[ISN] Payroll Giant Gives Scammer Personal Data of Hundreds of Thousands of Investors

[InfoSec News]

http://abcnews.go.com/Technology/story?id=2160425

By DAN ARNALL
ABC News
July 6, 2006

The latest corporate data breach is from a company you may never have
heard of, even though one in six American workers gets paid by the
firm.

Automatic Data Processing, one of the world's largest payroll service
companies, confirmed to ABC News that it was swindled by a data thief
looking for information on hundreds of thousands of American
investors.

According to a company spokeswoman, ADP provided a scammer with
personal information of investors who had purchased stock through
brokerages that use ADP's investor communications services. Initial
reporting indicates that these firms include a number of brand-name
brokers, including Fidelity Investments and Morgan Stanley.

A Fidelity spokesman says the data breach compromised 125,000 of the
72 million active accounts at the brokerage.

Morgan Stanley says 3,800 of its clients were affected.

An industry source says Bear Stearns, Citigroup and Merrill Lynch also
had account data leaked in the incident. A Merrill Lynch spokesperson
refused comment. Calls to Citigroup and Bear Stearns have not been
returned.

A spokesperson for banking and financial services group UBS confirms
that about 10,000 of its brokerage clients were among those whose data
was disclosed.

In a prepared statement, ADP spokeswoman Dorothy Friedman said the
data thief exploited a Securities and Exchange Commission rule that
allows public companies to get names and addresses of shareholders
from brokers, as long as the shareholder has not objected to the
disclosure of such information.

The thief impersonated a corporate officer from a public company and
got ADP to send the information.

ADP refused to answer questions about its data security measures or
why its existing policies did not prevent the data loss.

ADP said that the loss, which occurred between November 2005 and
February 2006, resulted in the "inadvertent disclosure" of investors'
names, mailing addresses and the number of shares they held in certain
companies. No Social Security numbers or brokerage account numbers
were disclosed.

"ADP notified federal law enforcement authorities promptly after its
discovery of the problem in February 2006," said Friedman. "Shortly
thereafter, ADP notified its broker clients. Law enforcement
authorities are continuing to investigate the matter."

Some customers whose personal data was compromised have received a
letter from ADP. The three-page letter contains a list of 60 "affected
companies," including HealthSouth and Sirius Satellite Radio among
many smaller corporate names.

"We have been advised that the information disclosed was not
sufficient by itself to permit unauthorized access to your account,
and we have no evidence that the information on the lists has been
improperly used," reads the customer notification. "However, we
recommend that you be alert to any unusual or unexpected contact or
correspondence that you may have with the listed public companies (or
with anyone else) about your holdings in these companies."

The letter then goes on to encourage affected customers to consider
contacting one of the national credit bureaus to discuss getting a
fraud alert service. ADP says federal authorities are investigating
the matter.

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