In last week’s column I referred to a “perfect storm” of events that has begun battering the compiled information industry. Call this past weekend Perfect Storm Redux, with three new happenstances coming together that do not bode well for compilers.
First, on Thursday, Senator Arlen Specter (R-PA) called for Judiciary Committee hearings into the consumer data industry. He did so at the behest of Senator Patrick Leahy, the ranking Democrat on the Judiciary Committee.
Leahy made his Thursday request as a constituent service, but on Friday, he became personally invested in the hearings. That day, Bank of America announced that it had lost the credit card records of 1.2 million government employees, including 900,000 Defense Department workers, along with several senators. Including – you guessed it -- Democrat Patrick Leahy of Vermont, as well as Sens. Charles Schumer (D-NY) and Elizabeth Dole (R-NC).
If that weren’t enough, on Friday ChoicePoint Inc., which last week disclosed that it had sold nearly 145,000 consumer records to scam artists, gave the mounting compiled data concerns a face. For on that day an Associated Press story noted that after the firm sales had been made to those questionable clients – but before its stockholders were notified – chief executive Derek Smith and president Douglas Curling made millions from selling company stock.
All this has happened against a backdrop provided by Robert O’Harrow Jr.’s recently released book, “No Place to Hide,” a review of consumer information which features data compilers in a less-than-flattering light.
The Associated Press reports regarding the ChoicePoint executives, while in many ways the smallest part of this perfect storm, may prove to be the most damaging. According to the Associated Press, Smith and Curling's trades of ChoicePoint stock during all of 2002 and 2003 totaled six purchases or sales. In contrast, they made eight transactions, which netted them $16.6 million in profit, in the three months between discovering ChoicePoint's sale of information to scammers, and the company's public disclosure of the same, the AP reported.
The Associated Press made no accusation of criminal activity, and neither do I. According to the story, the Securities and Exchange Commission has not even confirmed that it is looking into the transactions. In fact, the AP said that the transactions were part of a pre-set sales plan that had been approved by ChoicePoint’s board.
So why might this be the most damaging element of the perfect storm? Because from a public relations point of view this is a disaster, and should have immediately been recognized as such. Once the release of information to scam artists had been revealed, either Smith or Curling should have had the good sense to suspend their own trades, or the board should have compelled them to do so.
I’ll put good money on Smith and Curling being among the most visible faces of the compiled information industry appearing before the Senate Judiciary Committee hearings, whenever they are held. And if they are called before the committee, they will be appearing before Senator Leahy, for whom consumer information security has suddenly become an extremely personal issue.
It’s hard to imagine a Judicial Committee hearings scenario that doesn’t have similar overtones. Chairman Specter is currently undergoing treatment for Hodgkin’s disease, and has said the hearings may go on without him. His absence elevates Leahy’s stature, and Leahy would have to be a far better person than most not to bring a personal element into his participation.
Failure to vet clients purchasing consumer information is a serious, but survivable, oversight. But the appearance of profiting from these actions is not, especially when an ounce of publicity savvy could – should – have prevented it.
The compiled information industry is about to embark on one of the most challenging periods it has ever faced. Smith and Curling’s stock transactions have made it more difficult. Batten down the hatches, folks: There are more perfect storms ahead, and unless compilers lash themselves together, they’re sunk.
To respond to the opinions in this column, please contact e-mail: rlevey@primediabusiness.com
