Equifax execs sold shares before mega-hack reveal. All above board – Equifax probe

Senior Equifax executives sold their shares in the credit agency just before its stock price plunged when the world was told it had been thoroughly hacked. The US biz has since probed the transactions, and you'll all be extremely pleased to learn of that investigation's conclusion: there was no wrongdoing, nothing untoward, …

[Anonymous Coward]

> He asked for clearance to sell 4,000 shares worth about $585,000 on July 28, a day before the hack was uncovered

What timezone was the email server recording the clearance?

Just curious.

[Anonymous Coward]

The cynic in me suspects...

As a statistician at heart, I would suspect that "suspicion" of a hack may predate "discovery" by about an averaged 24 hours.

Post left anymouse for the real statisticians to discover whi posted it...

[Anonymous Coward]

Also being told officially and hearing rumblings at the cooler are two very different things....

Whilst they can't prove they knew, it's pretty obvious they had heard something was up that was going to make the share price tank.

[Adam 52]

I'd want to look into how usual a sale by all three at the same time is.

[Mad Mike]

Mmmmm

When people at this level are selling, they normally need to identify why they are selling. What are they going to do with the money. Pay off the mortgage, buy a second home, buy a new yacht etc.etc. So, three execs sell at the same time because they all need money for what? Anytime multiple execs sell at the same time, it should be investigated, especially when it's three. It's not impossible, but highly unlikely they all suddenly need money for something at the same time.

As to the timing of the day before. I bet rumours of something being seriously amiss would have been swirling around for several days, probably a week or more before it became official. Apart from anything else, they'll want a tranche of meetings to discuss how to reveal the information, which will take several days. So, the day before is no defence at all. It would have been common knowledge for several days before the actual date of announcement.

[Anonymous Coward]

I'm so glad we live in a society where everyone equally follows the rules. Well done to these other directors for checking that no wrong doing was done as clearly they wouldn't dream of doing the same thing in their situation. I'm really glad this has been cleared up quickly and efficiently.

As you were, carry on good fine upstanding citizens.

Sarcasm aside but don't the S.E.C. get involved in this sort of thing?

[Anonymous Coward]

"Sarcasm aside but don't the S.E.C. get involved in this sort of thing?"

Yes. There's a pretty comprehensive regulation commonly called 10b-5, which effectively sets out a process for insiders to sell their shares, consisting of two main steps:

1) Seeking clearance from internal and external compliance officers

2) Agreeing a sale justification, a reasonable selling price and a time delay (usually weeks or months) before the sale can happen. Then filing those agreements away and handing off the actual sale to a third party, blind broker who will execute the sale on your behalf when the time/price conditions are met.

Ironically it's much harder to insider trade as an actual insider. I'd be looking at recently ex-employees offloading their stock before I looked at directors. Directors sell shares all the time. In a company the size of Equifax there were bound to be a few. Assuming the 10b-5 rules have been followed (and they seem to have been), it's highly unlikely they were doing owt dodgy.

[Anonymous Coward]

Directors sell shares all the time

"Directors sell shares all the time. In a company the size of Equifax there were bound to be a few."

Right. So there will be public records that show what kind of, and how many, similar trades the directors in this picture had made on previous occasions. Purchases, and disposals.

So it should presumably be fairly easy for you (or someone similarly inclined) to prove your claim that it was a routine trade (well, several people 'routinely' trading) with nothing unusual about it.

The rest of us can just laugh at your gullibility, and patiently await the day of "the draining of the swamp".

[Anonymous Coward]

"the draining of the swamp"

Hey, once it's drained he'll be homeless.

[Captain DaFt]

Re: "the draining of the swamp"

"the draining of the swamp"

Hey, once it's drained he'll be homeless.

Actually, the bigger the gator, the more it's in favor of draining the swamp.

Forces all the fish to move into the lake with him where they're easier for him to get to.

[Anonymous Coward]

Re: Directors sell shares all the time

"So there will be public records that show what kind of, and how many, similar trades the directors in this picture had made on previous occasions. Purchases, and disposals."

