FBI's Reliance on the Private Sector-gctid25474

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http://www.interesting-people.org/archives/interesting-people/200104/msg00055.html

>FBI's Reliance on the Private Sector
>Has Raised Some Privacy Concerns
>
>By GLENN R. SIMPSON
>Staff Reporter of THE WALL STREET JOURNAL
>
>WASHINGTON -- Big Brother isn't gone. He's just been outsourced.
>
>After surveillance scandals in the 1960s and 1970s, the Federal
>Bureau of Investigation and other federal law-enforcement
>authorities curbed their file-keeping on U.S. citizens. But in
>the past several years, the FBI, the Internal Revenue Service
>and other agencies have started buying troves of personal data
>from the private sector.
>
> >From their desktop computers, 20,000 agents at the IRS have
>access to outside data on taxpayers' assets, driving histories,
>phone numbers and other personal statistics. Using a password,
>FBI agents can log on to a custom Web page that links them with
>privately owned files on tens of millions of Americans. And with
>just a few keystrokes, the U.S. Marshals Service can find out
>if a fugitive has recently rented a mailbox or acquired a new
>phone line.
>
>'An End Run'
>
>Behind such high-tech tools are ChoicePoint Inc., a publicly
>held Alpharetta, Ga., company and other commercial "look-up"
>services. ChoicePoint and its rivals specialize in doing what the
>law discourages the government from doing on its own -- culling,
>sorting and packaging data on individuals from scores of sources,
>including credit bureaus, marketers and regulatory agencies.
>
>Privacy activists say that by outsourcing these tasks, federal
>agencies are violating at least the spirit of the nation's major
>privacy law, which admonishes the agencies to maintain only
>the data about a given individual that they need to do their
>jobs. "It's simply an end run around the Privacy Act" of 1974,
>says Marc Rotenberg a lawyer for the Electronic Privacy Information
>Center, an advocacy group based here.
>
>Back in the 1970s, critics say, lawmakers never imagined that
>technology would place so much data within the government's reach
>but outside its actual possession. They add that the government's
>alliances with ChoicePoint and its peers have evolved largely
>without debate or congressional oversight at a time of increasing
>public concern about online threats to privacy.
>
>ChoicePoint and its federal clients say their use of the company's
>data follows both the letter and spirit of the law. And, indeed,
>there has been little evidence so far of privacy violations
>arising from government access to the data. "We are only permitted
>to obtain evidence and information consistent with applicable
>laws, including the Privacy Act, and rigorous attorney general
>guidelines," says FBI spokesman John Collingwood. "A vigorous
>inspection process, judicial oversight of prosecuted cases
>and civil remedies are in place to enforce compliance by FBI
>employees."
>
>ChoicePoint Chief Executive Derek Smith calls his company's
>dealings with the government "a natural extension" of its business
>of equipping insurers and other companies to check out prospective
>partners and clients. Similarly, he says, the company helps the
>government find criminals and uncover fraud that hurts taxpayers.
>
>Mr. Smith says his company's contracts define appropriate uses
>of its data and that ChoicePoint audits them to make sure those
>conditions are met. "I care very much about making sure the
>information is used to make a safer, more secure society," he says.
>
>Federal agencies contract with several private-sector companies for
>data and related services. Among them is Lexis-Nexis, a unit of
>Anglo-Dutch publisher Reed-Elsevier PLC, whose databases include
>newspaper articles, legal briefs and other public records. But
>ChoicePoint is the biggest supplier to law enforcement.
>
>The FBI's Investigative Information Services unit, which helps
>agents obtain information on individuals for their investigations,
>relies heavily on ChoicePoint's services. On the Web, FBI agents
>also can go to www.cpfbi.com1 -- "ChoicePoint Online for the FBI"
>-- for help in conducting their own searches. On that Web page,
>the company's logo appears alongside the FBI's official seal.
>
>"The FBI has located nearly 1,300 subjects of criminal cases
>using these kinds of searches," Mr. Collingwood says. The service
>"saves countless hours of manual records checks, a process the
>FBI has relied on for decades." Neither the FBI nor ChoicePoint
>would disclose how much the agency pays the company.
>
>The Justice Department's contract with ChoicePoint ballooned to $8
>million last year from $1 million in 1996. Treasury Department
>documents show that the exclusive multiyear deal the IRS signed
>with the company in August is worth a total of $8 million to
>$12 million. The company says its clients include at least 35
>federal agencies.
>
