Equifax Board Forms Panel To Review Executives' Stock Sales After Data Breach (bloomberg.com) 57
An anonymous reader quotes a report from Bloomberg: Equifax's board of directors has formed a special committee to review the stock sales that top executives made days after the company found out it was hacked. Directors at Equifax have retained counsel and are conducting a "thorough review" of the trades, according to a Sept. 28 letter the company's outside lawyers submitted to the top Democrat on the House Energy and Commerce Committee. The examination adds to investigations already being conducted by federal law-enforcement agencies. "Equifax takes these matters seriously," the company said in its response to questions posed by Democrats on the panel, led by Frank Pallone, from New Jersey. "The board of directors has formed a special committee," according to the letter, addressed to Pallone and obtained by Bloomberg News.
The trades, which were first reported by Bloomberg, involve Equifax CFO John Gamble, President of U.S. Information Solutions Joseph Loughran and President of Workforce Solutions Rodolfo Ploder. They unloaded shares worth almost $1.8 million just days after the company says it discovered the breach on July 29. Equifax has repeatedly said the managers didn't know of the intrusion when they sold stock.
The trades, which were first reported by Bloomberg, involve Equifax CFO John Gamble, President of U.S. Information Solutions Joseph Loughran and President of Workforce Solutions Rodolfo Ploder. They unloaded shares worth almost $1.8 million just days after the company says it discovered the breach on July 29. Equifax has repeatedly said the managers didn't know of the intrusion when they sold stock.
As Socrates said... (Score:2)
Quis equifaciet ipsos equifaces?
Investigation (Score:3)
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I'm sure the panel will absolve everyone.
I think the people on the panel will mostly be interested in figuring out why they didn't get in on this scam.
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If the company finds that they breached their fiduciary duty in some way, they can try to go after their ill-gotten gains in civil court.
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People form corporations because they offer "limited liability", i.e. the company is liable, not the individuals.
However, the Board of Directors are personally liable for certain things (e.g. employee pay, taxes) if the company fails to meet its financial obligations. That means their personal property can be liquidated, if necessary, to pay whatever they owe. They can't simply bankrupt the company and walk away.
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It hasn't been proven that the particular officials that engaged in stock trades had, or even should have had, knowledge of the incident. That I believe they did is irrelevant.
OTOH, WTF!!! Why on earth would I believe any report made by a company investigating itself for wrong-doing. Even when there's an outside investigation companies are *known* for passing the blame to innocent parties. Or subordinates who were operating under threat, and were at most accessories after the fact.
To me this screams that
SEC? (Score:3)
Why have 100 SEC agents not busted down their doors and hauled off truckloads of documents?
Is there no longer any SEC to worry about?
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The SEC has been mostly irrelevant for at least 20 years.
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The SEC is sometimes slow to act. But when it has a plainly illegal situation, it acts. Mostly for the PR, perhaps, but this will not go well for the Equifax execs involved.
Proving mostly that they were incompetent at a breathtakingly broad scope. God, bad security head hire, bad management, bad response, and trying to cash out before the fan went on high speed. Almost as bad as it can get. Only when we learn they backed their security head's destruction of the careers of the whistlelblowers who knew they w
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> The SEC is sometimes slow to act. But when it has a plainly illegal situation, it acts.
As best I can tell, the SEC has been stripped of resources with which to investigate _anything_ in the last few decades. This lack of resources, and the enforced unwillingness to investigate complex cases or those against powerful interests, has profoundly reduced their ability to prosecute even the most blatant abuses when the fiscal or political cost of the investigation would be high.
The result is that they seem t
"We have investigated ourselves..." (Score:5, Insightful)
A Special Committee?!? Oh noes!!! (Score:2)
Are they going to punish the evil-doers with a very harshly-worded letter?
Re:A Special Committee?!? Oh noes!!! (Score:4, Funny)
I've always wondered this.... (Score:3)
...isn't by definition any stock sales by current officers insider trading? For good or bad, they will always have information that the public will never have. Where and how is that line drawn, and how can it not be an arbitrary one?
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There are ways to sell stock that without being directly involved in the decision. For example, scheduling automatic buy/sell shares every quarter at the market price. You have some foreknowledge, but it is not perfect knowledge to make the optimal decision.
Re:I've always wondered this.... (Score:4, Informative)
Insiders are supposed to file their plans to buy or sell ahead of time with the SEC. It becomes public information that they're going to trade so outsiders have advanced knowledge of what's going to happen, if not why.
These guys are in trouble because they sold the stock without any advance notice.
How much? (Score:2, Interesting)
So two presidents and the CEO dumped $1.8 million shares of stock? Most CEOs get paid mostly in stocks as the capital gains is less than their income tax would be. I would think they owned more than that. If you knew the stock was going to tank wouldn't you unload everything?
