20/12/04
In Age of Security, Firm Mines Wealth Of Personal Data By Robert O'Harrow Jr.


Washington Post Staff Writer
Thursday, January 20, 2005

It began in 1997 as a company that sold credit data to the insurance industry. But over the next seven years, as it acquired dozens of other companies, Alpharetta, Ga.-based ChoicePoint Inc. became an all-purpose commercial source of personal information about Americans, with billions of details about their homes, cars, relatives, criminal records and other aspects of their lives.

As its dossier grew, so did the number of ChoicePoint's government and corporate clients, jumping from 1,000 to more than 50,000 today. Company stock once worth about $500 million ballooned to $4.1 billion.

Now the little-known information industry giant is transforming itself into a private intelligence service for national security and law enforcement tasks. It is snapping up a host of companies, some of them in the Washington area, that produce sophisticated computer tools for analyzing and sharing records in ChoicePoint's immense storehouses. In financial papers, the company itself says it provides "actionable intelligence."

"We do act as an intelligence agency, gathering data, applying analytics," said company vice president James A. Zimbardi.

ChoicePoint and other private companies increasingly occupy a special place in homeland security and crime-fighting efforts, in part because they can compile information and use it in ways government officials sometimes cannot because of privacy and information laws.

ChoicePoint renewed and expanded a contract with the Justice Department in the fall of 2001. Since then, the company and one of its leading competitors, LexisNexis Group, have also signed contracts with the Central Intelligence Agency to provide public records online, according to newly released documents.

Attorney General John D. Ashcroft and other government authorities have said these new tools are essential to national security. But activists for civil liberties and privacy, and some lawmakers, say current laws are inadequate to ensure that businesses and government agencies do not abuse the growing power to examine the activities of criminals and the innocent alike.

These critics said it will soon be hard for individuals looking for work or access to sensitive facilities to ever shake off a criminal past or small transgression, such as a bounced check or minor arrest.

Chris Hoofnagle, associate director of the Electronic Privacy Information Center, a nonprofit group in the District, said ChoicePoint is helping to create a " 'Scarlet Letter' society."

The information industry has traditionally fought regulations, arguing that it can police itself. But hoping to avoid a regulatory backlash that could curtail his company's access to information, ChoicePoint chief executive Derek V. Smith said he'll be reaching out to Capitol Hill in the coming months to promote the industry's benefits -- and express his willingness to work with lawmakers to develop new regulations.

"We have a new responsibility to society, and we want to make sure that's legitimized," Smith said. "We'd like everybody to play by the same rules and standards that society believes are correct."

An entire industry has mushroomed during the past decade because of extraordinary increases in computing power, the expansion of telecommunications networks and the ability of companies like ChoicePoint to gather and make sense of public records, criminal histories and other electronic details that people now routinely leave behind.

Some of these companies -- including the three major credit bureaus -- have become multi-pronged giants that regularly refresh information about more than 200 million adults and then sell that data to police, corporate marketers, homeland security officials and one another.

In doing so, they wield increasing power over the multitude of decisions that affect daily life -- influencing who gets hired, who is granted credit or who can get on an airplane.

ChoicePoint is not alone in eyeing the government for new business. LexisNexis and others also work closely with national security and intelligence officials. To compete in the homeland security market, LexisNexis paid $775 million last year for Seisint Inc., a rival company with a supercomputer and a counter-terrorism system dubbed Matrix.

ChoicePoint, though, has distinguished itself through 58 acquisitions in recent years. Those purchases have recently been companies that have close ties to the government or have products that will sate the demand for more refined details about people and their activities.

One ChoicePoint acquisition last year, Alexandria-based Templar Corp., was initially conceived by the departments of Defense and Justice to improve information sharing. Templar's system helps draw information together instantly from multiple databases. A District firm called iMapData Inc., also acquired by ChoicePoint last year, creates electronic maps of "business, economic, demographic, geographic and political" information. Its customers include intelligence and homeland security agencies.

ChoicePoint, Templar and iMapData help operate a fledgling law enforcement network in the Hampton Roads region of Virginia called the Comprehensive Regional Information Management and Exchange System, or CRIMES. A similar system operates in south Florida. ChoicePoint officials hope the system will be a model for a national information-sharing network mandated last fall when Congress approved intelligence reform legislation.

In marketing materials distributed to government officials, ChoicePoint says the system offers investigators "the ability to access all relevant information with a single query."

Two weeks ago, ChoicePoint also completed the acquisition of i2 Ltd., a British technology firm with a subsidiary in Springfield, i2 Inc., that creates computer software to help investigators and intelligence analysts in the United States and scores of others countries finds links among people, their associates and their activities.

