What Went Wrong at Bloomberg, and Where Do They Go Now?
By Sam Pfeifle
In light of revelations that some of Bloomberg’s journalists were using private client data for reporting, the company has announced it has hired former IBM CEO Samuel Palmisano “to serve as an independent advisor regarding the company’s privacy and data standards,” Forbes reports. According to Bloomberg’s press release, Palmisano “will immediately undertake a review of the company’s current practices and policies for client data and end-user information, including a review of access issues recently raised by the company’s clients.” Palmisano will report directly to the Board of Directors and will be assisted by representatives from Hogan Lovells and Promontory Financial Group.
Bloomberg News continues to answer questions about the actions of its reporters, who appear to have, on more than one occasion, used the desktop data terminals the company sells to financial institutions to monitor activity at those institutions.
The story began with a New York Post report that Goldman Sachs employees had confronted Bloomberg when it became obvious that Bloomberg reporters had knowledge of company activities that could only have come through terminal peeking:
In one instance, a Bloomberg reporter asked a Goldman executive if a partner at the bank had recently left the firm—noting casually that he hadn’t logged into his Bloomberg terminal in some time, sources added.
Now, the story is spreading considerably. The New York Times reported on Monday that other financial institutions—as varied as Deutsche Bank and the U.S. Treasury Department—are questioning Bloomberg’s polices and operations and wondering if their own terminal activity has helped Bloomberg develop its reputation for being first with financial news scoops.
Even worse, the Financial Times is reporting that more than 10,000 private messages generated by users of the terminals have been leaked online:
They showed information such as unique Bloomberg user identifiers, real names and traders’ e-mail addresses as well as confidential financial price information and trading activity.
As Bloomberg now looks to manage damages, both to its reputation and its terminal business—though Jim Kramer at CNBC believes Bloomberg’s monopoly with the terminals will likely insulate it from too much damage there—the questions remain: What went wrong with Bloomberg’s privacy and security controls to allow this to happen in the first place, and what can the company do to correct it?
Speaking to GovInfoSecurity, IAPP Board Member Lisa Sotto, CIPP/US, a partner at Hunton & Williams, said Bloomberg clearly needs to “toughen its IT security and privacy governance process…It is critically important to have a stringent set of access controls, but the integrity and ethics issues really go beyond privacy and data security."
Bloomberg was described by CNBC’s Tom Lowry, who worked at Bloomberg briefly, as a “Big Brother Culture,” noting the company not only issued a keycard but allowed the time of employees’ coming and going to be accessed by anyone in the company. Further, everyone in the company is issued the Bloomberg Way, which he said bolsters that “culture of paranoia.”
However, when he this week got his hands on Bloomberg’s standard service agreement for the terminals, he said he found nothing to indicate a “Chinese Wall” between the terminal business and the newsgathering business. They’re going to have to change that, Lowry said.
If for no other reason, Sotto told GovInfoSecurity, "There is a real concern about having compromised the trust of their customers because there was an expectation, and the expectation was not met.”
Robert Belair, former privacy lawyer at the FTC and now a partner with Arnall Golden Gregory, agreed, telling CNBC, “This is a violation, at a minimum, of the expectation that users have as to who is seeing the logon activity—and now we’re learning about this leak of messages, which is potentially a good deal more serious.”
Belair shared Sotto’s view that Bloomberg is unlikely to have violated any U.S. law, but he wasn’t so sure about Europe. “The Europeans have very strict and comprehensive privacy laws,” he said. “I assume some of the terminal users are in Europe, and that might present different issues.”
He also guessed that some of the federal users of the terminals might raise an uproar that could lead to new legislation and legal issues down the road for Bloomberg.
Finally, he agreed with Amy Chozich of The New York Times that Bloomberg may actually feel a financial pinch here because of these privacy violations.
“You can ask, where are they going to go?” Belair said, “and folks are addicted to their terminals, but ultimately, it’s a matter of trust, and if the trust isn’t there, folks will look for alternatives.”
Chozich indicated that both Reuters and Dow Jones might be interested in stepping in, but she also had an interesting comment about those expectations discussed by Belair and Sotto.
At $20,000 a terminal, per year, those expectations are higher of Bloomberg than they are of your average information-delivery company. “You might expect Facebook or Apple to invade your privacy,” Chozich said, but not a company to which you pay so much money.
Many commenters have talked about the impact on Bloomberg’s reputation. What might be the impact of being lumped in with Facebook and Apple?
Read More By Sam Pfeifle:
The Impact of SP 800-53: Putting Privacy and Security Side-By-Side
Will the White House Soon Have A Chief Privacy Officer or Not?
The BYOD Dilemma: What’s Yours and What’s Theirs?
Canada’s Grapple with Privacy and Freedom of Expression