Data broker hires U.S. security official

Defrauded ChoicePoint recruits TSA deputy

March 09, 2005|By COX NEWS SERVICE

ATLANTA - Directors of embattled ChoicePoint named a top federal anti-terror official their new privacy chief yesterday, marking the board's first public stand since news broke last month of the company's enormous security breach.

Carol A. DiBattiste, deputy administrator at the Transportation Security Administration, will report directly to ChoicePoint's board rather than to Chairman and Chief Executive Officer Derek V. Smith when she joins the company May 2.

In her role as chief credentialing, compliance and privacy officer, DiBattiste will head a new ChoicePoint office designed to prevent a repeat of the recent invasion into the company's consumer-information database.

DiBattiste is being hired "to regain the trust of consumers that their information is being used only for their benefit, or the benefit of society at large," John Hamre, chairman of the board's privacy committee and a former U.S. deputy secretary of defense, said in a statement.

Last month, ChoicePoint said it would notify 145,000 people nationwide that their personal information was endangered after the company sold access to its files to bogus businesses. The incident has sparked investigations by the Securities and Exchange Commission and the Federal Trade Commission.

Additionally, politicians nationwide have called for tighter control of data brokers such as ChoicePoint. The Alpharetta, Ga., company collects consumer data on nearly every American and sells it to insurance companies, other businesses and government agencies to help them check on people's background.

Paul Lapides, a corporate governance expert at Kennesaw State University, applauded the move and said it's time for the ChoicePoint board to take a strong public role.

"You have directors on the board who have stellar reputations," he said. "When one director says we are addressing this and here is what we are doing, it means a lot."

Charles Elson, a corporate governance expert at the University of Delaware, agreed. "The more transparent the board process, the better at this point," he said. "You have 145,000 people whose credit files are compromised."

The eight independent ChoicePoint directors did not respond to requests for comment yesterday. ChoicePoint President Doug Curling and Smith also are board members.

The board includes several high-powered directors. Among them are Wal-Mart Stores Inc. Vice Chairman Thomas M. Coughlin and Kenneth G. Langone, a founder of Home Depot Inc., who came under fire for his role as a New York Stock Exchange director who pushed for a huge compensation package for former Chairman Richard A. Grasso.

The FTC is investigating whether the company complied with laws governing information security. Meanwhile, the SEC is examining stock trades by Smith and Curling.

The two men made about $17 million in sales that began after the company detected the scheme in September but before it became public. Smith has said he didn't know of the problem until January.

Michael Rosenzweig, a lawyer and corporate governance expert with the Atlanta law firm McKenna, Long & Aldridge, said the appointment of DiBattiste is a good move but not enough. The board should conduct an internal investigation into the stock trading of the two executives, he said.

Experts agreed that hiring DiBattiste was a good move because she will help oversee the way ChoicePoint checks credentials of potential customers and the way it guards consumer data.

DiBattiste, who was not available for comment yesterday, is a former undersecretary of the Air Force and a former deputy U.S. attorney in Miami.

ChoicePoint did not say how it settled on DiBattiste, but the company has done business with her current employer, the TSA. After the Sept. 11, 2001, terrorist attacks, the TSA selected ChoicePoint to perform background checks on tens of thousands of potential airport screeners.

Last week, ChoicePoint announced that it would stop selling personal data about consumers through its small-business unit. The bogus companies established their accounts through that unit.

One man has been arrested and jailed, and California authorities are investigating. ChoicePoint initially said the incident was the first of its type, but reports of a previous case surfaced last week.

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