In 2001, the FBI announced a $2 million deal to buy i2 software over three years. Company officials said their software was used by the military to help find Saddam Hussein in Iraq.

In an interview, i2 Inc. President John J. Reis said analysts increasingly use the software to head off crimes or attacks, not just investigate them after the fact. "We are principally a company whose focus is all about converting large volumes of information into actionable intelligence," he said.

Police, lawyers, private investigators, reporters and many others have been using commercial information services for years, as the availability of personal information skyrocketed during the 1990s. But those commercial services did not play such an important role in the secretive, high-technology realm once dominated solely by the National Security Agency and other members of the government intelligence community.

The government still maintains some of the world's most sophisticated eavesdropping and spy gear. But officials often depend on commercial systems for public records, identity verification and automated analysis, such as finding anomalous personal information that might suggest a person has hidden ties to risky groups. Growing numbers of commercial systems offer "scoring" services that rate individuals for various kinds of risks.

To expand its presence in the intelligence community, ChoicePoint hired a team of prominent former government officials as homeland security advisors in late 2003. They included William P. Crowell Jr., the former deputy director of the National Security Agency; Dale Watson, a former FBI executive assistant director of counter-terrorism and counterintelligence, and Viet D. Dinh, a former assistant attorney general and primary author of the USA Patriot Act.

Current and former government officials praise the new services as important to efforts to investigate criminal and terrorist activity and to track down people who pose a threat. But some of those same officials, including Pasquale D'Amuro, an assistant director at the FBI and head of its New York office, also expressed qualms about whether ChoicePoint and other information services operate with enough supervision.

"There are all kinds of oversight and restrictions to the federal government, to Big Brother, going out there and collecting this type of information," he said. "Yet there are no restrictions in the private sector to individuals collecting information across this country, which potentially could be a problem for the citizens of this country."

Hoofnagle, the privacy activist, recently filed a complaint with the Federal Trade Commission claiming that ChoicePoint has worked hard to avoid triggering oversight under existing laws, including the Fair Credit Reporting Act. If ChoicePoint's reports about people are not legally considered consumer reports under the act, Hoofnagle said in the letter, then the law should be expanded to include them.

Hoofnagle's letter, co-authored with George Washington University law professor Daniel J. Solove, described the Fair Credit Reporting Act as a "landmark law that ensures that compilations of personal information used for many different purposes are accurate, correctable, fairly collected."

In a response, ChoicePoint said the thrust of Hoofnagle's letter was baseless. The Fair Credit Reporting Act was "not meant to be omnibus privacy legislation," the company's letter said. "Information used for investigative, law enforcement or governmental purpose is not regulated in the same manner as the information used to make decisions related to credit, insurance, or employment."

ChoicePoint started as a spin-off from Equifax Inc., the credit bureau and information service. It was considered an underperforming division, with its main source of revenue coming from the insurance industry. ChoicePoint examined credit records and other personal information to help top insurers assess customers and vet insurance applications for signs of fraud.

Smith and other ChoicePoint executives wanted much more. Intent on becoming a national data and analysis clearinghouse, the company went on a buying spree. ChoicePoint bought one company that screens new employees for signs of illicit drug use. It purchased another that specializes in the use of DNA to identify people, living or dead. In 2002, it bought VitalChek Network Inc., a Nashville company that provides the technology and networks to process and sell birth, death, marriage and divorce records in every state.

It collected data in other ways, too. Through an employee screening system called Esteem, the company compiles reports from dozens of retailers such as Target, Home Depot and others about employees who have admitted to, or been convicted of, shoplifting.

For a time in 2003 and last year, ChoicePoint even offered a background-check-in-a-box sold on the shelves of Sam's Club. The $39.77 package included a "How To Hire Quality Employees" handbook, a CD containing an online background screening package and one complimentary drug test.

By 2003, ChoicePoint could claim to have the leading background screening and testing business in the nation, analyzing job applicants, soccer coaches, day-care workers and Boy Scout volunteers. About 5 million criminal records searches that year turned up almost 400,000 applicants or others who had recent criminal records.

Since its inception, Smith said, his company has focused primarily on making the country a safer place, especially in the wake of the Sept. 11, 2001, terrorist attacks.

Smith said he recognizes that there have to be limits on what his company can do, if only to maintain the trust of the many millions of people whose information fuels his business.

"Whatever the country decides to do, I'm willing to accept, as long as it's done in an enlightened way," Smith said. "The stakes have escalated since 2001."

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