The Federal Trade Commission, preparing for “an unprecedented year of investigations and litigation,” fast-tracked spending nearly $3 million on technology to support the agency as it digs into the Equifax Inc. data breach and other cases of consumer harm.
Federal records disclosed this month show the FTC recently awarded a one-year contract to Innovative Discovery LLC, an Arlington, Virginia-based provider of electronic discovery technology, to provide a secure litigation support service. Justifying the agency’s decision not to open a competitive bidding process, the FTC said it “faces usual and compelling circumstances that require the immediate initiation of this pilot.”
“The FTC is entering into an unprecedented year of investigations and litigation, including its investigation into the Equifax data breach and an usually high number of forensic data acquisitions in fraud cases,” agency officials wrote. The contract, they added, “is essential to enabling the FTC to successfully conduct investigations and litigation to stop consumer harm, thus enabling the agency to accomplish its mission.”
According to a federal database of agency expenditures, the FTC is spending $2.75 million for the service. The contract was awarded Sept. 29.
The contracting document—called a “Justification for Other than Full and Open Competition,” or JOFOC—underscores the gravity of the challenge before the FTC as it wades into one of the largest data breaches in U.S. history. Last month, the FTC took the unusual step of confirming that it is investigating Equifax over a hack that compromised the personal information of 145 million people—nearly half the U.S. population. Numerous lawsuits have piled up against the company.
The agency is entering the Equifax probe somewhat shorthanded. Nearly nine months into the Trump administration, three of the FTC’s five seats remain vacant, and no one has been nominated to fill them.
Meanwhile, Thomas Pahl, the interim head of the FTC’s consumer protection division has recused himself from the Equifax investigation because of his past representation of the credit bureau while at the law firm Arnall Golden Gregory. A deputy, FTC veteran Daniel Kaufman, is leading the Equifax investigation.
In recent years, the FTC has asserted itself as the top cop on the cybersecurity beat, taking action against companies such as Wyndham Hotels and Resorts and Ashley Madison—the dating site marketed to those looking to have affairs—over lax data protections.
Terrell McSweeney, one of the two sitting commissioners at the agency, recently said in an interview with the Daily Princetonian that Congress should give the agency “more authority to penalize companies if they aren’t adequately securing very sensitive information that they have.” She added: “I firmly believe we need stronger data security protections, stronger privacy protections, stronger rights around our own data as consumers in the digital age.”
The FTC may not be alone in investigating the Equifax breach. Days after Equifax learned of the breach but weeks before the public disclosure, three managers sold off a combined $1.8 million in company stock. The sales of those shares have prompted calls for the U.S. Securities and Exchange Commission to launch an insider-trading investigation.
Richard Smith, the former Equifax CEO who retired in the fallout from the breach, endured three days of grilling last week on Capitol Hill. Legal teams from King & Spalding, DLA Piper and Quinn Emanuel Urquhart & Sullivan were in the hearing rooms for Smith and the company.
- DLA Piper, a Hacking Victim Itself, Helps Guide Equifax on Capitol Hill
- Businesses Begin Filing Class Actions Against Equifax
- Equifax, Before Breach, Lobbied to Limit Class-Action Damages
- FTC’s Top Consumer Enforcer Previously Represented Equifax. He Won’t Lead the Probe.
- Equifax Executives’ Stock Sales Raise ‘Fundamental Questions’ Tied to Breach