Funnily enough, yes. https://www.sec.gov/cgi-bin/own-disp?action=getissuer&CIK=0000033185

Equifax have over 100 director-involved transactions so far in 2017, including at least 13 direct sales by current directors (i.e. not including the dearly departed). This stuff is public knowledge and highly regulated.

You'd have to be insane, absolutely insane to try and pull something like this as a current employee. Especially when you look at the numbers involved. These folks are likely to be on 7 figure salaries. Why liquidate comparatively small sums of stock, running the risk of lengthy prison sentences, especially given the price "only" dropped 25% and will likely fully rebound. Little motive, huge risk, no evidence.

"Aren't there rules that you can only sell after results are published?"

They're even stricter than the UK's rules. You can't sell if you're in possession of "material nonpublic information", which for directors is deemed to be at all times. So the 10b5-1 process exists to facilitate a near-blind sale.

[Yet Another Anonymous coward]

Re: Directors sell shares all the time

Except they didn't know that prices would only drop 25% - the company could (should?) have been wiped out.

This was hardly a blind sale, unless the IT security director had a policy that he wasn't to be told of any hacks it has to look suspicious that they put in a sell order just after the hack but weren't officially informed until a month later.

[Charles 9]

Re: Directors sell shares all the time

"This was hardly a blind sale, unless the IT security director had a policy that he wasn't to be told of any hacks it has to look suspicious that they put in a sell order just after the hack but weren't officially informed until a month later."

But because of the SEC rules such information would've been easy to deduce, meaning if something really was shady, why haven't criminal charges already been bright forth?

[Someone Else]

@Charles 9 -- Re: Directors sell shares all the time

But because of the SEC rules such information would've been easy to deduce, meaning if something really was shady, why haven't criminal charges already been bright forth?

Have you noticed whose running the Justice Dept. nowadays?

[Anonymous Coward]

I like your philosophy, ignore the top and those with most to gain and focus on the peons.

I really like you, you're funny.

[Yet Another Anonymous coward]

Aren't there rules that you can only sell after results are published?

At least in the UK, there is a presumption that directors and senior staff have inside info and are only allowed to sell in a brief public window.

(or at least there was when I briefly worked for a PLC)

[Anonymous Coward]

Directors sell shares all the time

And therein lies a good part of the problem. Director's make significant parts of their income from being a Director through share options etc. I reality it is their salary and should be regarded as such.

It doesn't matter that the rules were obeyed and that they have a legitimate defence of ignorance ( a defence which from a personal point of view I find quite rich coming from someone who is highly rewarded for being in control and responsible). What really matters is that it looks wrong. It sends the wrong message: "Directors are crooks". Even if not illegal, these actions bring serious private enterprise into disrepute.

Hand wring over; what do we do?. The answer is actually quite simple. We put these share sales into purdah for six months or a year. Make a provision that any questionable sales of shares such as these should be rolled back if there is some serious company cock-up that has profited the senior officers of the company. In this particular case, these share sales should be reversed and the Directors hand back the $143 per share. They should be given the option of keeping the shares for later sale or if they really want to sell, do so at the post-cockup price of $109.

The chances of this happening are about the same as turkeys voting for an early Christmas. Perhaps Directors really are crooks.

[Anonymous Coward]

Re: Directors sell shares all the time

"someone who is highly rewarded for being in control and responsible"

And that's the way it should stay. These people have to be personally and individually rewarded when things go right (because they were personally and individually responsible). You can't possibly expect them to, in return, carry any kind of personal and individual risk of being held responsible when things go wrong under their authority. Where on earth would that lead to for our finest "business leaders" (and the people who pay their wages)?

"Perhaps Directors really are crooks."

A significant proportion of the major corporate ones appear to be lacking in moral judgement. Whether that makes them crooks is up to the legal eagles, which is one of several reasons why the whole thing is such a mess.

........

There is some sarcasm in one of the paragraphs above. Can you spot it?

[Anonymous Coward]

Re: Directors sell shares all the time

"There is some sarcasm in one of the paragraphs above. Can you spot it?"

Tough question. I shall have to mull it over.

