Ceridian and Lookout Services settled the lawsuits from the Federal Trade Commission over their poor Web security practices that compromised customer data.
The Federal Trade Commission settled with Ceridian and
Lookout Services over charges that the companies failed to put sufficient
security measures in place to protect sensitive information for 65,000 people.
Under the terms of the settlement, both companies will have
to implement a "comprehensive information security program" and to undergo
independent third-party security audits every other year for 20 years, the FTC
announced on May 3.
"Both Ceridian and Lookout
claimed they would take reasonable measures to secure the consumer data they
maintained, including social security numbers, but failed to do so,"
according to the FTC statement.
Payroll provider Ceridian failed to encrypt personal
information and stored it in clear text for an unspecified period of time. The
company's Web-based payroll processing application was breached by a
third-party intruder in December 2009 and personal information belonging to
28,000 people was compromised. Social Security numbers and direct deposit
information belonging to "employees of Ceridian's small business customers"
Ceridian failed to take "readily available, free or
low-cost defenses" against SQL injection attacks, the FTC said in its
Lookout Services, an immigration services software provider,
did not securely store private information from unauthorized access. Anyone could
access the data via its Web-based software, the FTC charged. The data included names,
addresses, dates of birth and Social Security numbers. The problem was
discovered when a Lookout customer accidentally accessed the Social Security
numbers of 37,000 Lookout users in other organizations in October 2010,
according to the FTC.
"Neither of these cases represents a sophisticated
attack that undermined strong security measures," Jackie Gilbert,
vice president of product and marketing at SailPoint, told eWEEK. Since "basic"
security controls were not in place, it was "child's play" for external intruders
to gain access to sensitive customer data, according to Gilbert.
Lookout didn't even require a username or password to access
the information, as it was accessible by typing a URL into the Web browser. Not
only did the company not require strong passwords, employees were not required
to periodically change passwords and did not receive "adequate" training, the
"Our servers are continuously monitoring attempted
network attacks on a 24/7 basis, using sophisticated software tools,"
Lookout claimed in its promotional materials dating as far back as 2006, even
though it did not have an intrusion detection system until October 2009 and did
not adequately monitor logs until December 2009, the FTC said in its complaint.
"These stories are classic examples of why companies need
strong controls over access to sensitive data, with governance and oversight to
ensure the effectiveness of those controls," Gilbert said.
Ceridian and Lookout Services both claimed they took
reasonable measures to secure sensitive data, but FTC accused them of
negligence whose "unfair and deceptive" security practices put consumers at
risk. Ceridian claimed its security program was "designed in accordance with
ISO 27000 series standards, industry best practices and federal, state and
local regulatory requirements."
Mandating comprehensive data security plans and independent
security audits as part of the settlements sent a "clear signal" to companies that
they will be held accountable, according to Gilbert.
The FTC settlements bar the companies from making
misrepresentations, including misleading claims about the privacy,
confidentiality, or integrity of any personal information collected about
If companies do not protect the personal information they
collect and store, that information could be compromised and result in fraud,
causing consumers to lose confidence in the marketplace, David Vladeck,
director of the FTC's Bureau of Consumer Protection, said at the House Subcommittee
on Commerce, Manufacturing, and Trade hearing on data breaches on May 4.
"Data security is of critical importance," Vladeck
The FTC has sued 34 businesses since 2001 for failing to
protect consumers' personal information. Twitter
finalized its settlement in
March over charges that the micro-blogging site did not safeguard user privacy
and misled users about its security practices.