HB Ad Slot
HB Mobile Ad Slot
Stolen Databases Obtained In Transaction Leads to $400K Settlement with PA and OH Attorneys General
Friday, February 17, 2023

This post deals with another data breach, yes, hackers were able to compromise the organization’s systems and exfiltrate personal information relating to over 45,000 Pennsylvania and Ohio residents. However, there are several important takeaways from this case, including cybersecurity in corporate transactions, data retention and destruction, and incident response planning.

According to the Assurance of Voluntary Compliance agreed to in this matter with Pennsylvania’s Acting Attorney General Michelle Henry:

  • As part of the 2021 breach, the hackers exfiltrated 28 databases from the organization’s network. Those databases were obtained by the organization as part of an acquisition that occurred nearly 10 years earlier, and they had not been used for any business purpose since. The organization claimed that the databases were inadvertently transferred to it as part of the transaction without the organization’s knowledge.

  • In May of 2021, the organization began receiving alerts concerning suspicious activity on its networks. When additional alerts came in August of 2021, indicating Cobalt Strike malware in the environment, the organization initiated its incident response plan.

In response to these and other allegations made by the Acting AG Henry and in coordination with the Ohio Attorney General’s office, the organization settled. According to the settlement, it will pay each state $200,000 and will adopt a compliant information security program within 180 days of the settlement.

So, what are the takeaways?

Transactions. As one cyber leader put it recently:

Mergers and acquisitions give organizations the potential to increase capabilities, diversify offerings and expand market share, but they also present considerable risks. And while companies usually review financial, strategic, legal and operational details before completing an M&A transaction, another important concern is often overlooked: cybersecurity.

The obligations to assess data risk in a transaction extend to that which is acquired (What are the reps? What are we getting? Do we want/need it? etc.) and that which is divested (Can we disclose? How should we transfer? etc.).  A complete inventory of systems and information assets in a transaction clearly would help acquiring organizations make prudent decisions about what should be retained, how best to safeguard what is retained and used, and do public statements about safeguards track their practices with respect to that data.

Data Retention and Destruction. Simply stated, organizations should only collect personal information they need, keep it only for as long as they need it, and when it is no longer needed, it should be destroyed or made unreadable. This is much more difficult in practice, of course. However, a good starting point is inventorying what personal information the organization has and continues to collect, and then make some determinations about whether that information is needed or can be eliminated. Increasingly, regulations are mandating implementation of these principles. See, for example, section 7002(d) of the CCPA regulations (awaiting final approval) which states:

“Whether a business’s collection, use, retention, and/or sharing of a consumer’s personal information is reasonably necessary and proportionate to achieve the purpose identified [the regulations], or any purpose for which the business obtains consent, shall be based on the following: (1) The minimum personal information that is necessary to achieve the purpose identified…or any purpose for which the business obtains consent.”

If those purposes cease to exist, retention also may need to cease.

Incident response planning. Simply having an incident response plan is not enough, although it is a good start. According to a WSJ survey, 74% of companies say they have “an incident response management strategy,” but only 23% surveyed tested their plan twice a year or more. For a whole host of reasons, responding to an incident can take time, but reacting as quickly as possible can help minimize the scope of the incident and mitigate harm. Regular and frequent training and tabletop exercises on a well-developed incident response plan can go a long way toward preparing the organization to face significant security incidents. 

HB Ad Slot
HB Ad Slot
HB Mobile Ad Slot
HB Ad Slot
HB Mobile Ad Slot
HB Ad Slot
HB Mobile Ad Slot
 

NLR Logo

We collaborate with the world's leading lawyers to deliver news tailored for you. Sign Up to receive our free e-Newsbulletins

 

Sign Up for e-NewsBulletins