>That business has contributed to ChoicePoint's impressive financial
>performance. Since it became a standalone company four years
>ago, ChoicePoint's stock price has more than doubled. Thursday
>in 4 p.m. New York Stock Exchange composite trading, its shares
>rose 65 cents to $35.50, down from its 52-week high of $44.67
>in December. Last year, ChoicePoint's business and government
>division had revenue of $292.4 million, up 24% from 1999, and its
>operating income more than tripled to $45.3 million. The division
>now accounts for more than half the company's total revenue.
>
>ChoicePoint says it buys its primary information for the data
>products it markets to the government, private detectives and
>the media from the nation's three major credit bureaus. They
>are Equifax Credit Information Services Inc., a unit of former
>ChoicePoint parent Equifax Inc.; Trans Union LLC and Experian
>Information Solutions Inc. Each of the three companies maintains
>credit histories on more than 180 million Americans.
>
>The company takes these credit-bureau files and retains the portion
>that lists the consumer's name, known aliases, birthdate, Social
>Security number, current and prior addresses and phone number. The
>credit-bureaus are valuable sources of such data because their
>records tend to be up-to- date. That's because people typically
>tell their creditors when they move, even if they fail to tell
>the Postal Service.
>
>ChoicePoint indexes this data under the subject's Social
>Security number and stirs in more information it gleans from
>other sources. These sources, including local, state and federal
>agencies, sell the company data ranging from motor-vehicle, driver
>and boat registrations, liens and deed transfers to phone listings,
>military personnel records and voter rolls.
>
>By mixing and matching its databases, ChoicePoint can accumulate
>all kinds of information -- a speeding fine, a bankruptcy filing,
>a spouse's name -- under a single Social Security number, tailoring
>the data and related software to a particular client. However, the
>company has warned investors that its ability to do business would
>suffer if Congress were to enact laws restricting the private use
>of Social Security numbers, as has been proposed in recent years.
>
>Address Inspector
>
>The Health Care Financing Administration uses the company's
>Address Inspector software to help identify fraudulent Medicare
>claims. The product lets it check health-care providers' addresses
>against two million of what ChoicePoint calls "high-risk and
>fraudulent business addresses." They include private mailboxes
>and street addresses in high-crime areas. Though many who rent
>private mailboxes do so out of concern for their privacy, those
>box numbers still can end up in ChoicePoint's hands if they are
>used in dealings with businesses or government.
>
>Although ChoicePoint says it has records on nearly every American
>with a credit card, it doesn't always provide access to that
>data. The company's Autotrack service is popular with many agencies
>and businesses and is also used by reporters at The Wall Street
>Journal. But entering the name of FBI Director Louis Freeh into the
>Autotrack database produces an error message. A company spokesman
>says ChoicePoint intentionally blocks Mr. Freeh's records as an
>act of good corporate citizenship.
>
>Among the tools ChoicePoint offers law-enforcement agencies
>is the ability to set up "alert" files that continuously scan
>databases for information on a suspect. So far, the U.S. Marshals
>Service, which has a $3.8 million contract with ChoicePoint,
>is the only agency that uses this feature. In 1999, one such
>alert showed that a woman wanted for mail fraud had rented a
>private mailbox. A follow-up investigation led to her arrest,
>according to agency records.
>
>While they decline to discuss details of their relationship with
>ChoicePoint, the FBI and other agencies say they aren't doing
>anything new except retrieving data electronically instead of
>digging through various far-flung paper files. Before ChoicePoint,
>"We went all over the place going to the same sources of
>information as ChoicePoint is going to," says Greg Gagne,
>a spokesman for the Immigration and Naturalization Service,
>which paid the company $1.5 million last year.
>
>Three decades ago, revelations about the FBI's history of
>compiling files on Vietnam War protesters, civil-rights activists,
>celebrities and thounited snakesnds of other citizens seemingly picked at
>random set off a wave of public outrage. Among those with files
>were Albert Einstein, Rock Hudson, Cesar Chavez and Henry Ford.
>
>Congress responded by passing the Privacy Act of 1974, which was
>designed to discourage such wholesale data gathering. While the
>law doesn't explicitly prohibit the government from compiling
>dossiers on presumably law-abiding private citizens, the FBI and
>other agencies in the past have generally interpreted it that way.
