Posted by R. Neal

ChoicePoint is nearing a settlement with the FTC regarding a security breach that led to hundreds of cases of identity theft:

ATLANTA - Data warehouser ChoicePoint Inc. said Thursday it is close to a settlement of a Federal Trade Commission investigation of a major data breach at the company that will include a civil penalty, as it reported a more than 29 percent drop in fourth-quarter profit.

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The Alpharetta, Ga.-based company, which had revealed last year that its massive database of consumer information was accessed by thieves, also said the settlement will include establishment of a fund to be administered by the FTC for consumer redress initiatives and completion of certain customer credentialing activities.

The company, which also is the subject of a pending Securities and Exchange Commission probe, said it does not admit to any wrongdoing in the FTC probe. It did not specify the amount of the penalty, but an FTC announcement could come later Thursday.

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Stock trades by Curling and Derek Smith, ChoicePoint's chief executive officer, are being investigated by the SEC. Curling and Smith made a combined $16.6 million in profit in the months after the company learned of the data breach and before the breach was made public.

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The data breach involved thieves posing as small business customers who gained access to ChoicePoint's database, possibly compromising the personal information of 145,000 Americans. The company discovered the breach more than four months before disclosing it to the public. ChoicePoint has said authorities asked it to keep the information secret initially.

Authorities say at least 750 people were defrauded in the scam that has fueled consumer advocates' calls for federal oversight of the loosely regulated data-brokering business. The company also is a defendant in several lawsuits and complaints arising from the breach, and several government agencies are investigating.

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ChoicePoint collects data on individuals, including Social Security numbers, real estate holdings and current and former addresses. It has about 19 billion records, and its customers include insurance companies, financial institutions and federal, state and local agencies.

This stuff needs to be highly regulated, if not outlawed. You might also recall that ChoicePoint is the same company that Florida Governor Jeb Bush and Secretary of State Katherine Harris hired to "scrub" the Florida voter registration database in 2000 to remove convicted felons. The trouble is, they also removed some 8,000 legitimate voters, some of whom were subsequently denied their right to vote in the 2000 presidential election (which you may also recall George Bush won by 537 votes in Florida and 5 to 4 in the U.S. Supreme Court.)