have been accessed, but on Feb. 16 the company said that another 110,000 letters would be sent nationwide connected with the fraud.


As of last week, 750 consumers have been confirmed as directly affected.


Though Senate hearings on the issues stemming from the ChoicePoint situation have not yet been scheduled, more bad news for data security emerged late last week. Bank of America confirmed Friday that some of its computer data tapes containing personal and account information for federal government charge card program customers were lost during shipment to a backup data center.


In a statement, the financial institution said it notified federal law enforcement immediately when it discovered the tapes were missing but did not specify when that occurred. It also said it has been given permission and would notify all affected parties by letter and continue to monitor those accounts.


Though the statement did not specify the number of records, several news reports said the lost data affected 1.2 million government workers with 900,000 being Defense Department employees.


Bank of America did not respond to requests for comment by deadline.


Kristen Bremner covers list news, insert media, privacy and fundraising for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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