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Veterans suffering anxiety and paranoia following the theft of a government hard drive containing the medical histories and Social Security numbers of 198,000 of their brethren cannot recover financial damages, a federal appeals court says. The 11th U.S. Circuit Court of Appeals, in largely dismissing a class-action, ruled Wednesday that the veterans could recoup at least $1,000 under the Privacy Act if they could show financial damages, not mental anguish. What's more, the Atlanta-based court noted that the veterans - some already suffering post-traumatic stress syndrome from their Vietnam War days - likely could recover damages for mental anguish associated with the data breach if the lawsuit was before a different court. That's because the courts of appeal across the nation have issued conflicting interpretations of the Privacy Act of 1974, which allows people to sue the government for privacy breaches and recover "actual damages." Precedent in the 11th Circuit, which includes Alabama, Florida and Georgia, interprets "actual damages" as money losses only. So 198,000 veterans - whose life history was on a hard drive that vanished from a Birmingham, Alabama Veterans Administration hospital - are out of luck, even if their war-time paranoia was exacerbated by the breach. The 11th Circuit noted (.pdf) that the 5th U.S. Circuit Court of Appeals and the 10th U.S. Circuit Court of Appeals "do not restrict 'actual damages' under the Privacy Act to pecuniary losses." And the Supreme Court has refused to resolve the circuit splits.

"A Texas bank is suing a customer hit by an $800,000 cybertheft incident in a case that could test the extent to which customers should be held responsible for protecting their online accounts from compromises. The incident, which was first reported by blogger Brian Krebs this week, involves Lubbock-based PlainsCapital bank and its customer Hillary Machinery Inc. of Plano. In November, unknown attackers based in Romania and Italy initiated a series of unauthorized wire transfers from Hillary's bank accounts and depleted it by $801,495. About $600,000 of the amount was later recovered by PlainsCapital. Hillary demanded that the bank repay it the rest of the stolen money. In a letter to the bank in December, Hillary claimed that the theft happened only because PlainsCapital had failed to implement adequate security measures. PlainsCapital promptly filed a lawsuit in the U.S. District Court for the Eastern District of Texas asking the court to certify that its security procedures were "commercially reasonable." In its complaint, the bank noted that it had made every effort to recover the stolen money."

Bank sues theft victim in pre-emptive strike

China has denied allegations that it hacked into a Pentagon IT system and recovered plans for the Joint Strike Fighter (JSF). The combat aircraft which is to be procured by Britain as well, is being produced by Lockheed Martin. In allegations first reported in the Wall Street Journal, hackers stole "several terabytes of data related to design and electronics systems". The most sensitive data however on weapons systems and its stealth technology was not breached since it is kept on computers not connected to the internet. IT experts have said that they suspect the hackers came from China although it will be difficult to identify their exact origins. Hacking into IT systems as complex as the DoD's would require the help and capabilities of another government. Recovering data on the JSF would allow countries or rogue groups who could face the aircraft in future conflicts to develop counter measures based on the aircraft's weaknesses. The Chinese strongly denied that the breach originated from their country. "China has not changed its stance on hacking. China has always been against hacking and we have cracked down very hard on hacking. This is not a Chinese phenomenon. It happens everywhere in the world," a spokesperson for the Foreign Ministry said. This is not the first time the JSF's security has been breached. Early on in the contract the DoD and Lockheed Martin admitted that there was no universal IT security policy for the 1,200 sub contractors and that leaks may have occurred. BAE subsequently admitted that their IT security for JSF material was lax and that leaks could have occurred. Britain is scheduled to buy 150 of the aircraft by 2018.

Until now, lawsuits seeking to recover significant damages based on the loss of, or unauthorized access to, sensitive personal information have not been especially successful for plaintiffs. Most companies suffering data breaches have escaped by offering affected consumers inexpensive credit monitoring services. But two recent cases show plaintiffs a way to expose many previously safe companies to substantial claims for damages. Any company that thinks there are no risks in employing less than best practices for data privacy and security needs a wake up call. The headlines are all too familiar. Some well known consumer services company (or less known wholesale data processor) announces that millions of individual records containing names, Social Security numbers, account numbers and other sensitive information were left in a dumpster, saved to a stolen, unencrypted laptop, or stored on a misplaced USB drive or backup tape. The press is terrible, the company's stock takes a temporary plunge, and sometimes the Federal Trade Commission enters into a consent decree where the company promises to never do it again. But when affected individuals or groups of consumers tried to sue for damages, they seldom recover significant amounts. These cases have not often succeeded because the plaintiffs have been unable to prove actual pecuniary losses resulting from the security breach. Sure, if identify theft occurs the affected individuals can suffer significant emotional trauma, loss of time, etc. But Courts have been unwilling to award damages for anxiety, fear, and other emotional harm that can result from a data breach, for the risk of future identify theft, or for actual identity theft when the plaintiff could not prove that the theft occurred as a direct result of a data breach at a particular source. Most companies facing claims based on data breaches have been able to settle cheaply by offering to provide credit monitoring services, which most consumers do not use, resu

