Information security and privacy is an incredibly broad and pervasive topic. It spans across industries, relates to private and public sectors, affects small business to publicly traded companies, is governed by federal and state legislation, is enforced by regulators and courts, and incorporates IT and legal solutions. Information is the DNA of the modern world. It is everywhere – our computers, our phones, our cars, our homes, our businesses, the cloud. We have unprecedented access to each other, and as a result, other people have unprecedented access to our information. The boundaries of information security are continually being stretched by the dramatic leaps in technology and ever shifting societal norms.
Events in the information security realm occur so quickly that it is difficult, even for privacy professionals, to keep current. This article will provide an overview of some recent information security cases, both which illustrate the concept that small to mid-sized business are the most vulnerable to, and least equipped to prevent, information security attacks.
Memphis Neurology Case: In February, the U.S. Attorneys’ office indicted Jeremy Jones on charges of identity theft, fraud, and conspiracy. Jones is accused of conspiring to steal the identities of more that 145 patients of Memphis Neurology, as well as customers of car dealerships and other people he knew. Jones used the stolen identities to apply for loans and credit cards, and to open banks accounts in the victims’ names. The estimated loss to the defrauded financial institutions is $1,660,587.30.
The Memphis Neurology case presents significant information security concerns, namely, insider threats and access controls. Memphis Neurology is a regional, private neurological practice with five locations.[i] The practice has been in business since the 1970’s. Jones allegedly conspired with an employee of Memphis Neurology to steal patient information from the practice’s database.[ii] The scheme allegedly began in 2011 and continued through 2015.[iii]
This case underscores the importance of: (1) training employees about information security: (2) clearly communicating to employees the consequences for intentional and unintentional security breaches; (3) properly screening potential employees during the hiring process; (4) conducting periodic audits of information security practices for efficacy and potential breaches; and (5) ensuring access to patient information is properly limited to authorized employees, including organizational and physical security. These items are crucial components to an overall information security governance program, which is required by HIPAA and the FTC Act, as well as necessitated by the modern world in which small to mid-sized medical practices operate.
Jeremy Jones is facing criminal charges. The financial institutions are facing the loss of $1,660,587.30. But, what about Memphis Neurology? What are the potential consequences to the practice? First, they almost certainly lost existing and future customers. Second, they face potential investigation and enforcement by the Federal Trade Commission and/or the Department of Health and Human Services. An investigation and enforcement action will cost Memphis Neurology significantly in legal fees and lost productivity. Further, the FTC and HHS are not averse to levying heavy financial penalties for violations. Finally, while neither the FTC Act or HIPAA provide a private right of action, there is an increasing trend of state courts adopting federal statutory/regulatory frameworks as the “standard of care” in common law negligence actions.[iv] This trend could expose Memphis Neurology to state court negligence lawsuits brought by the patient victims.
Target Breach-Fazio Mechanical. Most people are aware of the Target breach in 2013. In fact, most people probably held their breath waiting for notice from the retail giant that their information had been compromised. The fallout from the Target breach has been staggering:
- 110 million customers’ information exposed
- Immediate 50% drop in profits at the time of the breach from the previous year
- Consumer and media backlash
- Approximately $252 million spent to manage the breach
- An escrow account of $10 million set aside for compromised customers
- Ongoing litigation and regulatory action
- Target CEO ousted
- Potential personal exposure to fines and monetary damages for Target executives[v]
What is not commonly known is the source of the hack leading to the Target breach. According to Krebs on Security, hackers gained access to Target’s network via one of its vendors, Fazio Mechanical, a Pennsylvania based refrigeration company.[vi] According to investigators, the Target breach “traces back to network credentials” issued to Fazio by Target. Fazio has stated that its data connection to Target “was exclusively for electronic billing, contract submission and project management[.]”[vii]
It appears that Target’s network credentials were stolen by means of email “phishing” attack sent to employees at Fazio. Facts indicate that one or more Fazio employees opened the phishing email, thus infecting Fazio’s system and delivering Target’s network credentials to the hackers. The hackers then planted malware on Target’s system and began stealing credit card data from thousands of Target’s registers nationwide.
Target receives and retains an immense amount of customer information. As the recipient of this information, Target had a duty to ensure that the third party vendors with which it works have adequate security controls. There is no question that Target should have done a better job of auditing Fazio’s information security controls and ultimately bears responsibility for the breach. However, while Target is certainly culpable for the breach (namely failing to timely act on the breach[viii] and sending out inadequate data breach notifications[ix]), it was undoubtedly prepared for the possibility of an attack. Six months prior to the breach, the retailer had started installation of a $1.6 million malware detection tool designed by FireEye. FireEye is a leading cyber security firm who provides services to the CIA and the Pentagon. Target employed a security squad in Bangalore to monitor its system 24/7.[x] Despite these measures and obscene financial resources, Target was hacked and is now facing reputational damage, lawsuits, and regulatory enforcement.