>Moreover, some of those agencies' own internal guidelines bar
>them from actively assembling such files themselves.
>
>For instance, the FBI's "Manual of Investigations, Operations and
>Guidelines" says, "Only that information about an individual which
>is relevant and necessary to accomplish a purpose authorized by
>statute, executive order of the president, or by the Constitution
>is to be recorded in FBI files."
>
>Scott Charney, former head prosecutor in the Justice Department's
>computer crime unit, says department guidelines prohibit the
>collection of public or other data on an individual unless the
>agency has reason to believe he may have committed a crime. "If
>the government can't go out and collect information on you
>absent predication, they shouldn't be able to go out" and buy
>it from an outside source, says Mr. Charney, now a lawyer for
>PricewaterhouseCoopers LLC.
>
>Indeed, some attorneys think the government's reliance on
>outside data collectors may violate citizens' rights to protection
>against unreasonable searches. Gerry Goldstein, a criminal defense
>lawyer in San Antonio, says that, "When the government actively
>encourages and solicits individuals to act on their behalf,
>those individuals," in effect, become government agents.
>
>Mr. Gagne of the INS dismisses that argument. The government,
>he says, didn't solicit ChoicePoint or other data providers to
>build their databases. "They were doing this for quite some time"
>before the government started buying the data, he says.
>
>Another concern cited by critics is that Uncle Sam historically has
>proved to be an unreliable safekeeper of private information. In
>1993, an inquiry by the General Accounting Office, Congress's
>investigative arm, found that the FBI's own audits had repeatedly
>reported misuse of the agency's biggest internal database,
>the National Crime Information Center. Last year, the GAO said
>the federal government wasn't complying with privacy standards
>the Federal Trade Commission had proposed for businesses. And a
>recent House investigation gave the government's computer-security
>efforts a "D-minus" grade.
>
>Moreover, the public data ChoicePoint and its rivals use to build
>their databases aren't always accurate -- as ChoicePoint itself
>has found.
>
>Florida Lawsuit
>
>In January, the National Association for the Advancement of Colored
>People sued ChoicePoint and the state of Florida in federal court
>in Miami, accusing the company of supplying faulty data that led to
>thounited snakesnds of citizens being wrongly purged from Florida voter rolls
>in the November election. ChoicePoint has admitted that some data
>it provided was inaccurate, but it says its DBT Online Inc. unit,
>which was hired by the state to compile lists of convicted felons
>still carried on the rolls, warned state officials that the data
>needed to be verified. Florida election officials have blamed their
>predecessors and county authorities for not following through.
>
>In another incident, this time in the private sector, a
>Chicago-area woman was fired in 1998 from her technical job at
>a major computer maker after ChoicePoint told her employer that
>she was a convicted drug dealer and shoplifter. In fact, the
>woman had no criminal record. A ChoicePoint spokesman concedes
>the mistake. The woman's employer rehired her, but in a menial
>job. She sued both companies and reached a confidential settlement.
>
>Until four years ago, ChoicePoint was part of Atlanta-based
>Equifax. Like other credit bureaus, Equifax's collection and
>sale of personal data on American consumers has been dogged by
>controversy over the years, leading regulators to put stricter
>rules on the companies' practices.
>
>In 1993, Mr. Smith took the helm of Equifax's insurance-services
>division, which helped insurers evaluate the risks of taking on new
>policyholders. He says he quickly realized that the money-losing
>unit could serve another, potentially lucrative purpose. With
>society becoming more mobile, he says, he decided to pitch the
>division's database as a way for companies to feel more secure
>in dealing with relative strangers. The division's fortunes
>rebounded, with its operating income tripling in 1994. Equifax
>spun the division off in 1997, and Mr. Smith went along as CEO.
>
>Meanwhile, the FBI and others started to appreciate the value
>of computerized databases and looking to the private sector for
>help in gathering records. Two companies, CDB Infotek and DBT,
>won much of this early business, because of their experience
>selling data to police departments.
>
>ChoicePoint acquired CDB Infotek in 1996 and purchased DBT last
>year. It also bought up more than a dozen other firms that bought
>police reports and records relating to drug tests, physicians'
>backgrounds, insurance fraud, and litigation. DBT brought in the
>biggest haul. The data DBT had collected from insurers, private
>eyes, law firms and government doubled ChoicePoint's data bank
>to 10 billion records.