There could still be insider trading happening here, but really, at a company that size a couple of million dollars in stocks isn't that much.
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Most CEOs get paid mostly in stocks as the capital gains is less than their income tax would be. I would think they owned more than that.
Exactly. The raw data is here [nasdaq.com]. In sum:
John Gamble (CFO) sold 6,500 out of 48,578 shares (~13%) for a total of ~$950k. Total comp in 2016 (source here [morningstar.com]) was ~$3.1 million, including ~$1.2 million in stock.
Rodolfo Ploder (President) sold 1,179 out of 44,827 shares (~2.5%) for a total of $170k. Total comp in 2016 was ~$2.8 million, including $785k in stock.
Joseph Loughran (President) sold 4,000 out of 42,723 shares (~9%) for a total of ~$485k. Couldn't find his total comp, but reasonable to believe it's in
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If you knew the stock was going to tank wouldn't you unload everything?
I'm not saying one can know for sure what happened without doing an investigation.
But unloading stocks can be complicated. There are vesting schedules, tax implications, disclosure requirements, voting considerations for the control of the company, etc.
Misdirection (Score:5, Insightful)
In emails which subsequently came to light in discovery during an investigation and trial, Blair advised Brookes and Murdoch to "hold an internal enquiry". There is an interesting explanation of that here:-
https://www.theguardian.com/uk... [theguardian.com]
The key point about Blair's advice is that he advocates a "Hutton-style" inquiry. This was a judicial inquiry, run by Lord Hutton, into the death of MoD scientist Dr David Kelly. The inference in Blair's advice to Brookes is to set up an *internal* inquiry, staffed by people who might look independent but would be loyal to her, then direct them to go and find the answer that Brookes wanted them to find. In other words, do something which looks official to outsiders, but which in reality can be a complete sham.
I am reminded of that episode in this context, because this is starting to look for all the world as though Equifax management are hoping that any further accusations of wrong-doing can be stopped at the feet of those who have already left the company. Right now, the worst possible outcome for them would be a wide-ranging SEC or Federal investigation that looked at their own internal controls relating to such things as the sale of shares.
Disclosure - I've worked for a major US financial institution who, through caution regarding this specific issue, regularly implements "share blackout" windows to literally *prevent* staff from trading shares in the run-up to the reporting of quarterly figures. In other words, I've seen some of the lengths that some companies are willing to go to in order to demonstrate that they are "squeaky clean" with nothing to hide. This latest from Equifax looks for all the world as though the Board are now worried that the SEC might sanction more of them, even further, if it can be shown that their internal financial and governance controls are wanting.
The idea would be to implement this bogus review and find issues which could then be "fixed".
There are several advantages to this for Equifax:-
1. It is an attempt to persuade the SEC that their own internal controls do not require additional sanction for other directors/employees - i.e. a last-ditch attempt at damage limitation...
2. If they find issues and implement changes to address them, the changes will be of their choosing and not imposed on them by an outside third party.
3. It is an attempt at a public message to major shareholders that the company still takes their fiduciary duty seriously. As if anyone would believe them at this juncture.
Of course, the thing to bear in mind here is that this is complete and utter tosh. If the company wanted to "do the right thing", they would either wait for the SEC to finish, or the board of directors would appoint a firm of outside auditors, given them wide ranging authority to go where the evidence took them, and arrange for discussions on the findings to be held with major shareholders in the room. That last would be important given the implications that any wrong-doing might include directors themselves...
The fact that Equifax *aren't* going to the trouble of implementing an externally-led inquiry really tells you everything you need to know about the validity of what they are doing...
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Your analysis is very reasonable. I'd mention another opportunity of an internal inquiry: to close off avenues of inquiry by discovering what witnesses to prevent from testifying, and what evidence to eliminate before subpoenas are issued and destruction of evidence becomes a criminal matter. I've seen this happen: a company expecting a lawsuit asked for, and got, my consulting help with expunging records that were no longer legally required but which might have been of interest to a an opposing litigant. T
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If I'd sired a pair of burglar's dogs like them I'd try and hush it up.
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You're looking too far, this is a publicity stunt to appease the masses. If you want to avoid the SEC, all you have to do is make sure to hire a particular lawyer firm that has ties to the current SEC administration and then the investigation deadlocks. You know, like this [nytimes.com].
Company investigates own officers (Score:2)
Who thinks the flying spaghetti monster is god of the universe?
Surprise, same hands
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Not true!! I believe in the flying spaghetti monster, lord of the universe!
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Foxes form special panel to review... (Score:1)
...the spate of all the chicken deaths in the coop.