Data Broker Faces SEC Probe
Federal regulators are investigating why two top executives of information broker ChoicePoint Inc. earned more than $16 million selling stock in the weeks before outrage over a massive identity theft engulfed the company.
ChoicePoint said Friday that the Securities and Exchange Commission's staff had launched an inquiry into the stock sales and the company's handling of a security breach that has sparked a national furor over privacy. The Federal Trade Commission and several state attorneys general also are probing the incident.
Scammers accessed the company's massive online databases and retrieved the records of as many as 145,000 consumers, including their Social Security numbers and other confidential data. A North Hollywood man has been convicted of fraud in the case.
ChoicePoint also said it would restrict the kinds of data provided to small companies in an effort to prevent identity thieves from posing as customers with a legitimate need for personal data.
The company's stock price, which has tumbled since the Feb. 15 disclosure of the data leak, fell again Friday, sinking 6.5%.
Based in Alpharetta, Ga., ChoicePoint maintains the nation's largest commercial collection of court records, Social Security numbers, addresses and other data on people. Businesses and government agencies use the data to check on customers and prospective employees.
According to SEC filings by ChoicePoint, Chief Executive Derek Smith and President Douglas Curling started making regular, weekly stock sales by exercising options on Nov. 9, continuing until Feb. 23.
Smith earned a profit of $12.4 million on the sales that took place before the news broke. Curling took home a profit of roughly $4.1 million.
ChoicePoint spokesman Dan McGinn said Smith and Curling sold their shares as part of routine divestitures and that there was "absolutely no connection" with the identity-theft case.
But Nov. 9 was also the day search warrants were served on ChoicePoint by Los Angeles County sheriff's investigators probing suspicious applications, coming from Southern California, to use the company's databases. The warrants made clear the wide scope of the case, said Los Angeles County Sheriff's Lt. Robert Costa.
Before that day, the company had reason to think that a few hundred potential victims might have to be notified, said another law enforcement official who spoke on condition of anonymity. Afterward, this official said, it was clear that the number would be well into the thousands.
