Biglaw

Biglaw Firm Accused Of Covering Up For Hacker

The allegations in this suit are crazy.

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The allegations in this case are just wild — so buckle up and we’ll walk you through the deets.

So, LabMD is a cancer-screening lab — well, it used to be; it went out of business — that claims it was a victim of a “shakedown scheme” by a cybersecurity company, Tiversa Inc., that hacked into its files, obtained patient data, and posted it on a peer-to-peer file-sharing network. LabMD claims that when they refused to use Tiversa to remediate the hack, Tiversa turned around and reported them to the FTC. This led to an FTC data security enforcement action against LabMD. LabMD also alleges the Biglaw firm of Bryan Cave Leighton Paisner and former U.S. Attorney Mary Beth Buchanan (now a partner at Bryan Cave) assisted Tiversa in the scheme.

The complaint, filed April 28th in the Southern District of New York, alleges that Tiversa was able to hack into LabMD using FBI surveillance tools. The real nut is LabMD’s allegation that Tiversa got its hands on the FBI tools from Buchanan. Back in 2007, when she was U.S. Attorney for the Western District of Pennsylvania, LabMD claims that Buchanan used the services of Tiversa in the prosecution of child pornographers and that’s how Tiversa received access to “FBI proprietary surveillance software and equipment,” which they then allegedly used for their own gain.

The complaint goes on to allege that when Buchanan went to Bryan Cave she represented Richard E. Wallace, a former Tiversa employee who had been fired, as a whistleblower in the 2013 FTC action against LabMD, in violation of the Ethics in Government Act. The Act prevents former government employees from participating in matters related to work they did on behalf of the government.

Then there are some truly eye-popping allegations…. like that the Biglaw giant and the FTC colluded together against LabMD, because… reasons. As reported by Big Law Business, the complaint further alleges that the FTC and Buchanan worked together to build their case against LabMD, in violation of federal law:

The complaint says that FTC officials knew that Buchanan’s involvement in the enforcement action violated the Ethics in Government Act—and that they used that knowledge to shape Wallace’s testimony, by getting him to agree “not to disclose that he and Tiversa had acted as government agents in the FTC investigations.”

LabMD says Buchanan had her own interest in appearing in the FTC matter: ensuring that Wallace didn’t reveal that she had given him access to the FBI surveillance tools.

“Buchanan’s self-interest in keeping her violation of [the Ethics in Government Act] secret and her participation in Tiversa’s wrongdoing was so extreme that she was willing to jeopardize her client’s immunity by directing him to omit critically important and material facts from his testimony,” the complaint says.

Then there’s a claim that Bryan Cave owed a fiduciary duty to LabMD and its founder Michael J. Daugherty. This is based on a defamation and qui tam case against Tiversa filed by Daughterty and Wallace:

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The complaint says that because Daugherty and Wallace are partners in the qui tam action, “Buchanan and BCLP had a special, fiduciary and privity-like relationship with Daugherty that imposed on them a duty to impart correct and complete information.”

The complaint asserts claims for “negligent omissions” and “fraudulent omissions” against Buchanan and Bryan Cave Leighton Paisner.

All in all, the complaint is a wild ride of cybersecurity and intrigue.

Bryan Cave and Buchanan have not yet commented on the suit.

headshotKathryn Rubino is an editor at Above the Law. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).

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