Senator Warren: Equifax Profits from Data Hack While Consumers Pay the Price
Economist Bill Black says he’s skeptical that either Equifax or its former CEO Richard Smith will be held accountable for the breach that affected an estimated 145.5 million people
JAISAL NOOR: I’m Jaisal Noor for the Real News Network in Baltimore.
Equifax CEO Richard Smith faced a second day of sharp questioning from Congress on Wednesday over the theft of millions of people’s personal data in a hacking breach. This week Equifax increased their estimate of how many people were affected by the hack to 145.5 million. Massachusetts Senator Elizabeth Warren accused Smith and Equifax of profiting off the hack. Here’s a clip.
E. WARREN: In August, just a couple of weeks before you disclosed this massive hack, you said, and I want to quote you here, “Fraud is a huge opportunity for us. It is a massive growing business for us.” Mr. Smith, now that information for about 145 million Americans has been stolen, is fraud more likely now than before that hack?
RICHARD SMITH: Yes, Senator, it is.
E. WARREN: Yeah. So the breach of your system has actually created more business opportunities for you.
JAISAL NOOR: Joining us to discuss this from Kansas City, Missouri is Bill Black. Bill is an Associate Professor of Economics and Law at the University of Missouri Kansas City. He’s a white-collar criminologist, a former financial regulator and the author of, ‘The Best Way to Rob a Bank Is to Own One,’ and of course a regular contributor to The Real News.
Bill, let’s start off by getting your response to that clip today. The Equifax CEO was in front of Congress for the second day just getting pummeled by Republicans and Democrats alike, not really coming up with any good answers in defense of Equifax’s behavior or the fact that they’re continuing to profit from this.
BILL BLACK: There are no good answers at the most fundamental level. First, they were warned of this breach possibility, and they were told how to fix it, and they failed to do those things. That allowed the breach, but the breach shouldn’t have led to the disclosures, because the information should have been encrypted and protected, but Equifax doesn’t take even the most basic steps. The fundamental point, of course, is that we’re not the customer, so there’s nothing we can do to protect ourselves from Equifax. Indeed, Equifax is trying to make sure we have no legal remedies, and the administration is as well, taking away our ability to even sue when these things happen.
Now, Equifax is absolutely right. Fraud is massive. It’s massive both because of the hacking community and because firms take so little care with our information, because it typically doesn’t hurt them. It hurts us, so it really has created a profit opportunity. Everything Equifax did immediately after they went public, which was months later, with this breach, was designed to have them make money. What’s off on the wings, of course, is an investigation of what looks like it was insider trading by senior executives as well. We don’t know whether that will turn out to be true or not. Also, the officers may have personally seen it as a way to make money themselves.
All the facts that are coming out on Equifax are making things much, much worse for them and for other companies that follow very similar lackadaisical approaches.
JAISAL NOOR: Here’s another clip of Senator Warren talking about how Equifax’s profit has risen by 80 percent since these leaks have come out while consumers continue to pay the price.
E. WARREN: I want to look at the big picture here. From 2013 until today, Equifax has disclosed at least four separate hacks in which it compromised sensitive personal data. In those four years, has Equifax’s profit gone up? Mr. Smith?
RICHARD SMITH: Yes, Senator.
E. WARREN: Yes, it has gone up, right? In fact, it’s gone up by more than 80 percent over that time. Because of this breach, consumers will spend the rest of their lives worrying about identity theft. Small banks and credit unions will have to pay to issue new credit cards. Businesses will lose money to thieves, but Equifax will be just fine. Heck, it could actually come out ahead.
JAISAL NOOR: Bill, can you respond to Senator Warren’s comments there?
BILL BLACK: Yeah. We don’t know how much liability Equifax will have. We know that if Equifax gets its way, it will have only trivial liability to the people who it harmed. Our only possible remedy, if they’re able to foreclose our legal remedies, and right now the Administration is doing everything possible to foreclose it, and the Supreme Court has been very helpful to business in removing our legal rights, then our only hope is the Federal government, and you have seen that over the last 15 years, it has been not vigorous in the least in protecting us from white collar criminals and that this administration has said it wants to make things worse. It wants to go to a voluntary disclosure and remedy system, sort of an honor system. It’s incredible.
JAISAL NOOR: Louisiana Senator John Kennedy, he compared the recent 7.25 million dollar no-bid contract given to Equifax by the IRS, he compared that to giving Lindsay Lohan the keys to a minibar. Here’s that clip.
MR. KENNEDY: The contract, the seven million and change contract, does that involve taxpayer information that you would have access to?
RICHARD SMITH: Senator, it’s my understanding. I’m not profess to be deep in this particular contract. It is to prevent fraudulent access to the IRS, but beyond that, if you want more information, we can get that for you.
MR. KENNEDY: You realize, to many Americans right now, that looks like we’re giving Lindsay Lohan the keys to the minibar.
RICHARD SMITH: I understand your point.
JAISAL NOOR: Your response, Bill?
BILL BLACK: Well, it’s a pretty nasty insult to Lindsay Lohan, to compare her to Equifax.
This is in the context that the Securities and Exchange Commission has been revealed to have had a significant breach of some quite confidential market information where they sat on it and didn’t do much of anything. The no-bid contract, if that part is true, is terrible. That’s just one of the things we teach, I teach, is how to run procurement systems, and that’s just a way of encouraging fraud and corruption and cartels and overpricing, but of course it’s obscene and it’s of a piece.
The same type of thing happened with the banks. Even the very few banks that actually pled guilty to felonies and [inaudible 00:08:13] prosecution agreements, they agreed that they had committed felonies. None of them received the normal sanctions that those would mean that you would, for example, not be eligible for Federal contracts and such.
We have one rule for normal people, and we have a completely different rule for the very powerful, and of course we have still another rule for people with darker skins.
JAISAL NOOR: Bill, if this all wasn’t enough, let’s end on this news that came out yesterday that something like three billion Yahoo accounts were hacked in August 2013 affecting every single one of their customers at the time. What can you tell us about this?
BILL BLACK: I can tell you, I teach economics, so I can do advanced math. Two thousand thirteen, 2014, 2015, 2016, 2017, that’s a whole lot of years to finally figure it out that there were actually three billion hacks instead of one billion hacks. If we put this together and we made a novel of it or a movie, critics would pan it and say it’s preposterous. “It’s so unrealistic. It’s so anti-business. We’re just making them look like doddering fools when they’re geniuses …”
Okay. Again, our family rule is it is impossible to compete with unintentional self-parody, and Yahoo leaves me speechless.
JAISAL NOOR: All right. Bill Black, once again, thank you so much for joining us.
BILL BLACK: Thank you.
JAISAL NOOR: Thank you for watching The Real News.