The global recession manifests itself in big and small ways, most gloomy, some quirky and often reflecting the inventive human spirit. Here is a look at some signs of the times. * With record defaults on consumer loans, collection agencies in the United States are going to extra lengths to recover the money. Illinois resident and Mercedes driver James Ricobene says an agency hired by JP Morgan Chase left a post on his daughter's MySpace page threatening action that could lead to prison, unless she contacted the agency within five days about its efforts to repossess her father's car. Ricobene has sued the collection agency and JP Morgan for libel, fraud and invasion of privacy.

Financial fraud last year caused 7.5 percent of all adults in the United States to lose money, largely because of data breaches. That's the finding of a survey conducted by Stamford, Conn. research firm Gartner. The survey polled 5,000 U.S. adults and also found that when compared with average consumers, nearly twice as many people who lost money to fraud changed their shopping, payment, and e-commerce behavior. In particular, victims of electronic checking and/or savings account transfer fraud were nearly five times more likely to change banks because of security concerns. "Fraud victims are also more cautious about which brick-and-mortar stores they shop at and how they pay for goods when they get there, demonstrating more awareness of the risk of data breaches," said Avivah Litan, vice president and distinguished analyst at Gartner, in a news release. High-tech crimes, such as data breaches (which typically involve hacking into enterprise systems) and phishing attacks against consumers, are the most prevalent causes of payment card fraud. Gartner found that financial losses were highest with new-account, credit card and brokerage fraud, with average losses per incident totaling $1,097, $929 and $900, respectively. However, victims of brokerage, credit card and debit/ATM card fraud find it easiest to recover their losses, receiving an average of 100 percent, 86 percent, and 77 percent of the funds stolen, respectively.

The Veterans Affairs Department has agreed to pay up to $20 million to veterans for exposing them to possible identity theft in 2006 after losing their sensitive personal information. In court filings Tuesday, lawyers for the VA and the veterans said they had reached agreement to settle the veterans' lawsuit alleging invasion of privacy. The money will be used to pay for veterans who suffered actual harm, such as emotional distress or expenses incurred for credit monitoring. The lawsuit came after a VA data analyst in 2006 admitted that he had lost a laptop and external drive containing the names, birth dates and Social Security numbers of up to 26.5 million veterans and active-duty troops. The laptop was later recovered intact.

Jan 15, 2009 There may be only a handful of days left in the Bush administration, but the brouhaha over White House e-mail retention policies promises to continue right up to the last day. A federal court yesterday extended a preservation order to ensure that the outgoing administration does everything it can to recover any missing White House e-mails. The White House IT staff now has five days to scour workstations for missing e-mail before administration data records are archived on Jan. 20. The ruling, by U.S. District Judge Henry Kennedy Jr., also orders staff of the Executive Office of the President (EOP) to relinquish any digital media that may contain e-mails from March 2003 and October 2005. The legal action is the latest resulting from a lawsuit filed in September 2007 by the National Security Archive against the EOP, seeking to preserve and restore White House e-mails it alleged were missing. "There is nothing like a deadline to clarify the issues," Tom Blanton, the National Security Archive's director, said in a statement. "The White House will complain about the last-minute challenge, but this is a records crisis of its own making." The Archive, an independent nongovernmental research institute based at George Washington University, is a repository of government records and does not receive U.S. government funding. The Citizens for Responsibility and Ethics in Washington (CREW), a left-wing public advocacy group, also filed suit, but its legal action was subsequently consolidated with the Archive's legal action, which is taking place in the U.S. District Court for the District of Columbia. Last May, the White House's top tech staffer acknowledged that three months of data were missing from backup tapes. In earlier testimony before a congressional committee, White House technical staff said millions of e-mails from the past eight years could potentially have been erased. Also yesterday, Magistrate Judge John M. Facciola held an emergency status con