[Anonymous Coward]

"Well done to these other directors"

I guess a director of Kimberley-Clark would be really good at finding ways of ensuring shit never sullies the executive suite.

[fajensen]

Sarcasm aside but don't the S.E.C. get involved in this sort of thing?

Nope. The very last CO-Something being sent to the slammer for fraud was Bernie Madoff in 2009, probably only got nailed because he ripped off rich people.

Since Obama it's been: "Too big to fail, too Important to Jail"

[Anonymous Coward]

"probably only got nailed because he ripped off rich people."

AFAIK Madoff ripped off people from his own golf club and synagogue. Not so much the being rich as fouling his own nest.

[Roj Blake]

Re: Since Obama it's been: "Too big to fail, too Important to Jail"

How many rich businessmen were jailed for fraud during the presidency of G.W.Bush?

[Anonymous Coward]

Tell us, how independent was this report again?

Don't these fuckers sit on each other's boards and play golf / bridge together? Either way, not buying it! Why? Equifux lied about the dates of the earlier hacks...

[katrinab]

Re: Tell us, how independent was this report again?

The lawyers in the legal department are employed by Equifax, and the Board are responsible for setting their pay and bonus levels, and for any decisions related to their future employment. Therefore they are completely independent and not at all biased.

[Lysenko]

So basically, on hearing there might be some hidden contraband on "E" wing, Mr Barraclough asked Fletcher and 3 or 4 other lags to do a cell search and amazingly it came up clean!?

[frank ly]

+1 for an appropriate Porridge reference. Mr MacKay wouldn't have been so naive.

[Peter Clarke 1]

Wrong SitCom

You should be quoting Sir Humphrey from 'Yes, Minister'

'What's the point of having an inquiry if you don't already know the outcome?''

[Anonymous Coward]

Equifox declares henhouse clean

All is well.

As for all of the people who had no choice about being customers, they can go to hell.

[Anonymous Coward]

"a day before the hack was uncovered"

That should say, "a day before the hack was officially uncovered." There were surely individuals looking at odd events in the three months preceding the official announcement of discovery. Standard tech practice is to fully evaluate the scope of a problem and peer review the findings before making internal announcements. That's plenty of time to start covering butts.

[Anonymous Coward]

Re: "a day before the hack was uncovered"

> There were surely individuals looking at odd events in the three months preceding the official announcement of discovery.

Time sheets. I'm sure an SEC investigation will look at staff time sheets to see if anyone was booking to unexpected security event analysis type tasks in the 3 months between the hack and the announcement, and the reporting lines of those people.

That and the emails of course.

IMHO it stinks.

[horriblicious]

Uh, this is directors investigating directors. I suspect all they could do was review the public facts about meetings and timings. They are not the police or the SEC - did they check everyone else trading (relatives, friends, etc...) for others that might have known? Did they subpoena phone or message logs, speak to brokers and other staff and many other activities only government investigators can do? WHITEWASH!!! Worse still, the dummies now may be considered to have colluded in a cover-up. I await the SEC's investigation.

[Someone Else]

@horriblicious --

I await the SEC's investigation.

Don't hold your breath. As I noted earlier in this forum, have you noticed who's running the Justice Dept. nowadays?

[Version 1.0]

Do we need any more information?

Equifax deserves the commercial equivalent of the Usenet Death Penalty. It's that simple.

And anyone working with them or using their data should receive the same - it's the only way to be certain because nuking them from orbit is now just playing with the little rocket men.

[Claybob]

Oh, bollocks. Their findings have the integrity of Koch brothers funded climate scientist.

[Notas Badoff]

In favor of maybe

Since people love mentioning their own unique particular peculiar experiences as guides to general reality for all, let me participate.

I worked for a mid-sized tech company many-moons-ago and had incentive stock options. Decided to sell 'some' to move it out of that company - no specific knowledge required to be dubious generally.

The company's stock options selling people called back the next day and said "Oops, we thought that first digit on the number of shares was a '2' instead of the '1' you wrote. Is that okay?" Did I mention my feelings about the company? I said yes.

Monday following something burped, stock dropped 15+% and my dubiosity had been rewarded doubly. Did I know something? Not specifically, just generally, and ya'kno, diversify, right?