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http://www.msnbc.msn.com/id/6846357/

ChoicePoint finds wealth in information

Giant transforming itself into a private intelligence service

WASHINGTON - It began in 1997 as a company that sold credit data to the insurance industry. But over the next seven years, as it acquired dozens of other companies, Alpharetta, Ga.-based ChoicePoint Inc. became an all-purpose commercial source of personal information about Americans, with billions of details about their homes, cars, relatives, criminal records and other aspects of their lives.

As its dossier grew, so did the number of ChoicePoint's government and corporate clients, jumping from 1,000 to more than 50,000 today. Company stock once worth about $500 million ballooned to $4.1 billion.

Now the little-known information industry giant is transforming itself into a private intelligence service for national security and law enforcement tasks. It is snapping up a host of companies, some of them in the Washington area, that produce sophisticated computer tools for analyzing and sharing records in ChoicePoint's immense storehouses. In financial papers, the company itself says it provides "actionable intelligence."

"We do act as an intelligence agency, gathering data, applying analytics," said company vice president James A. Zimbardi.

ChoicePoint and other private companies increasingly occupy a special place in homeland security and crime-fighting efforts, in part because they can compile information and use it in ways government officials sometimes cannot because of privacy and information laws.

ChoicePoint renewed and expanded a contract with the Justice Department in the fall of 2001. Since then, the company and one of its leading competitors, LexisNexis Group, have also signed contracts with the Central Intelligence Agency to provide public records online, according to newly released documents.

Attorney General John D. Ashcroft and other government authorities have said these new tools are essential to national security. But activists for civil liberties and privacy, and some lawmakers, say current laws are inadequate to ensure that businesses and government agencies do not abuse the growing power to examine the activities of criminals and the innocent alike.

These critics said it will soon be hard for individuals looking for work or access to sensitive facilities to ever shake off a criminal past or small transgression, such as a bounced check or minor arrest.

A 'Scarlet Letter' society?
Chris Hoofnagle, associate director of the Electronic Privacy Information Center, a nonprofit group in the District, said ChoicePoint is helping to create a " 'Scarlet Letter' society."

The information industry has traditionally fought regulations, arguing that it can police itself. But hoping to avoid a regulatory backlash that could curtail his company's access to information, ChoicePoint chief executive Derek V. Smith said he'll be reaching out to Capitol Hill in the coming months to promote the industry's benefits -- and express his willingness to work with lawmakers to develop new regulations.

"We have a new responsibility to society, and we want to make sure that's legitimized," Smith said. "We'd like everybody to play by the same rules and standards that society believes are correct."

An expanding industry
An entire industry has mushroomed during the past decade because of extraordinary increases in computing power, the expansion of telecommunications networks and the ability of companies like ChoicePoint to gather and make sense of public records, criminal histories and other electronic details that people now routinely leave behind.

Some of these companies -- including the three major credit bureaus -- have become multi-pronged giants that regularly refresh information about more than 200 million adults and then sell that data to police, corporate marketers, homeland security officials and one another.

In doing so, they wield increasing power over the multitude of decisions that affect daily life -- influencing who gets hired, who is granted credit or who can get on an airplane.

ChoicePoint is not alone in eyeing the government for new business. LexisNexis and others also work closely with national security and intelligence officials. To compete in the homeland security market, LexisNexis paid $775 million last year for Seisint Inc., a rival company with a supercomputer and a counter-terrorism system dubbed Matrix.

A cut above
ChoicePoint, though, has distinguished itself through 58 acquisitions in recent years. Those purchases have recently been companies that have close ties to the government or have products that will sate the demand for more refined details about people and their activities.

One ChoicePoint acquisition last year, Alexandria-based Templar Corp., was initially conceived by the departments of Defense and Justice to improve information sharing. Templar's system helps draw information together instantly from multiple databases. A District firm called iMapData Inc., also acquired by ChoicePoint last year, creates electronic maps of "business, economic, demographic, geographic and political" information. Its customers include intelligence and homeland security agencies.

ChoicePoint, Templar and iMapData help operate a fledgling law enforcement network in the Hampton Roads region of Virginia called the Comprehensive Regional Information Management and Exchange System, or CRIMES. A similar system operates in south Florida. ChoicePoint officials hope the system will be a model for a national information-sharing network mandated last fall when Congress approved intelligence reform legislation.

In marketing materials distributed to government officials, ChoicePoint says the system offers investigators "the ability to access all relevant information with a single query."

Two weeks ago, ChoicePoint also completed the acquisition of i2 Ltd., a British technology firm with a subsidiary in Springfield, i2 Inc., that creates computer software to help investigators and intelligence analysts in the United States and scores of others countries finds links among people, their associates and their activities.

In 2001, the FBI announced a $2 million deal to buy i2 software over three years. Company officials said their software was used by the military to help find Saddam Hussein in Iraq.

