The Atlanta Journal-Constitution
Report: U.S. probes stock sales by 3 Equifax execs
Insider trading laws are focus amid company’s security breach.
Two federal agencies are investigating three top Equifax executives’ stock trades to see whether they violated insider trading laws, according to a media report.
Bloomberg reported Monday that a criminal probe by the U.S. Attorney’s Office in Atlanta is focused on Equifax’s chief financial officer and presidents of two business units, who sold a combined $1.8 million in stock in early August, days after the company learned of a massive security breach, but before it was public.
Bloomberg also reported that the U.S. Securities and Exchange Commission, which enforces federal securities laws through civil penalties and sanctions, is also
investigating the trades.
Later Monday, Bloomberg reported that Equifax was hit by another big data hack in March, months earlier than the company recently disclosed. Bloomberg said the earlier data breach may involve the same hackers. If true, that incident would raise additional questions about the executives’ stock trading or oversight of the company.
The Atlanta Journal Constitution could not independently confirm the existence of the reported probes.
A statement from the U.S. Attorney’s Office confirmed that it is investigating the data breach at the Atlanta-based company, but said nothing of an investigation into stock trades.
“The U.S. Attorney’s Office for the Northern District of Georgia is working with the FBI to conduct a criminal investigation into the Equifax breach and resulting theft of personal information,” said U.S. Attorney John Horn in a statement.
Representatives of the SEC could not be reached. Equifax did not answer requests for comment.
Previously, an Equifax representative said the three executives “had no knowledge that an intrusion had occurred at the time.”
But immediately after Equifax disclosed the hacking incident on Sept. 7, the company told its investors that it had “promptly” informed its board of directors after discovering the data breach on July 29.
A possible criminal investigation of some of Equifax’ executives would add an extra challenge to the company’s rapidly mounting troubles. Equifax faces investigations of how it handled people’s sensitive data and the ensuing data breach on several fronts, including by federal and state agencies, hearings by federal lawmakers and dozens of new or brewing lawsuits.
Equifax’s market value has plunged by roughly $6 billion as its stock fell about 35 percent after disclosing earlier this month that hackers stole Social Security numbers and other sensitive information for 143 million people in the U.S., as well as plundering similar data on other people internationally.
Equifax, one of the nation’s three key credit-tracking bureaus, said the breach occurred from mid-May to late July.
The company has been swamped with consumers’ efforts to freeze their credit profiles in the wake of the data breach, according to consumer experts and people who have tried to sign up.
Friday, Equifax announced that two top executives in charge of its information systems and data security were retiring. None were among the three who disclosed large stock sales after the data breach.
Insider trading is when someone with non-public information buys or sells stock to make a profit or to avoid losses on the holdings they have. It can also include tipping off others to make trades based on non-public information.
According to filings with the SEC, Equifax Chief Financial Officer John Gamble sold $946,374 of company stock on Aug. 1. Joseph Loughran, president of Equifax’s U.S. Information Solutions unit, sold $584,099 on the same
date. Rodolfo Ploder, president of Consumer Information Solutions, sold $250,0458 a day later.
Collectively, the trades allowed the executives to avoid almost $628,000 of losses as of Monday, when Equifax’s stock price closed at $94.38. The executives sold their shares at average prices of $145.60 to $146.02.
Typically, top executives at public corporations use pre-programmed stock sales through a so-called 10b5-1 plan to avoid accusations of illegal insider trading. But the three executives’ stock sale disclosures filed with the SEC do not indicate that their stock sales were pre-scheduled.
Joshua Lowther, a criminal defense attorney in Atlanta, said the stock sales raise a number of questions.
Given federal lawmakers’ concerns about the circumstances around the breach and the blitz of media coverage, investigators “can’t let something like this go unchecked in something this high profile” without a thorough examination of the facts, Lowther said.
The scope of the breach and the executives’ positions within the Fortune 500 company also opens them up to suspicions that they must have known, Lowther said.
For the public, that such senior level people would not be aware of the breach in the days after its discovery “defies belief,” he said.