In-House Counsel

What Were You Thinking? Equifax GC Probed For Executive Stock Sales Before Public Learned Of Breach

The timeline puts Equifax Chief Legal Officer John Kelley in an uncomfortable bind.

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It was bad enough when Equifax announced that millions of people had their financial information hacked. For a general counsel, a data breach of this magnitude — one sure to involve law enforcement, regulators, civil plaintiffs, and even legislators — would be crisis enough. Especially when you realize that Equifax put its chief legal officer in charge of security and paid him $2.8 million to keep just this sort of thing from happening. But soon after the company came forward with the news that they’d managed to lose sensitive financial information, everyone started noticing that a handful of highly placed Equifax executives went on a stock selling spree in the delicate period after the company learned of the breach, but before it disclosed this to the public.

That kind of trading is generally frowned upon. Equifax claims these executives, which included the Chief Financial Officer selling 13 percent of his stake in the company, didn’t know of the hack when they all decided to dump around $2 million in shares. Coincidences do happen. Sometimes.

That’s why eyes have turned to John Kelley, Equifax’s Chief Legal Officer and the man responsible for signing off on those transactions. Did Kelley, a former King & Spalding partner, know of the hack when he approved these sales? As the head of cybersecurity, one would hope he was on the short list of people in the company to know of one of the largest data breaches in history. And if Kelley knew of the breach, should the requests from these executives have raised red flags? Or at least triggered a concern that the company needed to avoid even the appearance of impropriety once this news got out? Even if nothing untoward happened here, the controversy over these sales is still damaging the company’s reputation, and that’s something a chief legal officer has to consider in protecting his or her client too.

The board is looking into who knew what and when.

At the Center of the Equifax Mess: Its Top Lawyer [Wall Street Journal]
The man who runs Equifax’s security group earned $2.8 million last year [CNBC]

HeadshotJoe Patrice is an editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news.

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