ChoicePoint Steps Up

Information broker ChoicePoint (NYSE: CPS  ) found itself with a bonanza of publicity last week. Unfortunately, it wasn't the good kind.

The big news on Friday was that a ring of "identity thieves" conned the Georgia company into providing them with access to its databases of personal information on tens of millions of individuals. Full names, Social Security numbers, addresses. You name it, ChoicePoint has it -- and has sold it.

Of course, ChoicePoint didn't realize it was selling database access to crooks. The thieves planned this operation well -- first stealing identities from fine, upstanding citizens, then using those stolen identities to set up apparently legitimate businesses, complete with state licenses and all the trimmings. And finally, the thieves applied, through those businesses, for dozens of accounts with ChoicePoint -- accounts that gave them access to ChoicePoint's vaults of information. Perhaps most frightening of all, the thieves' operations ran for approximately a year before they were finally shut down, and estimates of the number of people whose records (may) have fallen into the wrong hands have ranged as high as half a million.

Beginning Monday, ChoicePoint took to the field with a PR blitz of its own. The company rejected allegations from 38 state attorneys general that it had been dragging its feet in informing victims of the scam. ChoicePoint explained that it had not advised those at risk sooner because it was cooperating with law enforcement's investigation and efforts to nab the bad guys.

The company then went two steps further -- trying to win over the public, then preempt congressional calls for increased regulation of its business, as well as that of competitors such as Reed Elsevier (NYSE: ENL  ) .

In step one, ChoicePoint began notifying 145,000 potential victims of the scam and further offered to pay for a full year's subscription to a credit monitoring service for each potential victim.

In step two, ChoicePoint vowed to re-verify the legitimacy of all of its 17,000-odd clients who are not already public companies (presumably already verified by the SEC) or government agencies (insert your favorite joke here). It's a mammoth task, one that ChoicePoint expects to take at least two months -- and there's no telling how many dollars -- to complete. But in stepping up to undertake this effort, ChoicePoint may even steal Congress' thunder and save both itself and similar companies -- such as Acxiom (Nasdaq: ACXM  ) , infoUSA (Nasdaq: IUSA  ) , Equifax (NYSE: EFX  ) , and Dun & Bradstreet (NYSE: DNB  ) -- from the imposition of new regulations on their business.

It may be the cynic in me, noting how ChoicePoint's actions will benefit itself. But whatever its motivation, the fact of the matter is that at least ChoicePoint is trying to redress the harm already done, as well as head off future fiascos of this sort.

Learn more about ChoicePoint, its business and its competitors, in Tom Taulli's:

Fool contributorRich Smithhas no position in any of the companies mentioned in this article.


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