[Doctor Syntax]

A review like this carries all the conviction of, say, the EU Justice Commissioner and the US Sec of Commerce reviewing the Privacy Figleaf. Did I just write conviction? How odd.

[MachDiamond]

Lawyers (blood sucking) and official knowledge

The company attorneys should have been told about a major hack and they cleared the trades? Sounds a little bit on the shady side. For something this major, information being held on about half of the US population, word will get around and those at the top will confer "off the record" before they circulate anything in writing so everybody "officially" knows. That it took the company 3 months to realize they had been hacked and then delayed announcement should mean prison time for the execs. There needs to be very harsh penalties when it comes to data breaches such as this. Exploding a nuclear bomb, even a big one, would affect fewer people.

[Charles 9]

Re: Lawyers (blood sucking) and official knowledge

But under what law? Nothing's illegal unless stated as such in the law.

[Anonymous Coward]

Re: Lawyers (blood sucking) and official knowledge

“The company attorneys should have been told about a major hack”.

Well, yes. They should have. But being in legal and all that it would not surprise me that there’s a policy somewhere that the techs needed to be 100% sure that there was an issue before reporting. Plausible deniability and all that.

Even if (and that’s an “if” of absolutely massive proportions) everything is as the findings show and completely above board, the fact that these directors were not aware of the breach within 24 hours of discovery should be cause for a serious audit of internal processes.

[Boris the Cockroach]

Equifax directors got

lucky with their latest legal hire

Bob Massingbird

[Dave Harvey]

About auditors being held responsible...

IF the SEC investigates (and I sure hope it does), and IF they find the directors guilty of insider trading (which they may or may not do), then that would raise the question of whether those who have compiled this whitewash report should face any punishment for either:

(1) knowing that that there was insider trading and explicitly covering it up

OR

(2) being "deaf monkeys" who put out a report purporting to exonerate their friends without actually doing the required diligence to know whether or not their statements were true.

If they were prosecuted for doing this, then that might actually dissuade others from participating in such "private investigations" in the future, and that would be a good thing.

[unwarranted triumphalism]

Different story now

So now that these dishonest and libellous accusations have been shown to be false, those who made them will be equally as voluble in retracting them and making amends...?

No, I didn't think that would happen either.

[Doctor Syntax]

Re: Different story now

"So now that these dishonest and libellous accusations have been shown to be false"

I think I'd wait for an SEC investigation to get a definitive answer on that.

And have a down vote for answering your own question - such a tiresomely childish meme.

[Milton]

"Different story now"—no, not really

"So now that these dishonest and libellous accusations have been shown to be false, those who made them will be equally as voluble in retracting them and making amends...? No, I didn't think that would happen either."

But the accusations were clearly neither dishonest nor libellous, given that there was reasonable suspicion about the nature and timing of the events, and given that the company felt obliged to conduct a formal investigation.

Also, you'll note that "cannot be proven" is not the same as "shown to be false": this investigation was not a formal criminal trial, merely an internal enquiry conducted to very different standards.

So, not dishonest; not libellous; not false. Therefore, no retraction, no "making amends".

Anyone with a grain of common sense will consider the circumstances, which even the most charitable apologist would agree stank like a week-dead haddock, and form their own conclusions. One may hope that when these executives soon choose to resign, reasonable observations upon their honour and integrity will be high on the list of considerations for future prospective employers.

[unwarranted triumphalism]

Keep doubling down

When there is no evidence for your accusations, insist that they're true anyway.

[Someone Else]

Re: Keep doubling down

You know, I originally misread your handle as "unwarranted trumphalism". Now reading your posts, I'm pretty sure I didn't misread it after all.

[jaycee331]

I fear that this investigation has the same level of credibility as asking Jimmy Saville and Gary Glitter to look into whether Rolf Harris has ever done anything inappropriate.

[Sierpinski]

Shake some other trees

Insider trading might not even be the worst angle. Misappropriation of public funds would be a good one to look into if they were awarded any contracts in the affected time period on the basis of not actually meeting security standards as required. The IRS loves that kind of thing.