NEWS MAIN

Identity theft a growing corporate concern
BY TRACEY BIRKENHAUER
tbirkenhauer@mbizreview.com

Employers should be concerned about identity theft for many reasons. Employees who are victims spend an average 600 hours to rectify their situation ­ and they make most of their calls during work hours.

The distress and emotional trauma they experience also can affect their quality of work.

 

More importantly, companies are legally liable if an employee can prove their employer negligently handled personal information that led to an identity theft.

 

Many employees have won class action lawsuits. Law firms have posted special Web sites seeking clients to participate in negligence suits against employers.

 

The Identity Theft Resource Center reports 110 disclosed data breaches so far this year, potentially affecting more than 56.3 million people. Some of the most widely publicized incidents were at GMAC Financial Services, ChoicePoint and DSW Shoe Warehouse.

 

Michigan State University alone has been hit three times, potentially exposing students, employees and Wharton Center patrons to identity theft.

 

Identity theft is defined as a crime in which an imposter obtains key pieces of information such as Social Security and driver's license numbers and uses it for their own personal gain. About 50 percent of identity thefts originate in the workplace.

 

Almost 90 percent of business record thefts involve payroll or employment records, while only about 10 percent are customer lists, according to the Federal Trade Commission. About 10 million Americans are affected by the growing epidemic each year.

 

In about a third of these cases, the least of the victims' worries is credit cards. Many identity thieves use other people's personal information to open bank accounts, secure loans, get medical treatment and commit crimes. Some buy cars, houses and boats on someone else's tab.

"Crime rings today have IT departments," said Tony Petrill, an independent associate with Identity Theft Shield, a credit monitoring service. "Every thief today is an identity thief. They sell your information for drugs."

 

Petrill spoke at a recent identity theft seminar sponsored by the Ann Arbor Area Chamber of Commerce.

 

Sam Sarafa, president of Management Recruiters of Ann Arbor, said he was there to learn how to prevent identity theft. Petrill warned Sarafa that preventing identity theft completely is impossible, even if you are cautious.

 

The key is early detection.

Not surprising, his solution: Identity Theft Shield, a service marketed by Pre-Paid Legal Services Inc. (NYSE: PPD). For $12.95 a month, the service offers 24-hour credit monitoring and help clearing up credit problems. Many employers that offer it as an employee benefit pick of part of the cost.

 

Identity theft insurance as an employee benefit is an emerging trend, but many experts say these plans are unnecessary and sometimes even ineffective.

"Why pay for a recovery service when many agencies offer the service for free?" asked Linda Foley, co-executive director of the Identity Theft Resource Center, a San Diego-based nonprofit that helps people recover from identity theft. "None of these programs would make any difference at all to prevent identity theft."

 

"Federal law already says you have protection. At the worst, you're liable for $50 for lost or stolen credit cards. However, almost every credit card issuer has gone to a zero liability policy when someone reports fraud in a timely manner."

 

She said that Pre-Paid Legal representatives are the equivalent of "bad used car salespeople."

 

An identity theft victim herself in 1997, Foley said that almost every person working for the Identity Theft Resource Center has an identity theft story to tell. That's why they're so dedicated to helping others deal with the issue.

 

The center's Web site, www.idtheftcenter.org, gets more than 100,000 hits a month. Anyone can call the nonprofit anonymously and get information and tips on how to recover their identity.

 

Identity theft prevention trainer and consultant Johnny May said that companies can combat identity theft by using simple tools.

"Things like properly protecting customer and employee information, conducting background checks and training employees as to what information should be protected are all simple things companies can do."

In addition to seminars and workshops, May conducts on-site security audits to ensure companies are properly destroying sensitive materials. He also wrote "Johnny May's Guide to Preventing Identity Theft" (Security Resources Limited, ($14.95).

 

He notes that many identity thieves are employees who have access to personnel files. Some take jobs as temporary workers to get into a company so they can nab employee data. Others work for third-party vendors that do business with a company.

 

The Fair and Accurate Credit Transactions Act says that employers are responsible for their employees' personal information.

 

"Most small business owners don't even know what FACTA is," said Gary Smith, an employee benefit consultant with Patterson Bryant Inc. in Bingham Farms. "But they should, because companies can't afford class-action lawsuits."

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