And it is, in large part, Fazio’s fault.
True, if it wasn’t Fazio, it likely would have been another vendor. Or perhaps, malefactors could have penetrated Target’s system directly. However, the facts surrounding the Target breach point blame directly to an unremarkable, “mom and pop” business lacking any information security policies and practices. In stark contrast to Target’s measures, Fazio primarily relied on the free version of Malwarebytes Anti-Malware (“MBytes”) to detect malicious software on its systems.[xi] It is unknown if Fazio employed any actual information security protocols, but based on their use of MBytes, it seems likely that they did not.
What is more inexplicable was Fazio’s response to its role in the Target breach. In a press release, Fazio stated it was “the victim of a sophisticated cyber attack operation,” and further that its “IT system and security measures are in full compliance with industry practices.”[xii] Clearly, Fazio was out of its depths concerning the technical aspects of information security as well as willfully or unintentionally ignorant of its duties under applicable state and federal law.
First, phishing attacks are not “sophisticated.” Phishing attacks are common. They are not targeted, but instead use a “blast” approach to distribute the poison pill email as widely as possible. In fact, email phishing attacks are so unsophisticated that they can be defeated by simply ignoring and deleting the email.[xiii]
Second, while MBytes is a reputable malware program, it is seriously limited. The free version is an on-demand scan and kill program, which means a user must actually run the scanner or set it to run at scheduled times. Also, the free version of Mbytes does not offer real-time protection against threats. Real-time protection means that the software actually blocks or stops malware that is actively trying to infect a system. Imagine a pop-up blocker, which is a real-time protector. A pop-up blocker that did not protect in real-time would effectively allow the pop-up to appear, and then only remove the pop-up when the user prompts it to do so. Essentially, a non-real time malware program is ineffective to prevent malware infections.
Third, Fazio clearly was not in compliance with industry practices. We have already discussed the limited capabilities of free MBytes above. Further, the free version of Mbytes is made explicitly for individual users and its license prohibits corporate use.[xiv] Fazio violated this license, which is definitely not an industry standard. Finally, there is no evidence that Fazio employed any reasonable information security policies and procedures, let alone a written program including preventative measures, training, incident response strategy, and data breach notification plan. Thus, Fazio quite literally failed to meet the requirements of state and federal information security laws, which ARE the industry standard.[xv]
Information security is not a problem for “big” companies. Information security is not IT’s problem. Information security is everyone’s problem. Do you think your organization is somehow protected from phishing attacks? It happened to Fazio Mechanical. Fazio’s role in the Target breach proves that the “little guys” cannot ignore their place in the global marketplace. According to the Privacy Rights Clearinghouse, 621,955,664 records have been breached in the U.S. since state data breach notifications laws went into effect in 2005. Those are only the ones that have been reported—experts think the figure is actually much larger.[xvi]
In this modern age, it is best practice to assume that your organization has already been breached or will be breached in the future. The only way to prevent a breach is to put solid information security policies and procedures into place, train your employees, and regularly test your network security.
ICKES CALHOUN HOLT is a full-service, team-driven, and client focused law firm in Northeast Ohio concentrating on information security and governance. Information is the DNA of modern organizations and ICKES CALHOUN HOLT is dedicated to advising clients on how to protect its information. Please contact us to discuss establishing or improving the information governance policies for your organization.
[v] http://www.huffingtonpost.com/eric-dezenhall/a-look-back-at-the-target_b_7000816.html; https://www.privacyandsecuritymatters.com/2015/02/target-data-breach-price-tag-252-million-and-counting/; http://www.usatoday.com/story/money/business/2014/05/05/target-ceo-steps-down/8713847/
[viii] http://www.bloomberg.com/news/articles/2014-03-13/target-missed-warnings-in-epic-hack-of-credit-card-data; http://www.huffingtonpost.com/eric-dezenhall/a-look-back-at-the-target_b_7000816.html;
[xii] https://ickesholt.com/wp-content/uploads/2016/03/Target-Breach-Statement.pdf; http://krebsonsecurity.com/tag/fazio-mechanical-services/
[xv] See http://krebsonsecurity.com/tag/fazio-mechanical-services/