Paperwork containing the personal medical information of at least 66 patients at Massachusetts General Hospital was lost this month when an employee apparently left it on an MBTA train. The hospital sent out letters last week to patients whose identities were included in the lost paperwork, telling them the information listed their names and dates of birth, and private medical information, including their diagnoses and the name of the provider with whom they met. The material constituted billing records for patients who attended the hospital's Infectious Disease Associates outpatient practice on Fruit Street on March 4. Deborah A. Adair, the hospital's privacy officer and director of health information services, said in a statement released yesterday that while the incident was regrettable, the hospital followed privacy laws by immediately alerting affected patients and authorities, including the state attorney general's office and the Department of Consumer Affairs and Business Regulation. "[Hospital] police and security are thoroughly investigating this matter not only with an eye toward recovering the missing information but also toward making sure that this will not happen again," Adair said. "Our information privacy and security policies and procedures are among the strongest in the healthcare industry, but incidents such as this remind us that we must continue to review and revise them, as well as continue to educate our staff on best practices to avoid incidents such as this." According to hospital security reports, a manager in the infectious disease center's billing unit told supervisors that she left the paperwork on a Red Line train the morning of March 9. The manager said she had brought the paperwork home with her to work over the weekend and left the material sometime between 7:30 and 9 a.m. The Transit Police were notified, but the paperwork was not found.

Things to think about for auditors during a downturn

As IT environments are becoming more complex, enterprises are relying on them more than ever before, said Michael Juergens, principle at Deliotte & Touche, told attendees at an ISACA CACS audit and compliance conference. He identified 10 areas in which complexity makes IT more difficult to monitor. "This list is designed to get you thinking about your environments and if currently scheduled IT audit procedures will evaluate this risks," Juergens said. "The list is in no particular order, is by no means a comprehensive list, and will vary by environment. There may be a greater or lesser risk depending on your industry, technology, business processes, and other factors," he added. He said that auditors should make a careful risk assessment at any enterprise that uses external cloud computing solutions. A key risk for compliance is simply keeping track of the data and recovering it if part of the cloud goes down. IT administrators must have insight into the cloud to enable forensics if an investigation is required. Juergens added that virtualization, often a key component of private clouds, carries the same risks as public clouds. The key issue is finding and tracing data, which can move to different servers within a virtualized environment. During this economic downturn, many companies will face disgruntled employees and will need to be able to control their access. "Specific attention items should be: timely removal of access, periphery security, internal security architecture, physical security and badge location, help desk procedures, workstation security and IDS management," Juergens said. Layoffs can harm an organization even without disgruntled employees. Many help desks and incident response teams will be understaffed, and Juergens advised that now is a good time to re-examine security procedures. A related risk could occur if an employee takes on the responsibilities of another, combining tasks that were previously segregated for compliance purposes. En

Identity thieves are getting more clever and are increasingly using stolen information to get driver's licenses, employment and government assistance, according to a new report. The survey by the Identity Theft Resource Center also found that the greater awareness of this problem by the public has led to more people discovering they are victims themselves, through monitoring of their bank accounts and credit card statements. Typically, victims learned of their identity theft when they were denied a job or credit or were informed by law enforcement. "Most of our information is beyond our control," said Linda Foley, co-founder of the Identity Theft Resource Center, which surveys victims each year to see how identity theft is changing. "If a thief wants to get it, he will find a way to get it." The report covers the experiences of around 100 of the 1,500 people who were victimized in 2008 and contacted the center, a nonprofit that helps people recover from identity theft. Stolen personal information is now cheap - identities may sell on the black market for as little as 60 cents each - and thieves churn through them quickly to lower their chances of getting caught, Foley said. Rather than opening 10 or 20 credit card accounts in a victim's name, they now open two or three, charge as much as they can and move on to the next person. This raises the cost of identity theft to businesses, whose average loss to fraud nearly doubled last year to $90,107, up from $48,941 the year before.

There is pervasive fear of identity theft. Victims spend an extraordinary amount of time and money recovering from it. The government is doing something about it, but businesses may not be pleased to hear that the government's latest action is another unfunded mandate. New rules concerning identity theft prevention at financial companies go into effect on Friday May 1, 2009, but for most organizations, complying with the FTC's Red Flags Rule could be as simple as writing down rules and procedures already in place and having them certified by the Board. The rules are about procedures, not about data security, said Tiffany George, attorney for the division of privacy and identity protection at the FTC. She spoke on Tuesday at the FTC's workshop for businesses held on the campus of Fordham University in New York City. "The Red Flags Rule covers what to do when, despite our best efforts, thieves steal data," she said. As new regulations go, the FTC's Red Flags Rule will be less painful than many other recently enacted rules. For example, while Sarbanes-Oxley is considered a burden to many public companies, requiring several full-time staff, the Red Flags Rule can likely be handled by legal or compliance staff already in place.

Federal regulators will be able to take back two years of pay from executives held responsible for a large bank's failure. Executives deemed "negligent" and "substantially responsible" for a big bank's failure can lose all their compensation from the previous two years under a rule approved Wednesday by the board of the Federal Deposit Insurance Corp.