'Actionable intelligence'
In an interview, i2 Inc. President John J. Reis said analysts increasingly use the software to head off crimes or attacks, not just investigate them after the fact. "We are principally a company whose focus is all about converting large volumes of information into actionable intelligence," he said.

Police, lawyers, private investigators, reporters and many others have been using commercial information services for years, as the availability of personal information skyrocketed during the 1990s. But those commercial services did not play such an important role in the secretive, high-technology realm once dominated solely by the National Security Agency and other members of the government intelligence community.

The government still maintains some of the world's most sophisticated eavesdropping and spy gear. But officials often depend on commercial systems for public records, identity verification and automated analysis, such as finding anomalous personal information that might suggest a person has hidden ties to risky groups. Growing numbers of commercial systems offer "scoring" services that rate individuals for various kinds of risks.

To expand its presence in the intelligence community, ChoicePoint hired a team of prominent former government officials as homeland security advisors in late 2003. They included William P. Crowell Jr., the former deputy director of the National Security Agency; Dale Watson, a former FBI executive assistant director of counter-terrorism and counterintelligence, and Viet D. Dinh, a former assistant attorney general and primary author of the united snakes Patriot Act.

'No restrictions'
Current and former government officials praise the new services as important to efforts to investigate criminal and terrorist activity and to track down people who pose a threat. But some of those same officials, including Pasquale D'Amuro, an assistant director at the FBI and head of its New York office, also expressed qualms about whether ChoicePoint and other information services operate with enough supervision.

"There are all kinds of oversight and restrictions to the federal government, to Big Brother, going out there and collecting this type of information," he said. "Yet there are no restrictions in the private sector to individuals collecting information across this country, which potentially could be a problem for the citizens of this country."

Hoofnagle, the privacy activist, recently filed a complaint with the Federal Trade Commission claiming that ChoicePoint has worked hard to avoid triggering oversight under existing laws, including the Fair Credit Reporting Act. If ChoicePoint's reports about people are not legally considered consumer reports under the act, Hoofnagle said in the letter, then the law should be expanded to include them.

Hoofnagle's letter, co-authored with George Washington University law professor Daniel J. Solove, described the Fair Credit Reporting Act as a "landmark law that ensures that compilations of personal information used for many different purposes are accurate, correctable, fairly collected."

In a response, ChoicePoint said the thrust of Hoofnagle's letter was baseless. The Fair Credit Reporting Act was "not meant to be omnibus privacy legislation," the company's letter said. "Information used for investigative, law enforcement or governmental purpose is not regulated in the same manner as the information used to make decisions related to credit, insurance, or employment."

ChoicePoint started as a spin-off from Equifax Inc., the credit bureau and information service. It was considered an underperforming division, with its main source of revenue coming from the insurance industry. ChoicePoint examined credit records and other personal information to help top insurers assess customers and vet insurance applications for signs of fraud.

Smith and other ChoicePoint executives wanted much more. Intent on becoming a national data and analysis clearinghouse, the company went on a buying spree. ChoicePoint bought one company that screens new employees for signs of illicit drug use. It purchased another that specializes in the use of DNA to identify people, living or dead. In 2002, it bought VitalChek Network Inc., a Nashville company that provides the technology and networks to process and sell birth, death, marriage and divorce records in every state.

It collected data in other ways, too. Through an employee screening system called Esteem, the company compiles reports from dozens of retailers such as Target, Home Depot and others about employees who have admitted to, or been convicted of, shoplifting.

For a time in 2003 and last year, ChoicePoint even offered a background-check-in-a-box sold on the shelves of Sam's Club. The $39.77 package included a "How To Hire Quality Employees" handbook, a CD containing an online background screening package and one complimentary drug test.

By 2003, ChoicePoint could claim to have the leading background screening and testing business in the nation, analyzing job applicants, soccer coaches, day-care workers and Boy Scout volunteers. About 5 million criminal records searches that year turned up almost 400,000 applicants or others who had recent criminal records.

Since its inception, Smith said, his company has focused primarily on making the country a safer place, especially in the wake of the Sept. 11, 2001, terrorist attacks.

Smith said he recognizes that there have to be limits on what his company can do, if only to maintain the trust of the many millions of people whose information fuels his business.

"Whatever the country decides to do, I'm willing to accept, as long as it's done in an enlightened way," Smith said. "The stakes have escalated since 2001."

Some reporting for this story was done for Robert O'Harrow's book, "No Place to Hide," published by Free Press, copyright 2005. O'Harrow also received financial assistance from the Center for Investigative Reporting.
© 2007 The Washington Post Company