Facebook paid billions FTC to protect Zuckerberg

A huge lawsuit released this week accuses Facebook’s board of agreeing to overpay the Federal Trade Commission billions of dollars in exchange for not personally suing CEO Mark Zuckerberg over the Cambridge Analytica 2018 data breach scandal.

The consolidated lawsuit, made up of multiple complaints filed by Facebook shareholders, has been filed public Tuesday, courtesy of Jason Kint, CEO of Digital Content Next, a trade association that represents about 80 publishers, including The New York Times, Wall Street Journal and the parent company of Gizmodo G / O Media. On Twitter, Kint nicknamed that the “mother of all trials”.

The plaintiffs in the lawsuits, which were publicly filed in the Delaware Court of Chancellery in August, are shareholders of Facebook, including pension funds for teachers, firefighters, police, nurses, judges, as well. than a union of construction workers. They accuse Zuckerberg, Facebook COO Sheryl Sandberg and Facebook board members Marc Andreessen and Peter Thiel, of charges relating to breach of fiduciary duty. They also accuse Thiel’s data analytics firm, Palantir Technologies, of unfair competition. (Disclosure: Thiel secretly funded a lawsuit that bankrupted Gizmodo’s former parent company, Gawker Media.)

“… Zuckerberg, Sandberg and other Facebook administrators agreed to authorize multi-billion settlement with FTC as an express something for something to protect Zuckerberg from being named in the FTC complaint, subject to personal liability, or even required to sit for a deposition, “reads the complaint filed by the Rhode Island Pension Fund, which has since been consolidated with two other shareholder complaints. They specifically accuse the company of overpaying by agreeing to pay $ 4.9 billion more than Facebook’s maximum penalty, had there been any legal action (which could leave Facebook vulnerable to discovery and guilty plea).

The FTC has not publicly disclosed its alleged intention to personally prosecute Zuckerberg. The agency has yet to respond to a request for comment.

The lawsuit relies on documents related to the FTC settlement, which a the judge ordered Facebook will cede to the Rhode Island pension fund earlier this year. While most of the information they obtained is sealed and redacted, and much has already been reported, this partially confirms long-standing suspicions about the settlement.

“There were rumors about the amount [of the FTC settlement]”Kint told Gizmodo over the phone.

Kint had wanted more detailed answers about who at Facebook knew what, and when, about the Cambridge Analytica leak, in which data from some 50 million Facebook users landed in the hands of the political council by inappropriate means. But when the news of the $ 5 billion FTC settlement and a little-discussed $ 100 million SEC settlement arrived simultaneously, he feared he would never get answers. Before the settlement, Kint testified in front of the parliaments of 14 nations at the hearing of the Grand International Committee on Big Data, Privacy and Democracy in 2019, declaring that despite Facebook’s usual apologies, “the company has repeatedly refused to allow its CEO to offer evidence to urgent international governments who wish to ask intelligent questions, leaving lawmakers with many unanswered questions.

“[The SEC settlement] was sort of done through a press release just as the five billion dollar lawsuit took place, ”Kint said. “Why this amount of money? This is a huge number without any change of direction.

After the FTC Facebook investigated Cambridge Analytica, the complaint reads, board minutes show that Facebook refused to settle unless the FTC left Zuckerberg personally off the hook. The 2019 record finally well amounted to $ 5 billion, which the complaint claimed could have been Zuckerberg’s insurance money:

… Zuckerberg, Sandberg and other Facebook admins agreed to authorize multi-billion settlement with FTC as express something for something to protect Zuckerberg from being named in the FTC complaint, being subject to personal liability, or even being forced to sit for a deposition.

On July 24, 2019, the SEC and Facebook announced a settlement in which Facebook would pay $ 100 million to resolve an investigation into its misrepresentation of the Cambridge Analytica violation. On the same day, the FTC announced that Facebook had agreed to pay a record $ 5 billion as part of a settlement that included mass releases for Zuckerberg and Sandberg (who have not been named accused).

It is not known how a hypothetical negotiation would have gone. But after a long blackout section, the complaint continues:

This was the key moment in the negotiations when FTC staff accepted the quid pro quo offered by Facebook: it would allow Zuckerberg to escape but only if Facebook paid billions more than its maximum statutory exposure.

The settlement was the largest in the history of the FTC. Despite this he still fell very short a significant punishment for a company that made three times that amount in the first quarter of this year alone. After the FTC announced the settlement, Congressional Democrats condemned the decision not to hold Zuckerberg personally responsible.

Facebook did not respond to Gizmodo’s request for comment.

The lawsuit, which details Facebook’s alleged entanglements and cover-ups in stunning detail and length, largely repeats publicly reported information. He accuses, for example, Zuckerberg and others of ignoring obligations to shareholders by flouting responsibility for data and confidentiality and incurring “immense reputational damage” that damages its market capitalization. It starts with an agreement reached in 2012 between Facebook and the FTC to be transparent about sharing data with third parties. Two years later, he notes, Facebook turned around and structured its business around surreptitious third-party access to treasure troves of user data, which led to the Cambridge Analytica scandal.

The New York Times reported in March 2018, that at least one employee of Thiel’s Palantir company helped analyze the data and that Zuckerberg did not ensure that Cambridge Analytica deleted the data. From the complaint:

Zuckerberg and Sandberg also allowed Facebook media relations staff to mislead reporters by wrongly claiming that Facebook was investigating Cambridge Analytica’s use of Facebook user data and had not discovered any proof of wrongdoing. Finally, Zuckerberg and Sandberg both signed false and misleading SEC documents in which Facebook falsely told investors that “our users’ data may [emphasis theirs] be inappropriately accessed, used or disclosed ”without revealing that this risk was not hypothetical but, in fact, had already materialized.

Previous internal communications released by the Washington, DC Attorney General’s office revealed that Zuckerberg had been made aware of the Cambridge Analytica leak as early as 2015. Facebook employees asked that the company help them investigate the “summary” business. The complaint continues:

In December 2015, Facebook also learned that Cambridge Analytica was using private Facebook data to aid Senator Ted Cruz’s campaign.

Rather than taking steps to verify that Kogan and Cambridge Analytica had destroyed the data, Facebook simply requested that they remove the personal information of users that Facebook has allowed to disclose.

The lawsuit also states that only 0.31% of users have allowed third parties to share the data provided to Cambridge Analytica. The data was originally collected via a Facebook personality quiz created by psychologist Aleksandr Kogan.

The lawsuit then details the questionable board transactions, citing Sheryl Sandberg, who would have berated former Facebook security chief Alex Stamos for throwing them “under the bus!” by presenting its findings on the Russian interference to the council.

He accuses Zuckerberg and Thiel of a mutually beneficial deal that saved Thiel a lot of money and helped Facebook gain more power. When Facebook spear its stumbling stablecoin, Libra, in June 2019 it attracted Stripe and Spotify (two major investments from Thiel) and, according to the complaint, allowed Thiel to “expand its cryptocurrency holdings by leading the $ 18 million Series A and $ 30 million in Series B funding for Bitcoin lender, BlockFi. In revenge, he says, Thiel, an adviser to former President Donald Trump, helped Zuckerberg get closer to the Trump administration. Thiel, he says, shaped Facebook policies “in a way favorable to the Trump administration to help win this administration’s favor.”