SAN FRANCISCO - A Georgia company that collects consumer data warned thousands of Californians last week that hackers penetrated the company's computer network and may have stolen credit reports, Social Security numbers and other sensitive information.

Alpharetta, Ga.-based ChoicePoint Inc., which sells data to government agencies and insurance companies, acknowledged Tuesday that several hackers broke into its computer database and purloined data from as many as 35,000 Californians.

The attack appears to have resulted in at least six cases of identity theft in Los Angeles County. But law enforcement agents, who have arrested one person on six counts of theft, say hundreds of thousands of Americans in other states may be at risk.

Last fall, hackers apparently used stolen identities to create what appeared to be legitimate businesses seeking ChoicePoint accounts, said ChoicePoint spokesman Chuck Jones. They opened about 50 accounts.

When ChoicePoint discovered the crime in October, it closed the suspect accounts, restricted access, strengthened site verification, informed law enforcement agencies and cooperated in their investigation.

On Oct. 27, California sheriff deputies arrested Olatunji Oluwatosin, 41, when the Nigerian national went to his office to receive a fax ostensibly from ChoicePoint. The police were waiting for the North Hollywood resident at his office in Los Angeles. He's been in jail since then and is scheduled to appear in Los Angeles County Court on Thursday.

Robert Costa, the lieutenant in charge of Southern California's High Tech Task Force Identity Theft Detail, said agents believe several other people were involved.

"We believe that this is probably a pretty large, sophisticated ring and unfortunately all we got was a chard of glass," Costa said. "It definitely could not have been limited to Southern California."

Californians were the only Americans notified because the state has a unique law requiring companies that do business with residents to warn them when they've had holes in corporate computer networks. Since the law went into effect in July 2003, organizations have alerted customers whenever "unencrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person."

The bill defines "personal information" as an individual's first name or initial and last name, with one of the following: Social Security number; driver's license number; state identification number; or credit or debit card account number and security code. Except when disclosure would impede a criminal investigation, companies must notify consumers "in the most expedient time possible."

The law doesn't impose specific fines but makes companies with questionable computer networks more vulnerable to lawsuits and public scorn. If a hacker gains access to data for 500,000 or more customers, the company must notify people through e-mail, a "conspicuous" posting on a Web site and disclosure to a major media outlet.

Identity theft is the country's fastest-growing crime, and more than 9.9 million Americans were victims last year. The crimes cost a total of $5 billion, not including lost productivity, according to the U.S. Postal Inspection Service.

One of the biggest breaches happened in October, when a University of California network exposed personal data of 1.4 million Californians. The computer database in Berkeley, contained names, addresses, phone numbers, Social Security numbers and birthdays of everyone who participated in a state in-home care program since 2001.

Jones said Tuesday that Californians received ChoicePoint warnings last week not because the company was complying with the nation's most aggressive identity theft protection but because the attack appeared to be limited to Los Angeles County consumers. ChoicePoint has not notified consumers in other states, nor is it working with law enforcement agents elsewhere, he said.

"California is the focus of the investigation and we don't have any evidence to indicate at this point that the situation has spread beyond California," Jones said. "If at some point in time we get information that it's in other areas, we'll revisit the disclosure."

Security experts dismissed the notion that hackers would geographically limit their attack.

"I've never heard of a hacker doing something just to make a company comply with a state statute - that's ridiculous," said Nick Akerman, partner and co-chair of the computer fraud division of law firm Dorsey & Whitney. "It'd be like robbing a bank that wasn't FDIC insured so the robber wouldn't have to be prosecuted by the FBI."

The attack could galvanize support for a federal law protecting consumers from corporate security breaches. New Hampshire, New York and Texas politicians are considering similar bills, and Sen. Dianne Feinstein, D-Calif., reintroduced legislation Jan. 24 that would make federal laws that mirror California's.

"This is a nightmare scenario for the company and for consumers," said Matt Stevens, chief technology officer at Westwood, Mass.-based database security company Network Intelligence Inc. "More of these incidences and people will wake up. Right now you've got people in Massachusetts saying, 'Hey, why am I less important than people in California?'"
Source Mercury News

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