Shareholders sue ChoicePoint

Shareholders are suing ChoicePoint Inc. and its top executives after the company’s share price fell sharply following news that identity thieves had gained access to personal information about some U.S. residents that was held by the personal data vendor.

A class action lawsuit has been filed in U.S. District Court for the Central District of California on behalf of those who bought ChoicePoint shares between April 22 last year and March 3, 2005, Radnor, Pennsylvania-based law firm Schiffrin & Barroway LLP said in a statement Friday.

The suit charges ChoicePoint and three top executives with keeping key information from the public in an effort to artificially inflate the price of ChoicePoint stock.

Specifically, the suit alleges that the defendants knew that ChoicePoint’s measures to protect its data were inadequate, that the company knew it was selling data to illegal enterprises, that security breaches had occurred twice before, and that the company had exposed more than 500,000 people to the threat of identity theft, according to the statement.

The suit seeks to recover damages for the shareholders. ChoicePoint’s stock has nosedived since the company acknowledged that it had mistakenly given personal information of U.S. residents to identity thieves. ChoicePoint (CPS) shares closed at US$37.65 on Friday, near its 52-week low of $37.24 and far from the $47.85 price on Feb. 4, which was near its 52-week high.

ChoicePoint, of Alpharetta, Georgia, has access to about 19 billion public records, and the company reportedly has information on virtually every adult living in the U.S.

The company has been the focus of intense scrutiny and criticism since it acknowledged last month that identity thieves gained access to records and personal information on individuals in the 50 U.S. states, the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands. Information provided by ChoicePoint has since been used in about 750 identity theft scams, according to the company.

Since disclosing the security breach, the company has been the focus of a U.S. Federal Trade Commission inquiry into its compliance with federal information security laws, a U.S. Securities and Exchange Commission (SEC) investigation into possible insider stock trading violations by its CEO and chief operating officer and lawsuits alleging violations of the federal Fair Credit Reporting Act and California state law, ChoicePoint disclosed in a filing to the SEC on Friday.

(Paul Roberts in Boston contributed to this report)

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