FTC/ChoicePoint Reach Privacy Deal; 2005 Results Noted

Alpharetta, Ga.-based ChoicePoint Inc., an insurance and data services provider, has agreed to pay $15 million to settle Federal Trade Commission charges that the company mishandled records and violated consumers’ privacy rights. At the same time ChoicePoint reported it had record total revenue of $1.1 billion in 2005, a 15 percent increase over total revenue in 2004.

“The terms of the settlement call for ChoicePoint to pay a civil fine and establish an FTC-administered fund for potential consumer redress,” Derek V. Smith, chairman and chief executive officer told Insurance Journal. He said as a result of this tentative settlement the firm took a charge of approximately $8.8 million in the fourth quarter.

“The events of early 2005 provided critical lessons from which ChoicePoint and, indeed the entire industry, has learned a great deal,” Smith said. “The men and women of this company take nothing more seriously than their responsibility to safeguard consumer information and, as a direct result of those lessons learned, we have, for the past several months, been in the process of implementing nearly all of the changes reflected in today’s settlement with the Federal Trade Commission.

“One of the most significant changes ChoicePoint has made is the creation of an independent chief credentialing, compliance and privacy officer. Carol DiBattiste, a senior law enforcement and security official in both the Clinton and Bush administrations, is charged with ensuring not only that the events of 2005 cannot again occur but that ChoicePoint remains the industry leader in screening its customers and protecting its information. I believe it’s safe to say that our robust security and intensely strict internal procedures make us a leader in our field,” added Smith.

“I am gratified we were able to work with the FTC and reach an agreement that protects all parties and am even more pleased that we can now put this chapter behind us. I firmly believe that the changes we’ve implemented in the past year were not only the right thing for this company to do but are equally important for the entire industry to consider,” Smith concluded.

ChoicePoint reported full year 2005 Earnings Per Share from continuing operations was $1.53, which included a $0.24 per share dilutive effect of specific expenses related to the previously disclosed fraudulent data access, the FTC settlement and the abandonment of certain leases. Excluding these charges in 2005, EPS from continuing operations increased 9 percent for the full year 2005 over 2004.

For the fourth quarter of 2005, the company reported total revenue of $257.9 million, representing growth of 11 percent compared to $232.5 million for the fourth quarter of 2004. EPS for the fourth quarter was $0.30 which included a $0.14 per share dilutive effect of specific expenses related to the fraudulent data access and other operating charges noted above. Excluding these charges in 2005, EPS would have been $0.44, a 2.5 percent increase over the comparable period of 2004.